The One Big Beautiful Bill Act (P.L. 119-21): Permanent TCJA, New Deductions, and the 2026 Planning Reset

The One Big Beautiful Bill Act (P.L. 119-21, H.R. 1), enacted via budget reconciliation and signed July 4, 2025, is the most consequential tax legislation since TCJA. It (i) extends and makes permanent most TCJA individual and business provisions scheduled to sunset 12/31/2025, (ii) restores full § 168(k) bonus depreciation and § 174 expensing, (iii) creates several new deductions and credits, and (iv) modifies or accelerates the phase-out of certain IRA-era energy credits. IRS guidance is being issued on a rolling basis at the IRS OBBBA hub.

Permanent TCJA extensions

• Individual rates and brackets. The TCJA rate structure (§ 1(j)) is made permanent — no 2026 reversion to pre-TCJA brackets.
• Standard deduction. The TCJA-inflated § 63(c) amounts remain permanent; the personal exemption under § 151 stays at zero.
• § 199A QBI deduction. Made permanent — the scheduled 12/31/2025 sunset is repealed. Thresholds and SSTB rules continue.
• § 2010(c) estate/gift exemption. Increased to $15M per decedent starting in 2026 (vs. the ~$14.0M post-inflation 2025 figure), with future inflation indexing.
• § 24 child tax credit. Made permanently larger; refundable portion adjusted; income phaseouts and inflation indexing modified.

Business cost-recovery restorations

• § 168(k) bonus depreciation. Restored to 100% permanently for qualifying property placed in service after specified effective date; reverses TCJA's 80%/60%/40% phase-down.
• § 174 R&E expensing. Repeals TCJA's mandatory 5-year (domestic) / 15-year (foreign) amortization for domestic R&E; small businesses receive immediate expensing with elective transition relief for prior-year capitalized amounts.

New deductions and credits

• § 224 qualified tips deduction. Above-the-line deduction for qualifying cash tips received in specified occupations, capped per taxpayer, with phaseouts at high AGI. Sunsets after 2028 absent extension.
• Overtime premium deduction. Parallel above-the-line deduction for the premium portion of FLSA-required overtime compensation; capped and AGI-phased. Sunsets after 2028.
• Car loan interest deduction. Limited above-the-line deduction for interest on personal-use auto loans, AGI-phased; final-assembly-in-U.S. requirement on the vehicle.
• Senior additional deduction. Additional standard-deduction-like amount for taxpayers age 65+; AGI-phased.
• § 530A Trump Accounts. New tax-advantaged children's savings vehicle with broader qualifying uses than § 529; contribution and AGI limits apply.

§ 164 SALT cap modifications

The TCJA $10,000 cap on the state-and-local tax deduction is increased for most taxpayers, with a phase-down to the original $10,000 floor at upper income levels. Pass-through entity SALT workaround regimes at the state level remain effective for non-itemized planning.

Phase-outs and modifications

• Inflation Reduction Act energy credits. Several § 25C, § 25D, and § 30D credits have accelerated phase-outs or new domestic-content requirements; final-assembly and battery-sourcing restrictions tightened.
• Form 1099-K threshold. Restored to $20,000 / 200 transactions retroactively, undoing the ARPA-era $600 threshold for TPSOs (PayPal, Venmo, Etsy, etc.).
• § 36B premium tax credit and Medicaid expansion. Narrowed; income-based eligibility thresholds and benefit calculations modified.

Effective dates

OBBBA uses a mosaic of effective dates — some provisions apply to tax years beginning after 12/31/2024, some after 12/31/2025, and the temporary deductions (tips/overtime/car loan) cover 2025-2028. Re-check each provision's effective-date sub-section against the bill text; the IRS hub at the OBBBA provisions page is updated as guidance issues.