Overview of the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, represents a significant overhaul of U.S. tax and spending policies. It aims to align with the priorities of the Trump administration and includes various provisions affecting individuals, businesses, and federal programs.

Key Provisions

Tax Changes

• State and Local Tax (SALT) Deduction: The cap on the SALT deduction is raised from $10,000 to $40,000 for households earning under $500,000, effective from 2025 to 2029.

• Deductions for Tips: Employees and self-employed individuals can deduct qualified tips received in certain occupations from 2025 through 2028.

• Corporate Tax Cuts: The bill expands deductions for business investments and research costs, aiming to stimulate economic growth.

• Estate Tax Exemption: The One Big Beautiful Bill Act permanently increases the estate and gift tax exclusion to $15 million for individuals and $30 million for married couples, effective January 1, 2026, and this amount will be indexed for inflation. This change ensures that fewer estates will be subject to federal estate taxes, as it prevents a scheduled decrease in the exclusion amount that would have occurred without the bill.
  • Other Relevant Changes: (1) Preservation of Current Tax Rates: The bill maintains existing individual income tax rates, preventing scheduled increases that would have occurred without the legislation.  (2)  Standard Deduction: The standard deduction has been increased and made permanent, benefiting many taxpayers.  (3)  State-Level Taxes: While the federal estate tax risk is reduced, individuals should still consider state-level estate taxes, which may still apply.

Healthcare and Social Programs

• Medicaid Changes: The bill introduces stricter work requirements for Medicaid recipients, potentially affecting millions of enrollees.

• SNAP Funding: It proposes cuts to the Supplemental Nutrition Assistance Program (SNAP), impacting food assistance for low-income individuals.

Budget Impact

• Deficit Increase: The Congressional Budget Office estimates the bill will increase the budget deficit by $2.8 trillion by 2034.

• Health Coverage Loss: Approximately 10.9 million Americans may lose health insurance coverage due to changes in Medicaid and other health provisions.

Conclusion

The One Big Beautiful Bill Act encompasses a wide range of tax reforms and social program adjustments, with significant implications for federal spending and individual taxpayers. Its passage reflects a strategic use of budget reconciliation to expedite legislative changes.