Here is a comprehensive summary of the tax-related provisions from the One Big Beautiful Bill Act of 2025.
The OBBBA outline extensive modifications to the U.S. tax code, primarily through amendments to the Internal Revenue Code of 1986, across various titles and chapters. These changes aim to provide permanent tax relief, enhance business competitiveness, invest in communities, and reform certain energy and health-related tax provisions.
Subtitle A—Tax
This subtitle details significant tax reforms, categorized into several chapters:
A. Chapter 1—Providing Permanent Tax Relief for Middle-Class Families and Workers
Reduced Rates: The bill makes the reduced individual income tax rates permanent by eliminating their scheduled expiration on January 1, 2026, applying them to taxable years beginning after 2017. It also modifies how inflation adjustments are applied to determine the thresholds for different tax brackets.
Standard Deduction: The increased standard deduction amounts are extended and enhanced, applying to taxable years starting after December 31, 2024.
Personal Exemptions: The deduction for personal exemptions is generally terminated, but a new temporary senior deduction of $6,000 is introduced for individuals aged 65 or older, available for taxable years before January 1, 2029. This senior deduction is subject to a phase-out if modified Adjusted Gross Income (AGI) exceeds $75,000 ($150,000 for joint returns) and requires a Social Security Number (SSN).
Child Tax Credit: The increased Child Tax Credit (CTC) is extended and enhanced, raising the credit amount from $2,000 to $2,200 and removing its scheduled expiration. This applies to taxable years beginning after 2017, with future cost-of-living adjustments. The maximum refundable portion of the credit remains $1,400, and SSN omissions for the credit are now treated as mathematical errors.
Qualified Business Income Deduction (Section 199A): The taxable income phase-in amounts for this deduction are significantly increased from $50,000 to $75,000 ($100,000 to $150,000 for joint returns). A minimum deduction of $400 is established for taxpayers with at least $1,000 in active qualified business income, subject to inflation adjustments after 2026.
Estate and Gift Tax Exemption: This section indicates an extension and enhancement of increased estate and gift tax exemption amounts, though specific figures are not detailed in the provided text.
Alternative Minimum Tax (AMT): The increased AMT exemption amounts are extended permanently, removing the January 1, 2026, sunset. The phase-out thresholds are modified, and the phaseout rate is changed from 25% to 50%.
Qualified Residence Interest: The limitation on the deduction for qualified residence interest is extended permanently, applying to taxable years beginning after December 31, 2025.
Casualty Loss Deduction: The limitation on casualty loss deductions is extended, and the deduction is expanded to include losses from State-declared disasters, in addition to federally declared ones.
Miscellaneous Itemized Deductions: Most miscellaneous itemized deductions are terminated. However, the deduction for educator expenses is specifically retained and enhanced to include coaches and certain non-athletic instructional equipment.
Limitation on Tax Benefit of Itemized Deductions: A new rule reduces itemized deductions for high-income individuals by 2/37ths of a calculated amount, but this limitation does not affect the qualified business income deduction.
Qualified Transportation Fringe Benefits: Certain exclusions for qualified transportation fringe benefits are eliminated, and the deduction for such benefits is terminated.
Moving Expenses: The limitation on the deduction and exclusion for moving expenses is extended permanently.
Wagering Losses: The deduction for wagering losses is modified to be allowed up to 90 percent of the losses, limited by wagering gains.
ABLE Accounts: The increased contribution limitation for ABLE accounts is extended and enhanced with inflation adjustments, and rollovers from 529 qualified tuition programs to ABLE accounts are permanently permitted.
Savers Credit: The Savers Credit is extended and enhanced, increasing the maximum credit amount from $2,000 to $2,100.
Student Loan Discharges: The exclusion from gross income for student loans discharged due to death or disability is extended and modified to include private education loans, requiring an SSN for this exclusion.
State and Local Tax (SALT) Deduction: The $10,000 limitation on individual deductions for state and local taxes is made permanent. It introduces an "applicable limitation amount" that starts at $40,000 for 2025 (phasing up annually until 2030 when it reverts to $10,000) and a phasedown based on modified AGI exceeding $500,000 ($250,000 for married filing separately) for years before 2030.
B. Chapter 2—Delivering on Presidential Priorities to Provide New Middle-Class Tax Relief
No Tax on Tips: A new deduction is created for qualified tips, capped at $25,000, and subject to an AGI phase-out for incomes above $150,000 ($300,000 for joint returns). This deduction is available even for non-itemizers. New reporting requirements for cash tips are established, and the Secretary of the Treasury is mandated to publish a list of occupations customarily receiving tips. This deduction terminates after December 31, 2028.
No Tax on Overtime: A new deduction for qualified overtime compensation is introduced, limited to $12,500 ($25,000 for joint returns), also subject to an AGI phase-out. It's available to non-itemizers, and new reporting requirements are established for W-2s and other forms. This deduction also terminates after December 31, 2028.
No Tax on Car Loan Interest: Qualified passenger vehicle loan interest is excluded from personal interest, making it deductible for 2025-2028. This deduction is capped at $10,000 and has a modified AGI phase-out. New reporting requirements are implemented for lenders.
Trump Accounts and Contribution Pilot Program: A new tax-advantaged savings mechanism called "Trump accounts" is established.
Contributions: Annual contribution limit of $2,500 per beneficiary, adjusted for inflation.
Distributions: Generally tax-free if used for qualified higher education or primary/secondary education expenses. Non-qualified distributions made before the beneficiary turns 18 are subject to tax and a 100% penalty on net income.
Employer Contributions: Employer contributions to these accounts are excluded from employee gross income, up to $500 per year (indexed for inflation).
Pilot Program: A pilot program allows eligible children to be treated as making a payment against tax, which is not subject to offset for other federal debts. New penalties are introduced for negligent claims or fraud related to this program.
C. Chapter 3—Establishing Certainty and Competitiveness for American Job Creators
Full Expensing for Business Property: The 100% bonus depreciation is made permanent, removing its scheduled phase-out. This applies to property acquired and specified plants planted/grafted after January 19, 2025. A transitional election for reduced percentages (40% or 60%) is available for the first taxable year ending after January 19, 2025.
Domestic Research & Experimental Expenditures (R&E): Allows full expensing (immediate deduction) of domestic R&E expenditures, replacing the prior amortization requirement. Foreign R&E expenditures remain subject to 15-year amortization. The research credit (Section 41(a)) is reduced by the amount of this new deduction. This applies to amounts paid or incurred in taxable years beginning after December 31, 2024. A key transition rule allows eligible small businesses to elect retroactive application to taxable years beginning after December 31, 2021.
Business Interest Limitation (Section 163(j)): The provision that allowed adding back depreciation, amortization, and depletion when calculating the limitation on business interest is made permanent, removing its sunset. It also expands the definition of "floor plan financing indebtedness" to include certain trailers and campers. New rules coordinate this limitation with interest capitalization provisions, ensuring the limitation applies before capitalization and specifying how allowed amounts are applied. Certain capitalized interest is explicitly excluded from "business interest". The definition of "adjusted taxable income" for this limitation is modified to include certain amounts from CFC income.
Paid Family and Medical Leave Credit: The credit is extended permanently and now allows employers to elect between a percentage of wages paid for leave or a percentage of premiums paid for insurance policies. Rules for aggregation and the treatment of state-mandated benefits are clarified, and the definition of a "qualifying employee" is updated.
Business Meal Deductions: New exceptions are introduced to the limitations on the deduction for business meals. Specifically, meals provided on certain fishing vessels and at fish processing facilities are no longer subject to the 50% limitation.
Section 179 Expensing: The maximum amount for Section 179 expensing is increased from $1,000,000 to $2,500,000, and the phase-out threshold from $2,500,000 to $4,000,000, both adjusted for inflation.
Special Depreciation for Qualified Production Property: A new 100% special depreciation allowance is introduced for "qualified production property," which is tangible personal property used in manufacturing, production, or refining of qualified products.
Spaceports and Exempt Facility Bonds: Spaceports are treated like airports for the purposes of exempt facility bond rules, enabling tax-exempt financing for spaceport property.
International Tax Reforms (Subchapter B):
Foreign Tax Credit: Rules are modified to allocate certain deductions (like those under 250(a)(1)(B)) to foreign source net CFC tested income, but explicitly state no interest expense or R&E expenditures will be allocated to such income. Other deductions must be directly allocable.
Deemed Paid Credit: The deemed paid credit under Section 960(d)(1) is increased from 80% to 90%, but a 10% disallowance of foreign tax credit is introduced for foreign income taxes related to previously taxed net CFC tested income.
Inventory Sourcing: Income from the sale of U.S.-produced inventory through a foreign branch, for use outside the U.S., can be treated as foreign source income, up to 50% of such income.
Foreign-Derived Deduction Eligible Income (FDII) & Net CFC Tested Income: The deduction percentages under Section 250(a) are modified to 33.34% (from 37.5%) and 40% (from 50%) for certain income types. The definition of deduction eligible income is broadened to include income/gain from the sale of intangible and depreciable property. The term "global intangible low-taxed income" (GILTI) is replaced with "net CFC tested income" throughout the code, and the tax-free deemed return on foreign investments is repealed.
Base Erosion Minimum Tax (BEAT): The BEAT rate is increased from 10% to 10.5%.
Look-Thru Rule (CFCs): The look-thru rule for related controlled foreign corporations (Section 954(c)(6)(C)) is made permanent.
Specified Foreign Corporations' Taxable Year: The election for a 1-month deferral in determining the taxable year of specified foreign corporations is repealed.
Downward Attribution of Stock Ownership: The limitation on downward attribution of stock ownership (where a U.S. person is considered to own stock owned by a non-U.S. person) is restored in applying constructive ownership rules. New rules are introduced for "Foreign Controlled United States Shareholders" and "Foreign Controlled Foreign Corporations" to ensure they are subject to subpart F rules.
Pro Rata Share Rules: Section 951(a) is amended to modify how U.S. shareholders include their pro rata share of subpart F income, focusing on periods of ownership and CFC status.
D. Chapter 4—Investing in American Families, Communities, and Small Businesses
Employer-Provided Child Care Credit: Increases the credit amount from 25% to 40% (and 50% for eligible small businesses) of qualified expenditures, and the maximum credit amount is increased and inflation-adjusted.
Adoption Credit: A portion of the adoption credit (up to $5,000) is made refundable, and inflation adjustments are updated. Indian tribal governments are recognized for determining special needs children for this credit.
Dependent Care Assistance Program: The maximum exclusion from income for dependent care assistance is increased from $5,000 to $7,500 ($2,500 to $3,750 for separate filers).
Child and Dependent Care Tax Credit: The "applicable percentage" for this credit is modified, starting at 50% and phasing down based on AGI.
Scholarship Granting Organizations Credit: A new nonrefundable tax credit of up to $1,700 is allowed for individual contributions to qualified elementary and secondary education scholarship granting organizations. This credit prevents a double benefit with charitable contribution deductions.
Employer Payments of Student Loans: The exclusion from gross income for employer payments of student loans (up to $5,250) is made permanent and will be adjusted for inflation.
529 Accounts: The definition of "qualified higher education expenses" for 529 accounts is expanded to include certain expenses for individuals with disabilities, and the overall limitation is increased from $10,000 to $20,000.
Private College/University Excise Tax: The excise tax on investment income of certain private colleges and universities is modified, introducing tiered applicable percentages (1.4% to 15%) based on endowment size. "Federally-subsidized royalty income" is now explicitly subject to this tax. Reporting requirements for student numbers are added.
Tax-Exempt Organization Excess Compensation: The application of the excise tax on excess compensation within tax-exempt organizations is expanded by broadening the definition of "covered employee".
Opportunity Zones: The program is enhanced and renewed.
Designations: Allows for decennial designation dates for qualified opportunity zones (starting July 1, 2026, and every 10 years). The special rule for Puerto Rico is repealed.
Qualification: Redefines "low-income community" with specific income thresholds and extends the period of effectiveness for designations.
Capital Gains: The sunset on the election for qualified opportunity funds is repealed. It reinstates basis step-ups (10% after 5 years, 15% after 7 years) regardless of when the investment is sold, and extends the working capital safe harbor to 62 months.
Reporting: New annual reporting requirements (Forms 6039K and 6039L) are introduced for qualified opportunity funds and businesses, including details on assets, property, employment impact, and investor information. New penalties for non-compliance are established, and electronic filing is mandated.
Public Data: $15,000,000 is appropriated to the IRS to make public reports on opportunity zones, including economic indicators like job creation and poverty reduction.
Low-Income Housing Tax Credit: The State housing credit ceiling is permanently increased, applying a 1.12% factor to calendar years beginning after December 31, 2025. The tax-exempt bond financing requirement is also modified.
New Markets Tax Credit: The new markets tax credit is permanently extended by removing its sunset provision.
Charitable Contributions (Non-Itemizers): The partial deduction for charitable contributions made by individuals who do not itemize is made permanent and expanded, increasing the deduction from $300 ($600 joint) to $1,000 ($2,000 joint).
Charitable Contributions (Individuals - 0.5% Floor): A new 0.5% floor is introduced for individual charitable contributions, meaning only contributions exceeding this percentage of the contribution base are deductible. Carryforward rules are adjusted.
Charitable Contributions (Corporations - 1% Floor): A 1% floor (and a 10% ceiling) is established for corporate charitable contributions, and carryforward rules for corporations are modified.
Distilled Spirits Tax: The limitation on the cover over of tax on distilled spirits is permanently increased to $13.25.
Nonprofit Community Development (Native Villages): Activities related to fishing quota programs in remote Native villages are deemed "substantially related" for tax-exempt status. Asset transfers from wholly-owned subsidiaries to these entities are made tax-free under certain conditions.
Native Alaskan Subsistence Whaling: The charitable deduction for expenses incurred in support of Native Alaskan subsistence whaling is increased from $10,000 to $50,000.
Residential Construction Contracts: An exception to the percentage of completion method of accounting is applied to certain residential construction contracts, also impacting alternative minimum tax calculations.
Qualified Small Business Stock (QSBS) Exclusion:
Gain Exclusion: Introduces a phased increase in the exclusion for QSBS gain: 50% for stock held 3 years, 75% for 4 years, and 100% for 5 years or more, for stock acquired after the enactment date.
Per Issuer Limitation: Increases the per-issuer limitation on eligible QSBS gain from $10,000,000 to $15,000,000 for stock acquired after the enactment date, with inflation adjustments.
Aggregate Gross Assets: Increases the aggregate gross assets limit for a corporation to qualify as QSBS from $50,000,000 to $75,000,000, with inflation adjustments.
Third-Party Network Transactions (1099-K): Reinstates the prior de minimis reporting thresholds for third-party network transactions, requiring reporting only if gross payments exceed $20,000 AND the number of transactions exceeds 200. This change is retroactively applied as if it was part of the American Rescue Plan Act of 2021. These thresholds also apply to backup withholding.
Information Reporting Threshold (1099-NEC/MISC): Increases the threshold for requiring information reporting under Section 6041(a) (e.g., for non-employee compensation, rents) from $600 to $2,000, with inflation adjustments. This new threshold also applies to remuneration for services and backup withholding.
Sound Recording Productions: Allows an election to treat costs of "qualified sound recording productions" as expenses, similar to film or television productions, subject to a $150,000 dollar limitation. These productions are also added to the list of "qualified property" for 100% bonus depreciation.
Rural/Agricultural Real Property Loans: Excludes interest on "qualified real estate loans" secured by rural or agricultural real property from the lender's gross income.
Firearms Taxes: Reduces the transfer tax (Sec. 5811(a)) and making tax (Sec. 5821(a)) for firearms that are not machineguns or destructive devices from $200 to $0.
Farmland Capital Gains: Allows taxpayers to elect to pay the net income tax liability from the sale of "qualified farmland property" to a "qualified farmer" in 4 equal installments.
Disaster-Related Casualty Losses: Extends the special rules for the treatment of certain disaster-related personal casualty losses.
Taxable REIT Subsidiary Asset Test: The taxable REIT subsidiary asset test is restored from 20% to 25%.
E. Chapter 5—Ending Green New Deal Spending, Promoting America-First Energy, and Other Reforms
This chapter introduces significant changes to clean energy tax credits, primarily focusing on restrictions related to foreign entities and other modifications.
Prohibited Foreign Entity Restrictions (General): New definitions for "prohibited foreign entity," "specified foreign entity," and "foreign-influenced entity" are introduced, with complex rules regarding ownership, control (including effective control through contracts/agreements), and material assistance from such entities. These restrictions generally deny or limit various clean energy credits.
Clean Electricity Production Credit (Section 45Y): The credit for wind and solar facilities placed in service after December 31, 2027, is terminated. No credit is allowed if the construction of a facility includes "material assistance" from a prohibited foreign entity (if construction begins after December 31, 2025) or if the taxpayer itself is a prohibited foreign entity. It also denies the credit for wind and solar leasing arrangements.
Clean Electricity Investment Credit (Section 48E): Similar to Section 45Y, this credit is terminated for wind and solar facilities placed in service after December 31, 2027. No credit for energy storage technology if construction begins after December 31, 2025, and involves "material assistance" from a prohibited foreign entity. No credit if the taxpayer is a prohibited foreign entity. A recapture provision is introduced if an "applicable payment" (payment to a prohibited foreign entity) related to the property occurs within 10 years after being placed in service. The credit is also denied for wind and solar leasing arrangements. The domestic content rules are set to 0% for certain energy property, effectively removing the domestic content bonus.
Advanced Manufacturing Production Credit (Section 45X): Modifies domestic content rules for certain components and introduces phase-outs and terminations for wind energy components (after Dec 31, 2027) and metallurgical coal (after Dec 31, 2029). No credit is allowed if the property includes "material assistance" from a prohibited foreign entity or if the taxpayer is a prohibited foreign entity.
Clean Fuel Production Credit (Section 45Z): No credit is allowed if the taxpayer is a specified foreign entity, or a foreign-influenced entity (after a 2-year grace period). Also, the credit is coordinated with other credits for sustainable aviation fuel, applying to fuel sold or used after June 30, 2025.
Carbon Oxide Sequestration Credit (Section 45Q): No credit is allowed if the taxpayer is a specified foreign entity or a foreign-influenced entity. The credit rates and provisions are modified to provide parity for different uses and utilizations of qualified carbon oxide (secure geological storage, tertiary injectant, other utilization).
Corporate Alternative Minimum Tax (AMT): The calculation of "adjusted financial statement income" for the corporate AMT is modified to allow for deductions related to depreciation and intangible drilling costs, aligning it more closely with tax depreciation rather than book depreciation.
Publicly Traded Partnerships (PTPs): Income from hydrogen storage, carbon capture, advanced nuclear, hydropower, and geothermal energy is added to the list of "qualifying income" for PTPs, allowing more energy-related PTPs to retain their pass-through status.
Dyed Fuel Payments: A new section allows the Secretary to pay an amount (without interest) to persons who indelibly dye diesel fuel or kerosene if a tax was previously paid on that fuel.
Tax Penalties and Enforcement:
Accuracy-Related Penalties: New accuracy-related penalties are imposed for "substantial understatements of income tax due to disallowance of applicable energy credits." The standard 10% threshold for understatement is reduced to 1%, and the reasonable cause exception is disregarded in these cases.
Supplier Misstatement Penalty: A new penalty is introduced for "substantial misstatements on certification provided by a supplier" regarding materials from prohibited foreign entities. The penalty is the greater of $10,000 or 100% of the overstatement.
Statute of Limitations: The limitation period for assessing amounts related to these disallowances or penalties is extended to 6 years.
F. Chapter 6—Enhancing Deduction and Income Tax Credit Guardrails, and Other Reforms
Excess Business Losses (Noncorporate Taxpayers): The limitation on excess business losses for noncorporate taxpayers, which was set to expire, is made permanent. The amounts used for calculating these losses are also adjusted.
Partnership Payments: The language regarding the treatment of payments from partnerships to partners for property or services is modified, indicating a shift towards more explicit statutory rules.
Excessive Employee Remuneration: Rules for aggregating remuneration from controlled group members are applied to determine excessive employee remuneration (Section 162(m)), impacting deductibility for publicly held corporations.
Excise Tax on Remittance Transfers: A new 1% excise tax is imposed on certain remittance transfers where the sender provides cash or similar physical instruments. This tax is paid by the sender and collected by the remittance transfer provider. It does not apply to non-cash remittances that are not cash equivalents.
COVID-Related Employee Retention Credits (ERTC): New enforcement provisions are introduced.
Promoter Penalty: A new assessable penalty is imposed on "COVID-ERTC promoters" who fail to meet due diligence requirements. The penalty is $50,000 per document or a higher amount based on the promoter's gross receipts.
Credit/Refund Limitation: No COVID-ERTC credit or refund is allowed or made after the enactment date unless the claim was filed by January 31, 2024.
Assessment Extension: The statute of limitations for assessing amounts related to ERTCs is extended to 6 years.
Erroneous Claim Penalty: The penalty for erroneous claims for refund or credit is expanded to include "employment tax".
Social Security Number (SSN) Requirement for Education Credits: A student's SSN is now required to claim the American Opportunity Tax Credit or Lifetime Learning Credits. Omissions are treated as mathematical errors.
Direct File Task Force: $15,000,000 is appropriated to the Department of the Treasury for a report on the cost of enhancing public-private partnerships for free tax filing and replacing existing IRS direct e-file programs.
Subtitle B—Health
Chapter 3—Health Tax
This chapter specifically addresses tax provisions related to health care.
Premium Tax Credit (PTC) Eligibility:
Lawfully Present Aliens: The PTC is limited to individuals who are "eligible aliens," specifically excluding those who are lawfully present but not meeting the new "eligible alien" definition. Attestation of eligible alien status is required.
Medicaid Ineligibility: The PTC is explicitly disallowed during periods when an individual is ineligible for Medicaid due to alien status.
Verification: New "Exchange enrollment verification requirements" are introduced for the PTC, requiring affirmation of household income, family size, eligible alien status, and other health coverage details.
Special Enrollment Periods: The PTC is disallowed for certain coverage enrolled in during special enrollment periods that are based on income thresholds rather than a qualifying life event.
Recapture of Advance PTC: The limitation on the recapture of advance payments of the PTC is eliminated, meaning the full amount of excess advance payments must be repaid, regardless of income.
Telehealth Services (HSAs): The safe harbor allowing high-deductible health plans (HDHPs) to offer telehealth services without a deductible is made permanent.
Bronze and Catastrophic Plans (HSAs): Bronze and Catastrophic plans offered through Affordable Care Act (ACA) Exchanges are now treated as "high deductible health plans" for Health Savings Account (HSA) purposes.
Direct Primary Care (DPC) Arrangements: Direct primary care service arrangements are generally not treated as health plans for HSA eligibility, meaning individuals enrolled in DPC can still contribute to HSAs. Fees for DPC arrangements are now explicitly treated as qualified medical expenses for HSA purposes. Inflation adjustments will apply to DPC fee limits after 2026.