The One Big Beautiful Bill Act includes hundreds of provisions, and over a ten-year period is estimated to add roughly $3trillion to the
national debt and to cut approximately $4.46trillion in tax revenue.
Individual income taxes Extending 2017 tax cuts The law permanently extends the individual tax rates
Trump signed into law in 2017, which were set to expire at the end of 2025.
Tax deduction for qualified overtime income The law creates a new tax deduction of up to $12,500 ($25,000 if married filing jointly) of qualified overtime pay, effective January 1, 2025. Qualified overtime pay is compensation that an employer is required to pay an employee under the
Fair Labor Standards Act, Section 7 because the employee worked more than 40 hours during the same workweek. The employee may take a tax deduction only for the extra half-time pay above their usual hourly rate they are paid for working more than 40 hours during the same workweek, not all the pay they receive for working those hours. Overtime pay continues to be subject to Social Security tax and Medicare tax. The deduction begins to phase out for individuals whose
modified adjusted gross income is more than $150,000 (or $300,000 if married filing jointly), and is eliminated at $400,000 (or $550,000 if married filing jointly). Individuals may take a tax deduction for the amount of qualified overtime compensation that appears on their
Form W-2, which employers will be required to include on it. The
Internal Revenue Service will release new procedures for federal tax withholding effective 2026.
Tax deduction for qualified tip income The law creates new
tax deductions for tips of up to $25,000 per year received by workers earning less than $150,000, with the tax deduction set to expire in 2028. In order to be eligible, a tip must be paid voluntarily by the payor, and the payor must determine the amount of the tip. The payor must not be subject to a penalty if they do not pay a tip, and the tips must not be subject to any negotiation. The recipient of the tip must put their social security number on their income tax return to be eligible. The vehicle must be for personal use, rather than business use. It must be a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds. All-terrain vehicles, trailers, campers, used vehicles, and leased vehicles are not eligible. A taxpayer is not required to itemize their tax deductions in order to take the tax deduction. From 2025 to 2028, auto loan lenders are required to report loan details to the Internal Revenue Service if they receive at least $600 of interest on qualifying vehicle loans. There is a reduction to the limit for the tax deduction for individuals whose modified adjusted gross income is over $500,000 ($250,000 for married filing separately) but it never goes below $10,000. This provision has an estimated cost of $142billion. Republican representatives
Elise Stefanik,
Mike Lawler,
Nick LaLota, and
Andrew Garbarino of New York, Representative
Young Kim of California, and Representative
Tom Kean Jr. of New Jersey cut this deal with House speaker Mike Johnson in exchange for their votes.
Tax credit for seniors The law permanently eliminates the
personal exemption, which had been temporarily eliminated by the
Tax Cuts and Jobs Act of 2017. It offers a temporary tax deduction, set to expire in 2028, of up to $6,000 for seniors. The deduction phases out for individuals with
modified adjusted gross income (MAGI) exceeding $75,000 (or $150,000 for married couples). A taxpayer is not required to itemize their tax deductions in order to take the tax deduction. The refundable portion of the credit is also indexed to inflation, but is not increased, meaning that tax credit beneficiaries would not see a net increase in the credit, when adjusted for inflation. As of January 1, 2025, up to $5,000 of the adoption tax credit is a refundable tax credit.
Charitable contributions tax deduction Effective January 1, 2026, the law allows a tax deduction for charitable contributions made in cash by an individual who does not itemize their tax deductions. The deduction is limited to $1,000 (or $2,000 if married filing jointly). The deduction is not allowed for contributions to
donor-advised funds or private non-operating foundations. Carrying over excess charitable contributions to other years is not allowed if the person does not itemize their tax deductions. Effective January 1, 2026, for individuals who itemize their charitable contributions, a tax deduction is allowed only for the amount that exceeds 0.5percent of their
adjusted gross income.
Clean vehicle and clean energy home improvement tax credits eliminated The tax credit for buying a new qualified electric vehicle or fuel cell electric vehicle is no longer available for purchases made after September 30, 2025. The tax credit for buying a used qualified electric vehicle or fuel cell vehicle from a licensed dealer is no longer available for purchases made after September 30, 2025. The tax credit for installing property to either recharge electric vehicles or to store or dispense clean-burning fuel will no longer be available after June 30, 2026. The tax credit for making qualified energy-efficient improvements to one's home will no longer be available for improvements put into service after December 31, 2025. The tax credit for installing solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, or battery storage technology in one's home will no longer be available for improvements made after December 31, 2025.
Limitation on overall itemized deductions Itemized deductions are reduced by 2/37 of the lesser of the amount of the itemized tax deductions or the taxable income that is within the 37%-rate marginal tax bracket. As an exception, the qualified business income deduction under is not subject to the limitation. The excise tax is assessed on electronic transfers sent using cash,
money orders,
cashier's checks, prepaid card reloads, wire transfers, online bill payments, and similar methods. The excise tax is assessed on the amount transferred and not on any fees that the sending institution charges the sender to complete the transfer. A transfer to a U.S. military base located in a foreign country are considered to be received in the United States and is not subject to the remittance tax. Additionally, transfers of $15 or less are not subject to the remittance tax.
Business income taxes Tax deduction for executive compensation Public companies are not allowed to take a tax deduction for compensation paid to certain executives that exceeds $1million per year. Effective tax years beginning after December 31, 2026, the compensation paid to the five most highly compensated executives is expanded to all members of a covered corporation's controlled group and affiliated service group. The tax deductible portion of compensation is allocated to each control group member based on the pro-rata portion of the compensation paid by that member.
Depreciation tax deduction For qualified production property of a taxpayer, the law makes permanent a 100%
Section 179 depreciation deduction for the
adjusted basis for the property acquired after January 19, 2025. Businesses are allowed to take a
section 179 tax deduction for the cost of certain business property, software, leasehold improvements, and water utility property rather than deduct only the amount depreciated each year. Under the law, the maximum tax deduction is permanently increased from $1million to $2.5million and then phased out to $4million, all of which will be indexed for inflation in future years. These changes are effective for tax years beginning after December 31, 2024. The law also created a new depreciation allowance for nonresidential real property that is used as an essential part of an activity that includes the manufacturing, production, or refining of certain tangible products that significantly transforms the product. Types of property that do not qualify include nonresidential real property used for offices, administrative services, lodging, parking, sales activities, software development, and software engineering. The property's construction must begin between January 20, 2025, and December 31, 2028, and it must be placed in service in the U.S. or U.S. possessions on or before December 31, 2030.
Domestic research and experimentation tax deduction The law allows full expensing of domestic research and experimentation expenditures for tax years beginning on or after January 1, 2025.
Tax credits for affordable housing and poorer neighborhoods The law expands the
Low-Income Housing Tax Credit with a housing credit allocation increase and a bond threshold test reduction, projected to add up to 1.22million additional affordable rental homes from 2026 to 2035. To incentivize business investments in poorer neighborhoods, the law makes the LIHTC permanent, along with the
New Markets Tax Credit Program and
Opportunity Zones, restructuring the latter with tighter accountability standards, although the law does not create any new legal incentives for affordable housing or industrial lands cleanup.
Deductions for certain workers' meals The law allows a tax deduction for restaurants and caterers for the cost of providing a free meal to workers while on shift. Companies can also take a tax deduction for the cost of free meals provided to workers on offshore oil rigs and gas platform workers. Companies that are required to provide meals to maritime crew under federal law may also take a tax deduction for the cost of those meals.
Metallurgical coal tax credit The law establishes a new 2.5% tax credit for
metallurgical coal.
Charitable contributions tax deduction As of 2026, corporations may take a tax deduction for charitable contributions for the amount that exceeds 1percent of its taxable income and does not exceed 10percent of its taxable income. Charitable contributions that do not qualify for a tax deduction because of this change may be carried forward for five years.
Tax-exempt organizations Excess compensation Effective in 2026, certain tax-exempt organizations must pay an excise tax on compensation exceeding $1million paid to any current and former employee, rather than only to its top five most highly compensated employees for current and prior years.
Health and welfare Medicare drug negotiation The law reverses aspects of Medicare's price negotiation program, allowing more drugs to be purchased without negotiation and increasing costs for consumers. The Congressional Budget Office estimated $5billion in lost savings for the government over ten years.
Medicaid expansions The law establishes a $50billion Rural Hospital Fund, up from $25billion, to support health care providers in
rural areas, providing a safety net against Medicaid cuts;
Medicaid restrictions and funding cuts The law cuts over $1.2trillion in federal spending, The law: • Cuts the Medicaid provider tax, which helps states fund their Medicaid costs, from 6% to 3.5% by 2031; • Requires states to charge enrollees in Medicaid expansion states with family incomes between 100 and 138percent of the federal poverty level up to $35 for each health care service, if they qualify for Medicaid based on income alone. • Requires states to check eligibility of people on
Medicaid expansion every six months instead of annually; In July 2025, Planned Parenthood sued the Trump administration over the provision and a federal judge issued a temporary
injunction on the provision. In September 2025, the
First U.S. Circuit Court of Appeals overrode the injunction, allowing defunding.
Supplemental Nutrition Assistance Program (SNAP) The law: • Requires states with an error rate above 6% to contribute to up to 15% of SNAP benefit costs. Alaska and Hawaii received special exemptions for these effective cuts after lobbying from senators
Lisa Murkowski and
Dan Sullivan; and • Restricts future updates to the
Thrifty Food Plan used to calculate SNAP benefit levels.
Trump accounts and contribution pilot program The law creates
Trump accounts, a type of tax-advantaged savings investment account. Any individual is allowed to contribute to a child's account, up to $5,000 per year per child. Employers are allowed to contribute to their employees' accounts and their employees' children's accounts, up to $2,500 per year. Contributions by an employer count against the $5,000 annual limit per child, but contributions by the federal government do not. As an exception to the annual limit,
tax-exempt organizations are allowed to contribute an unlimited amount into a child's account. The OBBBA directed the Treasury Department to issue more stringent standards for documenting supply chains and construction of solar and wind facilities in August 2025. The OBBBA also severely limits the credits' transferability in dedicated markets.
Electric vehicle tax credits would be phased out by September 2025, and
EV charging tax credits would be phased out by June 2026.
Green hydrogen production credits are terminated by December 2027, rather than 2033.
Home electrification credits are terminated by December 2025. Advanced manufacturing,
carbon sequestration,
biofuel, and
nuclear power credits remain largely intact (nuclear power even gets a new 10% bonus credit), subject to the aforementioned foreign entity of concern rules. Fees on
methane emissions that polluters have to pay the government would be postponed for 10 years, while tax credits for biofuels would be extended an additional four years to 2031. The law raises reference prices under the Price Loss Coverage and Agricultural Risk Coverage programs, resulting in $54billion in additional spending over 10 years. The law increases spending on
crop insurance programs by $6.3billion over 10 years and disaster relief programs at
USDA by $2.9billion in the same timeframe. Over the next decade, the law requires four lease sales to oil and gas companies of lands inside
Arctic National Wildlife Refuge, and six lease sales in the
National Petroleum Reserve-Alaska along Alaska's northern coast. • $23billion for the
U.S. Coast Guard; • $16billion for military innovation and
artificial intelligence, including money for
kamikaze drones,
uncrewed aircraft systems,
drone boats, and
underwater drones; • $15billion for
nuclear deterrence; and • $12billion for improving military operations in the
Indo-Pacific.
Border security The law includes $170billion for spending on border security, creating the capacity to deport up to one million people each year. The law increases the funding for
Immigration and Customs Enforcement from $10 billion to more than $100 billion by 2029, making it the single most heavily funded law enforcement agency in the federal government. These funds include: • $46.5billion to build
a wall on the
United States–Mexico border; • $29.9billion to
Immigration and Customs Enforcement for hiring new agents and covering transportation and deportation costs, with the aim of hiring 10,000 new officers; • $17.3billion to support state and local law enforcement with border enforcement; • $7.8billion for hiring
Border Patrol agents and vehicles, with the aim of hiring 3,000 new agents;
Asylum fees and immigration The law establishes a $100 annual fee to apply for
asylum, down from $1,000 in the House bill, a $550 fee to apply for employment authorization for asylum seekers and migrants on
humanitarian parole or
temporary protected status, and a $500 fee to apply for temporary protected status. • Caps student loans for students seeking
professional degrees, such as
medical school or
law school, at $50,000 per year and $200,000 lifetime, and eliminates graduate
PLUS loans; and • Expands
Pell Grants to cover workforce-training programs.
Expansions to 529 education cost plans A
529 plan will be allowed to distribute funds for the cost to attend an elementary or secondary school, including a public, private, or religious school, after July 4, 2025. Eligible costs include tuition, curriculum and curricular materials, books, instructional materials, online educational materials, and tuition for certain tutoring or educational classes outside one's home. A 529 plan will be allowed to distribute funds for eligible costs of a state and federal licensing program, an industry certification program, or a registered apprenticeship program after July 4, 2025. Eligible costs include tuition, fees, books, supplies, required testing, and continuing education needed to maintain the credential.
1099 reporting A payor must report payments for goods or services via payment apps, online marketplaces, and payments from credit, debit, or gift cards to the
Internal Revenue Service and the payee on
Form 1099-K. The law changes the threshold for reporting; now reporting on Form 1099-K is required if a person received at least 200 transactions and received at least $20,000. The law increases the reporting threshold for
Form 1099-MISC and
Form 1099-NEC from $600 to $2,000 in 2026. The threshold will be adjusted for inflation for future years. • Halves funding for the
Consumer Financial Protection Bureau. • Provides $40million for the
National Garden of American Heroes; • Reduces the $200 tax levied on the manufacture or transfer of
firearm silencers and
short-barreled rifles on the
National Firearms Act to $0, effectively eliminating the tax levied on those items; ==Legislative history==