The Trump administration officially signed the ‘One Big Beautiful Tax Bill Act’ into law on July 4, 2025. The bill has now had time to settle, and a few clarifications have been made to help everyone understand how it works. It’s considered one of the biggest and most beneficial tax laws since the 2017 Tax Cuts and Jobs Act. It keeps many of the 2017 tax changes and adds new benefits for millions of Americans starting this year.
We won’t talk about politics here. Our goal is simple: to help you understand how this law affects you, whether you own a business or work for someone else. Below are some important changes you should know as you get ready for tax season.
The One Big Beautiful Tax Bill extends parts of the 2017 Tax Cuts and Jobs Act that were scheduled to expire on December 31, 2025. Without Congress taking action, American families faced a projected $4 trillion tax increase beginning in 2026. This new law permanently extends important tax rules while introducing fresh benefits for working-class voters and small businesses.
This impressive provision affects many workers starting this upcoming tax year and runs through 2028. The new bill allows tip income to be federally tax-free up to $25,000 per household for industries where tipping is the norm.
Real-Life Example: Maria, a waitress earning $30,000 in wages and $10,000 in tips, can deduct all $10,000 of her tips from her taxable income. She will now be taxed on only $30,000 in wages.
The new law introduces a federal tax exemption on a portion of overtime pay from 2025–2028. Here’s how it works:
Common Question: If only one spouse works, can the couple still claim the full $25,000? Answer: Yes. As long as your household meets the income requirement and you file jointly, you can claim the full benefit.
Real-Life Example: Jamie earns $32,000 in qualified overtime pay. Since he is filing jointly with his wife, he can deduct $25,000 from his gross income, which means less money will be taxed.
The Standard Deduction is an automatic tax reduction that every taxpayer is eligible for, which helps lower the amount of income you have to pay taxes on. This deduction has been saved and even made slightly bigger for 2025.
Before this bill passed, the Standard Deduction was set to significantly decrease to just $6,350 for single people and $12,700 for married couples. This decrease would have meant thousands more in taxable income for most of us. This update is permanent.
Example: The Johnson family (married, two kids, $80,000 income) claims a $31,500 standard deduction, paying taxes on only $48,500 of income. With the incoming drop, they would have paid roughly $2,250 more in taxes.
The Child Tax Credit was scheduled to drop back down to $1,000 per qualifying child. The One Big Beautiful Tax Bill now increases the credit to:
Example: The Martinez family with three children (ages 5, 8, 12) claims $6,600 in credits ($2,200 x 3). If they owed $8,000 in taxes, the credit directly lowers their final tax bill to $1,400.
A tax deduction lowers the amount of income you pay tax on, while a tax credit directly reduces the actual tax you owe. (For instance, a $1,000 Tax Credit equals $1,000 OFF your final tax bill.)
The new bill increases the deduction amount for seniors by allowing individuals age 65+ to claim an additional deduction on top of their standard or itemized deductions from 2025 through 2028.
This applies whether you use the Standard or Itemized Deduction.
Example: Robert, age 67, earning $35,000 part-time, claims the $15,750 standard deduction plus the $6,000 senior deduction for a total of $21,750 in deductions. He is now taxed only on $13,250 of his income.
Previously, taxpayers could only deduct up to $10,000 in combined state and local income tax and property taxes, also known as SALT. That cap has now been increased to $40,000.
This change is especially valuable if you:
If this fits you, you should compare the Standard and Itemized deduction to see which one is higher, for greater tax savings.
The Bill also introduced a corporate tax rate reduction from 35% to 21%, which is set to remain permanent. In regards to small business, the law has introduced several improvements and new benefits that self employed contractors and small business owners can take advantage.
The One Big Beautiful Tax Bill is packed with tax-saving benefits for working families this year. While these are some of the key highlights identified by Cornerstone Tax & Accounting, there are many more advantages for small business owners, investors, and those saving for retirement.
Stay tuned for more easy-to-understand blog posts about the tax benefits from the OBBB. If you’re unsure whether to take the standard deduction or itemize your deductions, now is a great time to schedule a meeting with your tax expert.
