New Deductions, New Red Tape: What to Watch Out for Under the OBBBA

While the One Big Beautiful Bill Act comes with generous tax breaks, it also adds layers of complexity that could trip up even experienced taxpayers. Here's what you need to know about the less-publicized provisions, and how to stay compliant.

1. Deductions for Overtime, Tips & Auto Loans

Trump’s campaign promise of “no tax on tips” is partially realized, at least for now.

New deductions include:

• Tip and overtime income (with income-based phaseouts)

• Auto loan interest

• An increased standard deduction for seniors (2025–2028)

These perks sound good, but they come with income thresholds and expiration dates, meaning timing and eligibility are everything.

2. Complicated New Savings Vehicles: “Trump Accounts”

Trump Accounts are new, tax-advantaged savings accounts that:

• Include a $1,000 baby bonus for children born in the next 4 years

• Allow $5,000/year contributions, growing tax-free until age 18

• Convert to traditional IRAs upon adulthood

They may be useful, but the rules are layered. We recommend evaluating these in the context of your current retirement or education savings strategies.

3. Shrinking (and Confusing) Clean Energy Credits

Many of the clean energy tax credits introduced under the Inflation Reduction Act are being phased out or restricted, especially for companies tied to “foreign entities of concern.”

Planning a solar project or EV purchase? Don’t assume your credits still apply, reach out for an updated review.

4. Watch for Medicaid & SNAP Changes (and Their Financial Ripple Effects)

Though not directly related to business taxes, the bill includes major cuts to federal benefits like Medicaid and SNAP and imposes stricter eligibility requirements. For individuals relying on these programs or employers in healthcare sectors, the ripple effects may be significant.

5. Strategy Beats Surprises

Whether you're navigating a new deduction, managing charitable contributions under tighter rules, or exploring Trump Accounts, the key takeaway is this:

The tax code just got more generous and more confusing at the same time.

Let’s cut through the noise and build a plan that fits.

Call us at 562-495-3331 or visit Holmes & Associates to schedule your mid-year review.

What the One Big Beautiful Bill Act Means for Your Taxes in 2025 and Beyond

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4th, 2025—and like any massive piece of legislation, it comes with both opportunities and complications for business owners and individuals. At Holmes & Associates, we’re here to break it down into actionable steps, so you know what changes matter to you.

1. Big Wins for Business Owners

Permanent 100% Bonus Depreciation & R&D Expensing

Businesses can now permanently deduct 100% of qualifying equipment purchases and domestic R&D expenses in the year they’re placed in service. This eliminates a tax penalty and gives businesses confidence to invest.

Pro Tip: Consider pairing this with a cost segregation study if you own commercial real estate.

Section 179 Expensing and Interest Deduction Improvements

Small business-friendly provisions—like the expanded Section 179 expensing rules and the less restrictive TCJA interest deduction cap—are now permanent.

2. Entity Structure Still Matters

Pass-Through Deduction Permanently Extended

The 20% deduction for pass-through income (such as from S-Corps and partnerships) has been made permanent. While controversial for creating unequal treatment compared to C-Corps, it means now’s a good time to revisit your business entity structure and confirm it still aligns with your goals.

3. SALT Cap Raised—Temporarily

From 2025–2029, the SALT (State and Local Tax) deduction cap increases from $10,000 to $40,000 for households making under $500,000.

It reverts to $10,000 after 2029—so timing is everything if you're in a high-tax state like California.

4. Estate and Gift Tax Changes Ahead

In 2026, the estate and gift tax exemption will be set at $15 million (adjusted for inflation). Now is the time to review your estate plan, especially if you're close to that threshold or considering significant asset transfers in the coming years.

5. Time to Book a Mid-Year Strategy Session

With OBBBA now official and tax season in the rearview mirror, July is the perfect time to:

• Adjust estimated tax payments

• Review entity selection

• Maximize deductions under the new rules

• Begin 2026 planning with updated exemption thresholds in mind

Let’s talk about what these changes mean for your specific situation.

Book a complimentary consultation today at 562-495-3331 or visit us at Holmes & Associates.