The One Big Beautiful Bill (OBBB) is here. Whether that means you are cheering or jeering, it is important to understand the new tax benefits that may affect everyday Americans. Regardless of where you stand, if you can’t change the system: game the system. That’s how successful entrepreneurs do it. And that’s exactly what this article is meant to inspire. You’ve seen the headlines on no tax on tipping, overtime, state and local tax caps and more from the media. The following 8 benefits will break out the most important benefits for everyday people and cite where those benefits are found. How you choose to take advantage of the listed benefits below is up to your discretion. Always consult with a qualified tax professional or financial advisor regarding your specific situation before making any decisions based on the information provided herein.
With that, enjoy!
✅ Permanent Extension of Lower Individual Income Tax Rates
Summary
What it does: Makes permanent the TCJA-era lower marginal tax brackets, set to expire in 2025.
Impact: The Tax Cuts and Jobs Acts created opportunity for individual households to pay slightly less income tax percentages. Now that the Tax Cuts and Jobs Act rates are permanent, American households will continue to pay slightly less in federal income tax.
Explain like I’m 5: Average taxpayers will continue to benefit from reduced rates.
Where you can find it
One Big Beautiful Bill: §70101 – Extension and enhancement of reduced rates
✅ Increased Standard Deduction
Summary
What it does: Increases single, joint and head of household standard deductions on federal income taxes if you choose not to itemize your deductions.
Impact: Starting in 2025, the standard deduction for single tax payers is $15,750, joint tax payers is $31,500 and heads of households is $23,625.
Explain like I’m 5: Fewer households will itemize, simplifying tax filing and reducing taxable income.
Where you can find it
One Big Beautiful Bill: §70102 – Extension and enhancement of increased standard deduction
✅ Expanded Child Tax Credit (CTC)
Summary
What it does: Keeps the CTC at an increased level (up to $2,200 per child originally $2,000), with expanded income eligibility and a refundable portion.
Impact: Depending on your income, you can earn up to $2,200 in tax credits per child you have. The credit will be adjusted annually to account for inflation beginning in 2026.
Explain like I’m 5: Greater support for families with children.
Where you can find it
One Big Beautiful Bill: §70104 – Extension and enhancement of increased child tax credit
✅ Higher AMT Exemption Thresholds
Summary
What it does: Extends higher exemption amounts and phase-out thresholds for the Alternative Minimum Tax (AMT).
Impact: The Alternative Minimum Tax is a parallel tax system in the U.S. that ensures that individuals with numerous deductions or tax benefits, pay a minimum amount of tax. The TCJA reduced the number of taxpayers subject to the AMT.
Explain like I’m 5: Fewer middle-income earners will be subject to AMT.
Where you can find it
One Big Beautiful Bill: §70107 – Extension of increased AMT exemption amounts
✅ Additional Expenses Funded from a 529
What it does: Expands the list of expenses that can be paid from a 529 plan without penalty.
Impact: Allows you to utilize a 529 plan for educational expenses to cover online educational materials, outside tutoring, fees for national exams such as the ACT, and educational therapies for students with disabilities.
Explain like I’m 5: There are more ways to utilize the money in a 529 account so that you won’t have to worry about it going to waste.
Where you can find it
One Big Beautiful Bill: §70413 – Additional Expenses Treated As Qualified Education Expenses for Purposes of 529 Accounts
✅ No Tax on Tips or Overtime
Summary
What it does: Eliminates eligible federal income tax on tips and overtime pay.
Impact: Effective 2025 - 2028 individuals reporting tips as a form of income may deduct up to $25,000 worth of tips based on their gross income. During this same time frame, individuals who receive qualified overtime pay may deduct up to $12,500 based on their gross income.
Explain like I’m 5: Direct tax savings for eligible hourly workers and service industry employees.
Where you can find it
One Big Beautiful Bill: §70201 and §70202
✅ Moving Expense and Transportation Fringe Benefit Deduction
Summary
What it does: Restores and expands deductions and exclusions for job-related moving expenses and commuter benefits.
Impact: Employees who have to move or commute for business justifications can continue to write off specific transportation expenses up to certain thresholds.
Explain like I’m 5: Save money for workers changing jobs or commuting long distances.
Where you can find it
One Big Beautiful Bill: §70112 and §70113
✅ State and Local Tax Deduction (SALT Cap)
Summary
What it does: Modifies the cap on deducting state and local taxes (details depend on income and filing status).
Impact: Dependent on your filing status, you can deduct higher amounts of state and local taxes from your federal income tax.
Explain like I’m 5: May offer relief to those in high-tax states. If you live in New York, you can now get more relief from your federal income tax amount owed after you pay your state taxes.
Where you can find it
One Big Beautiful Bill: §70120 – Limitation on individual deductions for certain state and local taxes
Did You Know?
Donald Trump is the only U.S. president to have been inducted into the WWE Hall of Fame.
In 2013, Trump was inducted into the World Wrestling Entertainment (WWE) Hall of Fame for his appearances at WrestleMania events and his involvement in the "Battle of the Billionaires" storyline in 2007, where he famously shaved Vince McMahon’s head in the ring!
Till next time,
Tax Hacks
The content provided in this newsletter is for informational purposes only and is not intended to be, and should not be construed as, professional tax, legal, or financial advice. While we strive to ensure accuracy, tax laws are complex and subject to change. Always consult with a qualified tax professional or financial advisor regarding your specific situation before making any decisions based on the information provided herein.