One Big Beautiful Bill Overview

One Big Beautiful Bill Overview

Your tax bill just got smaller. Your paycheck just got bigger. And if you’re over 65, your Social Security benefits might stay in your pocket instead of going to the IRS. Welcome to the new reality under the One Big Beautiful Bill Act, signed into law by President Trump on July 4, 2025.

This sweeping legislation combines the largest tax cuts in American history with major changes to spending, border security, and social programs. From eliminating taxes on tips and overtime to expanding small business deductions and raising the estate tax exemption, the bill touches nearly every aspect of the tax code. But like any major policy shift, it creates winners and losers, with benefits flowing primarily to middle and upper-income earners while cutting safety net programs that help lower-income Americans.

Key Takeaways

• The legislation makes the 2017 Tax Cuts and Jobs Act permanent and adds new tax breaks for tips, overtime, and Social Security
• The average American taxpayer will see a tax cut of $3,752 according to Tax Foundation analysis
• State and local tax deduction caps increase from $10,000 to $40,000 through 2029
• Small business owners get expanded Section 179 expensing and permanent 20% deduction on business income

Major Tax Changes for Individuals

No Tax on Tips, Overtime, and Social Security

The most talked-about changes affect working Americans directly. Starting immediately, income earned from tips becomes tax-free, providing relief to millions of restaurant workers, hairstylists, and service industry employees. The same applies to overtime pay – those extra hours now come without the federal tax bite.

For seniors, the bill doesn’t eliminate taxes on Social Security benefits as some believe, but it creates a new $6,000 standard deduction for people 65 and older. This means many more seniors will pay little or no federal taxes, effectively making their Social Security tax-free in practice.

Higher SALT Deduction Limits

The state and local tax (SALT) deduction cap jumps from $10,000 to $40,000 for tax years 2025 through 2029. This change primarily helps homeowners in high-tax states like New York, New Jersey, and California, where property taxes alone often exceed the old limit.

The increased SALT deduction phases out for high earners, starting at $500,000 in income for 2025. After 2029, the cap returns to $10,000 unless Congress acts again.

Small Business and Investment Benefits

Expanded Business Deductions

Small business owners get several wins under the new law. The Section 179 expensing cap doubles from $1.25 million to $2.5 million, allowing businesses to write off equipment purchases immediately rather than depreciating them over years.

The 20% deduction for pass-through business income under Section 199A becomes permanent, with higher income thresholds before phase-outs begin. This affects over 25 million small business owners who organize as partnerships, S-corporations, or sole proprietorships.

Estate Tax Relief

Family farms and small businesses get breathing room with expanded estate tax exemptions. The thresholds increase to $15 million for individuals and $30 million for married couples, up from the previous limits that would have dropped to around $7 million.

Investment Incentives

The qualified small business stock (QSBS) exclusion increases from $10 million to $15 million, helping startup founders and early employees avoid capital gains taxes on their equity. The bill also introduces 100% expensing for certain commercial real property that normally depreciates over 39 years.

Corporate and International Changes

Business Investment Incentives

Companies get 100% expensing for new factories and expansions of existing facilities, encouraging domestic manufacturing. The research and development expensing rules that would have forced companies to amortize R&D costs over five years get delayed, providing immediate deductions instead.

International Tax Adjustments

The global intangible low-taxed income (GILTI) tax rate increases slightly, while the foreign-derived deduction eligible income (FDDEI) benefit decreases. These changes affect how multinational corporations are taxed on overseas profits and exports.

Social Program Changes

Border Security and Defense Spending

The bill allocates $350 billion for border security and immigration enforcement, including funding to hire 10,000 additional Immigration and Customs Enforcement (ICE) agents. Defense spending also increases, with billions allocated for new military equipment and Arctic security investments.

Timeline and Implementation

Immediate Changes

Many provisions took effect immediately when President Trump signed the bill on July 4, 2025. These include the no-tax provisions on tips and overtime, the expanded senior deduction, and the higher SALT deduction cap.

Phased Implementation

Some business provisions phase in over time, while others have sunset dates. The expanded SALT deduction expires after 2029, and various tax breaks for specific industries have different timelines.

The Medicaid and SNAP changes roll out gradually, with full implementation expected by 2029 for the additional ICE agents and border security measures.

Work With Us

The One Big Beautiful Bill Act represents the most sweeping tax legislation in decades, touching virtually every aspect of the federal tax code and spending priorities. While the average American taxpayer will see a $3,752 tax cut, the true impact varies dramatically based on your income level, business ownership, age, and family situation. Understanding how these changes affect your specific circumstances is crucial for making informed financial decisions in this new tax environment.

At Avior, we’re closely monitoring how the One Big Beautiful Bill Act impacts our clients’ tax strategies, retirement planning, and investment decisions. The legislation creates new opportunities for tax optimization while changing the rules around estate planning, business structures, and retirement withdrawals. Whether you need help maximizing your new deductions, restructuring business entities, or adjusting investment strategies to account for the changing tax landscape, our team can guide you through these complex changes. Contact Avior today to discuss how the new tax law affects your financial plan and what steps you should take to optimize your situation under the new rules.