One Big Beautiful Bill Act Explained - What Accountants and Tax Professionals Need to Know
The One Big Beautiful Bill Act (OBBBA), signed into law by the President on July 4, 2025, represents one of the most sweeping tax reforms in recent years. This 870-page legislation fundamentally reshapes the tax landscape for individuals, families, and businesses, creating both unprecedented opportunities and complex compliance challenges for accounting and tax professionals.
As trusted advisors to clients navigating this new terrain, accountants and tax professionals must quickly master the intricacies of the OBBBA while positioning their firms to provide strategic value beyond traditional compliance services. This quick and easy guide examines the Act’s key provisions and provides you with actionable strategies for helping clients optimize their tax positions under the new law.
Understanding the OBBBA’s Core Impact: Why Would Your Clients Care?
According to the Tax Foundation, the major tax provisions will result in tax savings of $5 trillion between 2025 and 2034, signaling the legislation’s massive scope and impact.
As a tax professional, you can help your clients correctly claim their slice of this $5 trillion pie!
Key Provisions Affecting Individuals and Families
The OBBBA introduces several new deductions that create planning opportunities for individual clients:
Enhanced SALT Relief
The State and Local Tax (SALT) deduction cap has temporarily increased from $10,000 to $40,000 through 2029 for taxpayers earning under $500,000 ($20,000 each for married filing separately), then reverts to $10,000 in 2030.
The increased cap is subject to a phaseout for higher-income taxpayers. For 2025, it begins for those with a Modified Adjusted Gross Income (MAGI) over $500,000 ($250,000 if married filing separately) and is fully phased out for those with a MAGI over $600,000.
How you need to plan for the change:
- Review Client Portfolios: Identify clients who could benefit from the increased SALT deduction. Even if the client’s itemized deductions are above the previous $10,000 cap, the new standard deduction of $31,000 means that the SALT cap may not be as beneficial for many taxpayers.
- Income Projections: Help clients project their MAGI. If their MAGI is near thresholds, you will need to compute their SALT cap phase-out correctly. The SALT cap reduces from $40,000 to $10,000 as the income grows from $500,000 to $600,000 but the standard deduction stays at $31,000. As a result, if the MAGI is more than $533,000, the SALT cap will fall to $30,000 and the standard deduction will likely be better.
- PTET: Some states had previously introduced pass-through entity tax (PTET) workarounds to mitigate the effects of the federal SALT cap and these are mostly still in place. These allow pass-through businesses (like partnerships and S corporations) to pay state tax at the entity level and claim a deduction federally. With a higher SALT cap in place, some taxpayers who used these workarounds last year may not need them anymore. The workarounds still remain relevant for taxpayers with state taxes above $40,000 or the MAGI exceeding the phase-out thresholds.
New Deductions for Working Americans
Senior “Bonus” Deduction: An additional $6,000 deduction per senior (age 65+) or $12,000 for qualified couples, effective 2025-2028, phasing out at $75,000 MAGI for single filers and $150,000 for joint filers.
Tip and Overtime Income Deductions: Up to $25,000 deduction for tip income per filer and overtime deduction capped at $12,500 (single)/$25,000 (joint), both applying from 2025-2028 with phase-outs beginning at $150,000 MAGI for single filers.
Auto Loan Interest Deduction: Up to $10,000 annually for interest on loans for U.S.-assembled vehicles purchased after 2024, phasing out at $100,000/$200,000 income levels.
How you need to plan for the change:
Are you prepared to answer questions from clients like “Can I ask my employer pay part of my income as tips?” or “How can I classify my consulting income from a side gig as overtime?”
The new deduction only applies to tips received in occupations that “customarily and regularly received tips” on or before December 31, 2024. The Treasury Department is required to publish a list of eligible occupations, providing further clarity on the matter.
Do you know if any clients are considering a new vehicle purchase, or if their business vehicle reached the end of its depreciable life? Informing them of the new auto loan interest deduction could help them maximize their savings and also help you start the filing work before the busy season hits. Also prepare to answer questions related to refinancing auto loans, or which cars would qualify as U.S.-assembled vehicles.
Enhanced Credits and Exemptions
- Child Tax Credit increased to $2,200 per child, indexed for inflation beginning 2026
- Estate and gift tax exemptions increased to $15 million (single) and $30 million (joint)
- New tax-advantaged “Trump Accounts” for children under age 8 for long-term savings
How you need to plan for the change:
Having a quick estimate of the increased savings from the enhanced Child Tax Credit can help start some important planning conversations on a positive note.
Understanding the quantitative benefits of Trump Accounts over other state and federal savings vehicles, especially 529 plans, can help you guide clients on the best options for their children’s future education and expenses.
- A key difference is that Trump Accounts can be used for a wider range of expenses beyond just education but withdrawals are taxed regardless of the reason for withdrawal. The 529 plans offer tax-free withdrawals for qualified education expenses.
- Another point to note is the contribution limit - Trump Accounts have a $5,000 annual contribution limit per child, while 529 plans have significantly higher limits.
Advanced Planning Opportunities
Energy Credit Phase-Outs: Several popular energy credits are being eliminated, creating urgency for clients considering sustainable investments.
Residential Clean Energy Credit (Section 25D) expires after December 31, 2025. Energy-Efficient Home Improvement Credit (Section 25C) also ends after 2025
Clean Vehicle and Charging Credits expire after September 30, 2025.
Estate Planning Acceleration: With increased estate and gift tax exemptions ($15 million single/$30 million joint), high-net-worth clients have expanded opportunities for wealth transfer strategies.
The “Big Three” Business Provisions
Three critical business provisions, historically known as the “Big Three,” form the cornerstone of the OBBBA’s business tax strategy:
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Research and Development (R&D) Costs: The Act restores the ability for businesses to immediately expense domestic R&D costs under Section 174, reversing the mandatory capitalization requirements that began in 2022. Additionally, entities can accelerate remaining unamortized domestic Section 174 costs for amounts incurred from 2022 to 2024. This change is particularly significant for life sciences and technology companies that have been adversely affected by the capitalization requirements.
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Business Interest Expense Deductions: The legislation restores the definition of adjusted taxable income from an earnings before interest and taxes (EBIT) to an earnings before interest, taxes, depreciation, and amortization (EBITDA) calculation for determining interest expense limitations under Section 163(j). This change significantly increases the amount of business interest expense companies can deduct.
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Bonus Depreciation: The Act reinstates 100% bonus depreciation on qualified assets acquired on or after January 20, 2025, and expands eligibility to include manufacturing buildings placed in service before January 1, 2031. This provision provides immediate cash flow benefits for businesses making capital investments.
Another notable change is that the QBI deduction is staying and will have a few modifications for the 2026 tax year. This can affect taxpayers considering changes to business structure (partnership to S-Corp, etc.) and should be reviewed with clients.
Strategic Implications for Tax Professionals
ASC 740 Considerations for Corporate Clients
For corporate clients, the OBBBA creates significant accounting considerations under ASC 740. Entities may need to account for tax law changes in the period that includes the enactment date (July 4, 2025), affecting third-quarter provisions for calendar-year entities.
Key Accounting Impact Areas
Valuation Allowance Reassessment: Entities with valuation allowances may experience significant effects on their tax provisions, particularly in life sciences and technology industries affected by Section 174 R&D expense changes.
Deferred Tax Considerations: The restoration of favorable treatment for the “Big Three” items may result in:
- Lower current taxable income in 2025
- Adjustments to deferred tax assets and liabilities
- Potential changes to valuation allowance requirements
Documentation and Compliance
The Act introduces stricter compliance requirements, including:
- Enhanced 1099 information reporting for businesses
- VIN reporting requirements for auto loan interest deductions
- New Social Security number requirements for claiming certain deductions
Positioning Your Firm for Success
The OBBBA presents an opportunity to position your firm as a strategic advisor rather than just a compliance provider. Consider:
Advisory Service Development
- Multi-year tax planning scenarios
- Business restructuring opportunities
- Investment timing strategies
- Estate planning optimization
Client Education Programs
Want to get clients started with engagement letters before the busy season hits? Helping clients recognize planning opportunities is a great way to have them start early.
Here are concrete steps firms can take to prepare and help clients, potential clients, local communities, and your online communities navigate the OBBBA:
- Host targeted webinars and education programs by taxpayer type (e.g., small businesses, high-net-worth individuals).
- Run industry-specific guidance sessions to surface sector impacts and planning opportunities.
- Offer quarterly tax-planning reviews to adjust strategies as rules or client situations change.
Invest in professional development
- Attend specialized OBBBA training programs.
- Obtain relevant continuing-education credits.
- Build deep expertise in provisions affecting your client base.
Compliance risks
Manage transition and compliance risks with clear documentation and substantiation policies:
- Explain required record-keeping for new deductions.
- Communicate timing requirements for elections.
- Prepare clients for potential audit questions and mitigation strategies.
Long-Term Planning and Monitoring
Implement multi-year planning for provisions with sunsets (many individual items end in 2028):
- Perform long-term cash-flow modeling.
- Optimize timing of elections and transactions.
- Create contingency plans for possible legislative changes.
Looking Ahead: Legislative Vigilance
Monitor political and legislative developments:
- Track potential reversals or state-level responses.
- Prepare scenario-based planning models.
- Keep client strategies flexible to adapt to changes.
Conclusion: Embracing the OBBBA Opportunity
The One Big Beautiful Bill Act represents both a challenge and an unprecedented opportunity for accounting and tax professionals. Those who quickly master its complexities and proactively guide clients through the new landscape will not only ensure compliance but also drive significant value for their practices.
Success in the OBBBA era requires more than technical knowledge — it demands strategic thinking, proactive communication, and the ability to translate complex tax provisions into actionable client guidance. By positioning your firm as a trusted advisor capable of navigating this new terrain, you can transform the OBBBA from a compliance challenge into a competitive advantage.
The clients who will benefit most from the OBBBA are those with advisors who understand not just what the law says, but how to leverage its provisions strategically.
As you prepare for the upcoming tax seasons, also remember to take advantage of the new features in your Encyro account that enhance the core secure file sharing and electronic signature functionalities:
- online invoicing
- collecting payments with e-signatures (e.g. collect payment with IRS Form 8879 to comply with the IRS stockpiling rule and minimize delayed payments or bad debts)
- requiring payment with file delivery (e.g. require a payment before the client can download final tax returns or ready-to-file documents)
This analysis is based on a current understanding of the One Big Beautiful Bill Act as enacted, at the time of this writing. Tax professionals should consult the latest IRS guidance and professional resources for the most current interpretations and compliance requirements.
Encyro Inc does not provide tax or legal advice. This article is for informational purposes only and does not constitute professional advice.