The One Big Beautiful Bill Act (OBBBA) brings forward comprehensive revisions to the federal tax code, going into effect for the 2025 tax season. These updates are critical for tax professionals who must adjust planning strategies, advise clients accordingly, and ensure their tax software is up to date.
Key Provisions of the OBBBA:
1. Permanent Continuation of 2017 Tax Cuts
The OBBBA codifies the individual and corporate tax rate reductions first introduced in the 2017 Tax Cuts and Jobs Act (TCJA), making these lower rates a lasting part of the code.
2. Expanded SALT Deduction Limit
The deduction cap for state and local taxes (SALT) will increase to $40,000 for households earning less than $500,000 annually. This change will remain in effect through 2029.
3. Increased Child Tax Credit
Effective in 2025, the child tax credit rises to $2,200 per qualifying child. A maximum of $1,400 is refundable, and the total credit will be adjusted for inflation in future years.
4. New Tax Break for Seniors
A new $6,000 deduction is available for taxpayers aged 65 and older. This benefit begins to phase out for single filers earning above $75,000 and for joint filers above $150,000.
5. Reinstatement of R&E Expensing
The legislation restores immediate expensing for U.S.-based research and experimental costs, undoing the TCJA mandate to amortize these expenditures over time.
Readiness Steps for Tax Professionals
Now that the bill has been signed into law, tax professionals should take steps to prepare for the changes:
· Software Updates: Ensure your tax preparation platform—such as TaxAct Professional—has been updated to reflect the newly enacted provisions.
· Client Outreach: Communicate with clients about the potential effects on their tax situation, especially in areas like deductions and credits.
· Ongoing Learning: Monitor legislative updates and best practices. We’ll continue posting insights and guidance via our blog.
By taking proactive steps, you’ll be well-equipped to manage the changes introduced by the One Big Beautiful Bill Act and help your clients stay compliant and informed.
For more updates on the OBBBA and future tax legislation, keep visiting our blog.
Disclosure: This article is for informational purposes only and not legal or financial advice. All TaxAct offers, products and services are subject to applicable terms and conditions.