The One Big Beautiful Bill is Here, but Are You Ready for the Changes?

The One Big Beautiful Bill Act (OBBBA) is now law, bringing major changes to the U.S. tax and financial landscape. This comprehensive legislation introduces reforms that will influence how individuals and businesses manage their taxes, payroll, and retirement savings.

Let’s begin with an overview.

What is the One Big Beautiful Bill?

The One Big Beautiful Bill Act is a sweeping piece of legislation passed by Congress in 2025. Commonly referred to as the Big Beautiful Bill, it combines tax reforms, enhanced small business credits, and updated retirement savings rules.

This law stands as one of the most significant updates to federal tax and financial regulations in recent years, affecting everything from how individuals report income and claim deductions to new incentives that promote retirement funds. It also simplifies payroll compliance for many employers.

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Key Highlights of the Bill

Here's a look at how specific provisions of the bill will affect CPAs, business owners, and individuals:

What This Means for CPAs

CPAs play a crucial role in helping clients navigate complex tax and retirement regulations. The OBBBA introduces several changes that directly impact their work:

Form 1099-NEC: Higher Reporting Threshold for Nonemployee Compensation

• The reporting threshold for Form 1099-NEC increases from $600 to $2,000, meaning businesses only need to file if they pay a nonemployee $2,000 or more in a calendar year.

Client Education on Deduction Shifts: QBI and SALT Cap

• The Qualified Business Income (QBI) deduction is made permanent, with increased phase-in thresholds (e.g., to $75,000 for single filers and $150,000 for joint filers).

• The State and Local Tax (SALT) deduction cap is increased from $10,000 to $40,000 for most filers through 2029. CPAs will be key in helping clients optimize these deductions.

New Planning Opportunities: Enhanced Depreciation and Interest Deductions

• The bill permanently reinstates 100% bonus depreciation for qualified business property acquired after January 19, 2025.

• The business interest deduction limitation now shifts to an EBITDA basis, generally allowing businesses to deduct more interest expense. CPAs can offer more specialized planning services around these changes.

How Small Business Owners Are Affected

Small business owners face a variety of new rules and opportunities under the OBBBA, primarily aimed at stimulating growth and simplifying compliance:

Simplified Retirement Plan Setups: Automatic Enrollment & Part-Time Eligibility

• New 401(k) plans are required to have automatic enrollment (unless an exemption applies).

• The eligibility requirement for long-term part-time employees to participate in 401(k) plans is reduced to two consecutive years (from three). This simplifies plan administration and expands employee access.

Significant Potential for Tax Savings: Section 179 & Bonus Depreciation

• The Section 179 expense limit is increased to $2.5 million per year (with a phase-out beginning at $4 million).

• The 100% bonus depreciation for most business property purchased and placed into service after January 19, 2025, is made permanent, allowing immediate write-offs.

Payroll Integration Updates: Deductions for Tips & Overtime

• The bill introduces above-the-line deductions for employee tips (up to $25,000) and federal overtime pay (up to $12,500 for single filers). However, employers must still withhold applicable FICA and FUTA taxes.

• Businesses using payroll providers may benefit from streamlined processing for these new deductions.

Increased Compliance: System Updates for New Standards

• Small businesses will need to update payroll and benefits systems to comply with the new auto-enrollment rules for 401(k)s and adjust for the new tip and overtime deductions, ensuring accurate reporting.

What Individuals Need to Know

For individual taxpayers, the One Big Beautiful Bill introduces key changes worth noting, impacting savings, credits, and overall tax liability:

Higher Retirement Contribution Limits: IRAs & "Trump Accounts"

• IRA contribution limits increase to $7,000 for most, and $8,000 for individuals aged 50 or older, starting in 2025.

• The new "Trump Accounts" allow annual tax-deferred contributions of up to $5,000 for minors, offering a new savings avenue for families.

Revised Tax Credits: Saver's Credit & Family Leave

• ABLE account contributions are permanently eligible for the Saver's Credit, and the maximum amount eligible for the credit increases to $2,100 starting in 2027.

• A permanent employer credit for paid family and medical leave may encourage more businesses to offer these benefits.

Adjustments to Taxable Income & Withholding: Standard Deduction & SALT

• The permanent extension of higher standard deductions ($15,750 for single filers, $31,500 for joint filers in 2025) means fewer individuals will itemize.

• The increased SALT deduction cap to $40,000 provides significant relief for taxpayers in high-tax states. These changes may require adjustments to paycheck withholding.

New Planning Opportunities: 529 Plans & Estate Planning

• 529 plan qualified expenses are expanded to include certain pre-college costs and increase the annual K-12 expense limit from $10,000 to $20,000.

• The permanent increase in the estate and gift tax unified credit to $15 million per individual opens up significant estate planning avenues.

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How to Prepare for the OBBBA

The OBBBA calls for proactive planning. Understand its key changes, like the new 1099-NEC threshold, "Trump Accounts," and altered deductions for QBI and SALT, alongside updated retirement and business incentives. Consult your financial professionals to adjust tax strategies and savings plans. Businesses should also update systems for compliance and optimized reporting. Taking these steps helps you maximize benefits and confidently navigate the OBBBA’s impact.

Final thoughts

The One Big Beautiful Bill Act updates retirement, tax, and payroll rules that affect CPAs, small businesses, and individuals. Staying informed and prepared will help you take advantage of new opportunities and ensure compliance with upcoming changes.

Stay connected with WealthRabbit for the latest updates, expert insights, and practical advice on how these changes may affect your financial planning.