One Big Beautiful Bill Act—untangling the highlights

At 887 pages, it certainly is one big bill, but as Margaret Wolfe Hungerford wrote, “Beauty is in the eye of the beholder.” U.S. Rep. Brian Schatz, D-Hawaii, commented that, “It’s like this was designed in a lab to piss off the maximum number of people.” U.S. Sen. Bernie Moreno, R-Ohio, is quoted as saying, “If everybody draws a red line, you end up with a maze.”

Everybody got a little piece under the One Big Beautiful Bill Act, and nobody got all they wanted. The compromises needed to get consensus from deficit hard-liners, Medicaid defenders, the SALT caucus and Inflation Reduction Act protectors created a confusing hodgepodge of provisions. I confess that I have not read the entire 887 pages, but I have read countless summaries and sat in on webinars reviewing the provisions. Each webinar has had a different emphasis on various provisions, and here are a few that I found most interesting or confusing.

Tax Cut and Jobs Act

Passed in 2017 during the first Trump administration, it had provisions that were set to expire at the end of this year. The OBBBA made a lot of those provisions permanent.

◗ Tax rates: The lower individual income tax rates and tax brackets that were implemented temporarily have been made permanent.

◗ Standard deduction: 70% of filers used the standard deduction. After the Tax Cuts and Jobs Act was implemented and the standard deduction was significantly increased, that percentage rose to around 90%. The OBBBA makes the increase permanent.

◗ Estate and gift tax exemption: OBBBA permanently extends the estate and lifetime gift tax exemption, and effective in 2026, increases the exemption amount to $15 million for single filers and $30 million for those married filing jointly.

◗ Child tax credit: Increased from $2,000 to $2,200 and will be inflation-adjusted. There are also strict Social Security number requirements to qualify.

◗ Alternative minimum tax: A parallel tax system designed to ensure that certain high-income taxpayers pay at least a minimum amount of tax. Before TCJA, there were over 5 million filers. The TCJA decreased that to about 200,000; the figure is expected to remain there under the new OBBBA provisions.

New deductions

◗ Tips and overtime: No tax, but there are restrictions on who qualifies and caps on deductions.

◗ Charitable contribution deduction for those who don’t itemize: You are allowed to deduct up to $1,000 for a single taxpayer or $2,000 for joint returns for charitable contributions.

◗ Enhanced senior deduction: Temporary $6,000 deduction per qualified senior age 65 and older. This is in place for tax years 2025, 2026, 2027 and 2028. This amount is phased out for higher-income individuals. President Trump proposed eliminating taxes on Social Security benefits as part of his 2024 campaign. This provision is a way to meet Trump’s pledge.

Currently, 64% of seniors do not pay taxes on Social Security. This provision would increase that to 88%. Contrary to a communication by the Social Security Administration, this exemption is not tied to being a Social Security recipient. Those claiming Social Security before age 65 do not receive the credit, and those who are over 65 but not claiming benefits are still eligible for the deduction.

For example, a married couple filing jointly for tax year 2025 will have a standard deduction of $31,500. In addition, there is no change to the extra standard deduction of $1,600 if they are age 65 or older, or $3,200 for the couple.

Then, the budget bill gives each spouse an additional deduction of $6,000, or $12,000 for both, which would be available even for those who itemize their other deductions. Thus, for tax year 2025, a senior couple would owe no tax on their first $46,700 of income. But keep in mind, this has nothing directly to do with Social Security benefits. It lowers taxable income for all income tax purposes.

The latest SSA communication and additional rhetoric regarding this $6,000 senior deduction might raise false hope for many seniors.•