There’s a massive piece of legislation making waves in Congress, and while the final vote is still pending, it’s being called the “One Big Beautiful Bill Act.” If it successfully navigates the legislative process and gets signed into law, it’s poised to usher in some of the most significant tax changes we’ve seen in years, starting as early as 2025.
This isn’t just about extending a few expiring provisions; this bill is packed with entirely new rules that could reshape your personal finances and how businesses operate. It’s a hot topic, and getting ahead of the curve now means you’ll be prepared no matter what happens. Let’s dive into what this potential new law could mean for you.
Key Changes Starting this 2025
Higher Standard Deductions
For tax years 2025 through 2028, the standard deduction will increase for all filing statuses:
- Married couples: $32,000 (up from $30,000)
- Heads of household: $24,000 (up from $22,500)
- Single filers and all others: $16,000 (up from $15,000)
There is also a new bonus standard deduction for seniors, providing an additional $4,000. This deduction is subject to a phaseout based on income.
All others: A nice $1,000 increase, reaching $16,000 (up from $15,000 in 2025).
Pro Tip: This increased standard deduction could mean fewer people need to itemize, simplifying their tax filing.
New Vehicle Loan Interest Deduction
Thinking of buying a new car? From 2025 to 2028, you could deduct up to $10,000 in interest on loans for new vehicles assembled in the United States.
Child Tax Credit Gets a Raise:
The Child Tax Credit is increasing from $2,000 to a generous $2,200. This could put more money back into families’ budgets.
Tips and Overtime Could Be Tax-Free (Partially)
From 2025 to 2028, you can deduct up to $25,000 for qualified tips you receive. This applies to both W-2 employees and 1099-K contractors. Just be aware, it starts to phase out if your income is above $150,000 ($300,000 for joint returns).
Similarly, you might be able to deduct up to $12,500 ($25,000 for joint returns) for qualified overtime pay. That’s a direct reward for putting in those extra hours!
Changes Coming in 2026 and Future Tax Years
Higher SALT (State and Local Tax) Deduction Cap
The deduction cap for state and local taxes (SALT) will increase to $40,000 in 2026, up from the current $10,000. However, this expanded cap is temporary as it returns to $10,000 in 2030.
Phaseout of Itemized Deductions for High-Income Earners
For taxpayers in the top 37% tax bracket, each dollar of itemized deductions will only reduce taxable income by 35 cents. This limits the benefit of itemizing for higher earners.
New Excise Tax on International Transfers
Starting January 1, 2026, a 3.5% excise tax will be levied on money transfers made by individuals to foreign recipients. This change may significantly impact taxpayers who regularly send money abroad.
Refundable Adoption Tax Credit:
Up to $5,000 of the credit is now refundable, which could benefit families with little or no income tax liability.
Tax Advantage “Trump Accounts” for Newborns:
Children born between January 2025 and December 2028 will automatically receive a $1,000 contribution to a new tax-advantaged investment account created and funded by the federal government.
Businesses Tax Updates You Should Know
Increased Qualified Business Income (QBI) Deduction
The QBI deduction is increasing to 23% (up from 20%). A minimum deduction of $400 will also apply to taxpayers with at least $1,000 in qualified business income.This is great news for small business owners and self-employed individuals.
New SALT Cap Restrictions for Pass-Through Entities
Pass-through entity owners (LLCs, partnerships, S corporations) will face new limits on strategies that previously helped bypass the SALT deduction cap.
Employer-Provided Childcare Credit Expansion:
Businesses looking to support their employees with childcare are getting a significant incentive. The credit increases to 40% of qualified expenses (up from 25%), with a maximum credit of $500,000 (up from $150,000). Small businesses may also deduct up to 50% of qualified childcare expenses, up to a $600,000 cap.
Updated 1099 Reporting Thresholds
- The Form 1099-NEC threshold will increase from $600 to $2,000, starting in 2025.
- The controversial $600 threshold for Form 1099-K will be rolled back to the previous $20,000 threshold and 200 transaction minimum.
R&E Expensing Reinstated:
Businesses can once again fully deduct domestic Research and Experimental (R&E) costs from January 1, 2025, to 2029.
Bonus Depreciation Returns:
The 100% bonus depreciation for qualified property that is acquired and placed in service is back, effective January 19, 2025, through December 31, 2029. This incentivizes businesses to invest in new assets.
Section 179 Deduction Increase:
Businesses can now deduct a maximum of $2.5 million of qualifying property under Section 179, a significant jump from $1.25 million.
What Does This Mean for You?
This “One Big Beautiful Bill Act” is a game-changer for taxpayers across the board. Whether you’re an individual, a family, or a business owner, these changes are going to affect how you plan and file your taxes.
What This Means for Californians
- Tax Savings vs. Budget Risks
California taxpayers will welcome expanded deductions—especially SALT and standard deduction increases. Yet, any savings might be undermined by future federal austerity measures, especially around energy and health funding. - Healthcare and Safety-Net Impacts
Medicaid and SNAP cuts could strain already-overburdened state programs, putting low-income residents at risk. California may need to pick up more of the slack with state funds. - Clean Energy and Utility Costs
Rollbacks to federal clean-energy incentives could slow solar and wind investment in California, potentially raising utility rates and affecting green job growth.
| 📌 Pros | ❗ Cons |
| Expanded deductions (standard, SALT) for CA taxpayers | Trillions added to national debt |
| New tax breaks for families, workers, small businesses | Cutting Medicaid and SNAP. Millions lose coverage |
| Incentives for U.S. car owners and business investments | Higher energy costs due to reduced clean-energy credits |
| Support for childcare, newborn savings | Wealthy gain disproportionately; low-income see smaller gains |
Final Take
For Californians, this bill brings immediate tax relief, particularly for families and small businesses. But it also raises new concerns:
- State fiscal pressure as federal support for social services shrinks.
- Higher utility bills with diminished clean-energy support.
- Worsening inequality, with benefits skewed toward higher-income households.
If you’re in California and navigating these changes whether as an individual, business owner, or policy advocate you’ll want to:
- Optimize your deductions (including SALT).
- Consider the future costs of lost healthcare and energy support.
- Stay alert to state-level responses or compensations.
Consulting a California-based tax advisor or policy analyst can help you understand how your personal or business finances may shift under this new law.
