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Breaking Down the "One Big Beautiful Bill": What You Need to Know

Insights

Spanning more than 1,100 pages, the OBBB is packed with many changes to tax reforms, government spending, and rollbacks of several existing policies. While the bill has a lighthearted nickname, it includes many serious reforms that may impact individual taxpayers, families, retirees, and business owners alike. 

In this blog post, we'll review some of the bill's most important and relevant parts so that you can stay informed. The "One Big Beautiful Bill" (OBBB) is still under consideration and has not yet been signed into law. Provisions discussed here may change before its final passage.

Family Perks 

Several provisions in the OBBB aim to provide relief and incentives for working families. Here are some highlights families should be aware of:  

  • Child Tax Credit Extension: Set to expire in December 2025, the child tax credit will continue and increase to $2,500 per child, helping families offset child expenses. The credit amount is currently $2,000.
  • No Tax on Tips or Overtime: This change could result in substantial tax savings for hourly employees who rely on tips and overtime. Tips and overtime are presently taxed as ordinary income. 
  • Enhanced Deductions for Seniors: Eligible seniors (65+) will receive an additional deduction of $4,000. The current senior deduction for single and head-of-household filers is $2,000. 
  • 529 Plan Adjustment: This broadens the allowable uses of 529 education savings accounts, expanding them to include postsecondary programs such as professional licenses for attorneys, cosmetologists, electricians, EMTs, HVAC, and other blue-collar professions. 

Effects on Business Owners 

A few of the revised tax policies may prove to be beneficial for certain business owners.

  • Immediate Expensing of Eligible Assets: The depreciation expense for eligible assets will be increased to $2.5 million, doubling the previous limit of $1.25 million, encouraging business reinvestment and equipment purchases.
  • Special Depreciation for Qualified Production Property: Businesses can immediately deduct 100% of eligible assets, such as new factories or improvements to existing factories, which previously had to be deducted over a 39-year period. 

Disincentivizing Clean Energy and Medicare Fraud Watch 

While the OBBB provides many new tax breaks, it also rolls back some regarding clean energy credits, which were initially in place until 2032 and will expire in December 2025. The rollbacks include:

  • Credits for pre-owned clean energy vehicles (previously $4,000 per year or 30% of purchase price) 
  • Commercial clean energy credits (previously $7,500 per year)
  • Energy-efficient home incentives (previously $3,200 per year)

If you plan to take advantage of these clean energy incentives, now may be a good time to rethink your timeline; some credits could end as early as 2025. 

On the Medicare side, the bill introduces new measures aimed at tightening individual eligibility requirements by eliminating Medicare eligibility for illegal immigrants and only allowing eligibility for lawful permanent residents, certain Cuban immigrants, and individuals living in the U.S. through a Compact of Free Association. Furthermore, work requirements for individuals receiving Medicaid coverage have been added. To receive coverage, you must: 

  • Work 80 hours per month (currently no work requirement) 
  • Be aged 19-64, including parents of teens (currently no age requirement) 

Parents with children under 14 are exempt from the requirements listed above.

The OBBB also implements a provision to provide $25 million for the Secretary of Health and Human Services to contract with AI vendors to crack down on excessive Medicare payments. 

The End of the IRS Direct File 

The IRS Direct File program, which allows taxpayers in select states to file with the IRS directly for free, will now be discontinued. Moving forward, the IRS will partner with third-party tax preparation providers. 

Next Move? 

The Senate plans to vote on the final version of the OBBB in mid-June. The administration aims to have the bill signed into law by the 4th of July, although some negotiations and changes are likely before then. Some important negotiations we will watch closely include an increase in the SALT (State and Local Tax) Deduction Cap, a decrease in Clean Energy Credits, and the tightening of Medicaid work requirements. 

Legislation changes this significant can feel overwhelming, but they provide planning opportunities. Whether you're a parent, business owner, or retiree, examining the OBBB and how it may affect your financial and tax situation may be worthwhile. 

As always, KWB Wealth is here to help you navigate these changes and any necessary modifications to your financial plan. If you have any questions, please feel free to reach out.

~ KWB Team

This article is for general informational purposes only and does not constitute legal or tax advice. Please consult with your tax or legal professional about how proposed changes may apply to your individual situation.

Sources (as of June 2025)
Congress.gov
United States House Committee on Ways & Means