One Big Beautiful Bill (OBBB)

One Big Beautiful Bill (OBBB)

By: Jason Watson / Posted Friday, July 4, 2025
one big beautiful bill
Posted By: Jason Watson

Overview of the One Big Beautiful Bill (OBBB)

Before we dive into the nitty gritty of this new bill, here are some of the key highlights specific to our clients.

  • Corporate Tax Rate remains at 21%, unchanged from TCJA.
  • 100% Bonus Depreciation returns for assets placed in service 2025–2030. Huge win for real estate investors and short-term rentals.
  • Section 199A (QBID) stays at 20% and is now permanent with some phase-out improvements.
  • SALT Deduction Limit increased to $40,000 (up from $10,000) but phases out above $500,000 AGI; sunsets in 2029.
  • No Federal Income Tax on Tips and Overtime up to $25,000 (phases out at $190,000 AGI); FICA taxes still apply. Ends in 2029.
  • EV Credits Eliminated after September 30, 2025, but replaced with:
    • Auto Loan Interest Deduction up to $10,000 for new U.S.-assembled vehicles (income limits apply).
  • Solar & Energy Credits being phased out by December 31, 2025.
  • Short-Term Rental Loophole and Cost Segregation strategies are back in full force, boosting real estate tax planning.
  • Expect delays in IRS forms and guidance as Treasury and IRS work through implementation.
  • State tax conformity may vary — many states do not follow federal rules on bonus depreciation.

One Big Beautiful Bill (OBBB)The House recently passed the Senate’s version of the One Big Beautiful Bill Act (OBBB or OB3 which we just made up), and it is set to be signed on July 4, 2025. You could also take a chance on us or be a dancing queen, and call it OBBBA for One Big Beautiful Bill Act, and pronounce it like Abba, but we digress. OooBBBA like tuba? No?

There are a ton of crazy tax provisions in the OBBB, OBBBA, or OB3, but we will focus on those most impactful to WCG CPAs & Advisors’ clients. Here we go-

  • Corporate tax rate kept at 21% but remains tax inefficient for most business owners given dividend taxes (C Corps are good for aggressive debt reduction / pay down, qualified small business stock exclusions, ROBS applications, among other narrow situations).
  • Bonus depreciation is back to 100%, but only for assets placed in service in 2025 through 2030 (no retro for 2024 and 2023, sorry). Short-term rental loophole and cost segregation are back with a vengeance. Add a little lower interest rates, and booyeah, the real estate business will be back.
  • SALT limits, or what is also known as state and local tax limits, are $40,000 but phase out after $500,000 in adjusted gross income. No SSTB carve-out limiting PTET deductions. Yay!
  • Qualified Business Income Deduction, or Section 199A QBID, remains at 20% and largely unchanged except for some phase out improvements. It also becomes permanent.
  • No tax on tips and overtime up to certain limits including income phase-outs.
  • EV credits are eliminated but replaced with an auto loan interest deduction (yeah, you read that correctly), and solar credits including related energy credits are being phased out. All these energy credits are being rapidly eliminated this year.

There are several other things, but in our opinion, these are the big ones for most small business owners and rental property investors.

Of course some will consider OBBB to stand for One Big Bloated Bill. It’s classic legislation written by hundreds, each with someone to answer to. Oh well.

OBBB Treasury Regulations and IRS Guidance

Just like any other major tax reform, it generally starts off as an amendment to the 1986 Internal Revenue Code (IRC). Since the One Big Beautiful Bill is written in crayon, ping-ponged like a hot potato, and hurried along without care for accuracy and exactness, the Treasury Department and Internal Revenue Service must now explain, curtail, expand and offer guidance on how to interpret and deploy the madness.

Typically, it goes like this- the Treasury Department will issue temporary regulations and ask industry leaders and others for opinions, questions and whatnot. They also attempt to offer definitions and clear up ambiguities. Tax code ambiguous? Nah, not our tax code!

Next, once the temporary regulations are finalized, the IRS steps in with Revenue Procedures, updated Publications, new or modified tax forms, and other memorandums including procedural guidance.

Sidebar: With all major tax reform including OBBB, you can expect delayed tax forms especially at the state level. The good news is that this bill is being signed into legislation in July and not December like TCJA was. All the same, states usually stink at getting their poop in a group when tax season rolls around.

As such, when you have a zillion questions, just like with Tax Cuts and Jobs Act of 2017 (TCJA), you’ll need to exercise some patience for the finer details and nuances for your unique tax footprint. In other words, some email restraint is in order as we all navigate this.

21% Corporate Tax Rate

The good news with TCJA is that the 21% corporate tax rate was never going to sunset like bonus depreciation, qualified business income deduction, SALT limits among other things. Therefore, the 21% tax rate was not necessarily included in OBBB or OB3 (we might be onto something) but it was debated and haggled on some levels as legislators played Red Rover with your money.

100% Bonus Depreciation

This 100% bonus depreciation is massive. The good news is that it was never in jeopardy like state and local tax (SALT) limits were. There was discussion to make it retroactive back to January 2017 for any assets and rental properties placed in service (ready and available for the its intended purpose). However, and this a slight bummer, 100% bonus depreciation remains available for assets, such as rental properties including short-term rentals, placed in service after January 19, 2025 through the end of 2030.

In other words, rental properties, and other assets, placed in service in 2024 and 2023 remain at the 60% and 80% bonus depreciation amounts, respectively. Sorry.

While we all had Section 179 expensing available to us (as bonus depreciation started to step down) for a cost segregation study where real estate was divided into 5-, 7- and 15-year property, Section 179 also had it its warts-

  • It could not create a loss, and therefore losses at the entity level are carried forward. So, rental properties owned in partnerships leveraging Section 179 could not create losses to offset high W-2 incomes (owning a rental property in a single-member LLC, two-member spouse LLC in a community property state or individually did not have this issue).
  • When applied to 15-year property such as driveways, sidewalks, landscaping, fences, etc., Section 179 could only be used if the real estate was considered nonresidential (30 days or less average guest stay).
  • It had personal limitations when aggregating Section 179 expensing from various activities such as real estate syndicates and other business interests on top of common rental property activities. Section 179 also had pesky income limitations.

Therefore, with 100% bonus depreciation back in the mix, and given the above items remain true today, Section 179 expensing will once again take a back seat for most situations (but don’t sleep on it since states don’t like bonus depreciation).

Short-term rental loophole or real estate professional status paired with a cost segregation study is back to being a powerful investment strategy. Bonus depreciation was set to be 40% for 2025, and now enjoys 2.5 times the power through 2030. For example, if you have a rental property with a depreciable basis of $400,000 (let’s say the building is $400,000 and land is $200,000), your accelerated depreciation plus first year depreciation might be calculated at $65,000. Quickie guess, so let’s play along.

With the One Big Beautiful Bill (OBBB), the first year depreciation with 100% bonus depreciation could easily be $150,000 or more. At a 37% marginal tax bracket, this puts $55,500 back into your pocket (versus $24,000ish). Boom!

Sidebar: Most states decouple from the federal tax code, and do not allow for bonus depreciation or severely limit it. This can be a massive surprise as you enjoy a big fat deduction against your equally big fat W-2 on your 1040 tax return, yet have to write check to the state.

Just to reiterate, the 100% bonus depreciation under OBBB does not step down like it did with TCJA. It is 100% through 2030. Yeah, baby!

Short-Term Rental Loophole

STR Loophole Chapter

See our Short-Term Rental Loophole chapter from our rental book.

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Cost Segregation Study

Learn about cost segregation and how it can lower your taxes.

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Real Estate Professional Defined

See how real estate professional status can help deduct passive losses.

$40,000 SALT Limit

The state and local tax limit of $10,000 is now $40,000 but the new SALT limit is reduced $1 for every $13.33 above $500,000 in adjusted gross income (fully phased out at $900,000 which $400,000… $400,000 divided by $30,000 is $13.33). This is good news and bad news all at the same time. Good news first- if you are a W-2 employee and have $15,000 in property taxes and $20,000 in state income taxes, your state and local tax deducted on Schedule A of your 1040 tax return goes from $10,000 to $35,000. At 37% marginal tax rate, this is a $9,250 swing in your cash flow. Yay.

$40,000 SALT LimitThe bad news is not really that bad, but tax planning will get way more complicated for small business owners who have leveraged the pass-through entity tax (PTET) deduction in the past. Should you do it? Skip it? Generally speaking, it remains a good idea to use business dollars to create a federal tax deduction for your S corporation or partnership when paying a state pass-through entity tax (PTET), but there are always devils in details.

Stay tuned as WCG CPAs & Advisors recalibrates our Clash “should I stay or should I go now” PTET table for each state.

More good news- there was silly chatter about limiting SALT tax deductions for what the Treasury Department calls a specified service trade or business, or SSTB. For those who are impacted by this designation on their Section 199A qualified business income deduction (QBID) at they hit the 32% marginal tax bracket, this was going to be yet another kick in the pants. However, it was dropped in the final One Big Beautiful Bill Act.

Sidebar: Congress has a thing for SSTBs which loosely contain medical personnel, accountants, attorneys, consultants among others. The rationale is that these businesses are mostly “disguised W-2s” when operating as an S Corp. This is dumb. WCG CPAs & Advisors is an accounting firm, yet we are a real business with real team members and real payroll expenses beyond the shareholders, and is anything but a disguised W-2. However, we are considered an SSTB just the same. Sour grapes, sure, but crummy nonetheless.

The SALT limit of $40,000 is slated to sunset in 2029 and return to $10,000 in 2030.

No Tax on Tips or Overtime

This one is going to be a mess. Tips and overtime up to $25,000 combined will be deducted from federal income to determine federal income tax. Social Security and Medicare taxes (FICA) are still applied. The adjusted gross income limit is $150,000 and fully phases out at $190,000.

Why is this messy? Reporting is going to be a problem. Can everyone simply deduct $25,000 in tips or is there a control such as it must be reported by the employer on a tax document like a W-2? What is a tip? Must it come from a customer? Or can an employer simply call a bonus a tip? To take this tax deduction, taxpayers must have originally reported it as income- it is doubtful a bunch of cash tips will be suddenly be reported since they are still subject to payroll taxes (just not income taxes).

Next, overtime. Another mess. Payroll companies and human resource departments now have to track overtime on a paystub and eventually onto (seemingly) a W-2? Gee, thanks. It’s not like payroll reporting is a snap, and this little wrinkle is just that.

Overall, this is good for food service and hospitality workers among other professions but is going to be ripe with problems.

This sunsets at the end of 2029.

EV and Energy Credits

Electric vehicle credits, such as the famous $7,500 tax credit, including the commercial and alternative fuels ancillary tax credits are being quickly eliminated. From our understanding, these credits go away for vehicles purchased after September 30, 2025.

However, a vehicle loan interest deduction is now available like it’s the 1980s all over again. There are some considerations, however, and they sound vaguely familiar-

  • Up to $10,000 above the line deduction (i.e., you don’t need to itemize your tax deductions on Schedule A to benefit)
  • New cars only and assembled in United States (not just North America)
  • Income limits of $100,000 for single filers and $200,000 for joint filers
  • Must purchase by December 31, 2028 (although it appears the interest deduction can continue beyond 2028)

Also, energy credits such as solar and related home upgrade initiatives are being phased out by December 31, 2025.

There will be tons of devils in the details on this for sure!

Other OBBB Tidbits

Here are some extra things to consider on the One Big Beautiful Bill-

  • Tax brackets are permanently set to 10%, 12%, 22%, 24%, 32%, 35% and 37%. The 22% and 24% cover taxable incomes from $97,000 to $395,000 for married filing joint taxpayers given 2025 tax brackets.
  • Standard deduction remains elevated from TCJA with $31,500 for married filing joint taxpayers. Only about 10% of the tax returns filed have itemized deductions on Schedule A (down from 30% before TCJA).
  • Lifetime estate exemption is now $15 million starting in 2026 and will be adjusted for inflation.
  • $2,000 above the line charitable donations for married filing joint taxpayers starting in 2026. However, and this is a bit of a bummer, the first 0.5% of your modified adjusted gross income (MAGI) is no longer deductible on Schedule A starting in 2026. A donor advised fund (DAF) is going to be a big consideration to “pay” your 0.5% now and get your nice Schedule A deduction, and then dole out the contributions over time.
  • Those 65 years or older will have an additional $6,000 deduction on top of their standard deduction, but phases out at $150,000 adjusted gross income for married filing joint taxpayers. This was the solution for the “no taxes on Social Security benefits” objective.
  • 529 plans got a boost too. Additional K-12 expenses are now eligible, and vocational certifications are also eligible. For example, if someone wants to attend electrician school and obtain their licensing, a 529 plan might cover those expenses.

Neat!

I Just Got A Rental, What Do I Do?

Please give us a few beats as we also update our rental property book, I Just Got A Rental, What Do I Do? We make several references to bonus depreciaton and the related step downs. We’ll get it updated soon!

Summary

There are several other provisions in the OBBB (say it with us, the OB3). Like lots! We highlighted a few, but encourage you to stay connected with WCG CPAs & Advisors as things get refined and updated.

Getting Started with WCG

Learn about important tax deadlines, document checklists and due dates, and other essential tax return information.

Getting Started

Jason Watson, CPA is a Partner and the CEO of WCG CPAs & Advisors, a boutique consultation and tax preparation CPA firm located in Colorado, and is the author of Taxpayer’s Comprehensive Guide on LLC’s and S Corps and I Just Got a Rental, What Do I Do? which are available online and from mostly average retailers.

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Did you want to chat about this OBBB stuff? Curious about 100% bonus depreciation and cost segregation? Do you have questions about how we can help? Let’s chat!

The tax advisors, business consultants and rental property experts at WCG CPAs & Advisors are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.”

Let’s chat so you can be smart about it.

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