One Big Beautiful Bill Act Resources
One-stop shop on the 2025 reconciliation tax changes.
On July 4, 2025, Republicans passed a multi-trillion-dollar fiscal policy package that extends and makes permanent most of the expiring 2017 tax cuts, adds new targeted tax cuts, repeals many of the costliest energy tax subsidies, and cuts spending to a number of targeted programs.
The following explainer begins with a high-level overview of the major tax changes, their fiscal consequences, macroeconomic projections, and distributional effects. The end of the blog includes summaries of the law’s most significant changes with additional suggested readings, which will be updated as new resources are released.
Revenue, Spending, and Deficits
The Congressional Budget Office estimates the final law will add $3.4 trillion to primary (non-interest) deficits over a decade and another $700 billion in interest costs. The additional deficit is the result of the net $4.5 trillion tax cut being larger than the offsetting $1.1 trillion in spending cuts. Due to significant temporary portions of the law, these figures likely understate the true fiscal consequences. Using estimates from the Committee for a Responsible Federal Budget, Figure 1 shows that permanently extending both the tax cuts and new spending would put annual deficits at 7.8 percent of GDP in 2035 (up from 5.8 percent pre-reform).
On the revenue side, the changes were much more than simple tax cuts. The Joint Committee on Taxation estimated more than 100 different changes to the tax code that both increased and decreased revenue. The base broadening and other tax increases result in $3.9 trillion in higher revenue under current law, the majority of which comes from making 2017 changes to the personal income tax permanent. The significant new revenue only partially offsets the $8.4 trillion of gross tax cuts. Figure 2 summarizes categories of provisions with the largest changes in revenue.
On the spending side, the law primarily cut spending through reforms to Medicaid and food stamps by $1.4 trillion on a gross basis. These cuts were partially offset by about $300 billion in new outlays for defense and immigration enforcement.
Economic Growth
Several government and independent organizations have released “dynamic scores” of the reconciliation law, assessing its impact on the economy and changes in revenues and deficits due to the macroeconomic feedback. These complex models rely on strong (and different) assumptions and vary significantly in what they include and exclude. Consensus estimates show that the final law is somewhere between mildly pro-growth and economically neutral, and will not generate enough dynamic revenue to offset the size of the tax cuts even in the most optimistic scenarios.
Table 1 summarizes the economic and dynamic feedback estimates. The models that include stronger assumptions about the negative economic and budgetary effects of additional debt tend to have overall negative economic effects and thus make the deficit worse. Models with larger positive economic effects tend to assume workers and investors are more responsive to tax changes. The Council of Economic Advisers’ estimate is an outlier, but still shows the bill will not pay for itself. The larger estimate is primarily because it leaves out some of the base broadening tax increases and offsetting spending cuts.
Who Got A Tax Cut?
The US tax and transfer system is already highly progressive; wealthier households pay most federal income taxes, and lower-income households receive most federal transfers. So, when critics call the reconciliation law regressive, they really mean it made the system slightly less progressive.
While means-tested transfers clearly increase as personal income declines, the tax code is even more progressive, with tax rates increasing with income. In 2026, the top 20 percent of earners will pay more than two-thirds of all federal taxes, while the bottom 20 percent pay less than 1 percent. Because of this imbalance, any broad-based tax cut will inevitably deliver more dollars to those who pay more. But measured by percentage reduction in taxes paid (a more informative way to show how tax changes affect the progressivity of a tax system), the largest relative tax cuts in the budget bill go to the lowest-income taxpayers. Figure 3 uses Tax Policy Center data to show that the lowest-income taxpayers benefited from the largest tax cuts.
Major Provisions
Below are brief descriptions of the major tax changes in the 2025 reconciliation act and selected links to additional resources.
TCJA Permanence
The central component of the law makes the majority of the 2017 tax cuts permanent, including lower individual income tax rates, adjusted tax brackets, larger standard deductions, an expanded child tax credit, and a doubled estate tax exemption. It also makes permanent many of the revenue-raising base-broadeners, including repealing the personal and dependent exemptions, a lower cap to the mortgage interest deduction, and other limits on itemized deductions. These permanent provisions preserve many of the TCJA’s simplifications to individual taxpaying and lock in rate cuts.
Individual State and Local Tax Deduction (SALT)
Temporarily raises the SALT deduction cap from $10,000 to $40,000 for taxpayers earning under $500,000 a year beginning in 2025. For higher-income earners, the cap phases down at a 30 percent rate until it returns to $10,000. The $40,000 cap and $500,000 income threshold increase 1 percent each year through 2029, after which the cap resets to $10,000.
SALT Deduction Changes in the One Big Beautiful Bill Act, Fredrick Hernandez, Bipartisan Policy Center.
Inflation Reduction Act Green Energy Credits
Significantly scales back many of the clean-energy tax credits created under the Biden-era Inflation Reduction Act (IRA). The law eliminates credits for electric vehicles, residential clean-energy, and energy efficiency. It accelerates the expiration of others, such as the electricity production and investment credits, which now phase out by 2036 instead of being tied to emissions targets. And it narrows eligibility through expanded foreign-entity-of-concern restrictions, limiting who can claim credits for projects involving foreign-sourced materials or partnerships. At the same time, it expands targeted credits for clean-fuel production.
Evaluating the OBBBA’s Energy Provisions, Shuting Pomerleau, American Action Forum.
Investment Expensing
Permanently extends the 2017 law’s 100 percent bonus depreciation (full expensing) for qualifying equipment and machinery, and reinstates the full research and development deduction. Additionally, the bill temporarily expands full expensing to nonresidential manufacturing structures through 2028.
Expensing and the Taxation of Capital Investment, Adam Michel, Cato Institute.
No Tax on Tips
Allows a deduction of up to $25,000 in tips from taxable income each year, available to taxpayers who claim the standard deduction and those who itemize. Available through 2028, the deduction phases out at a 10 percent rate for single taxpayers with modified adjusted gross income over $150,000 ($300,000 for married couples filing jointly).
How Does “No Tax on Tips” Work in the One Big Beautiful Bill?, Andrew Lautz, Bipartisan Policy Center.
No Tax on Overtime
Allows a deduction for overtime bonus pay above the base hourly rate through 2028. The deduction is capped at $12,500 for single taxpayers ($25,000 for married filing jointly) and is available to taxpayers who claim the standard deduction and those who itemize. The deduction phases out at a 10 percent rate for single taxpayers with modified adjusted gross income over $150,000 ($300,000 for married couples filing jointly).
The 2025 Tax Bill: No Taxes on Overtime, Simplified, Aaron Till, Bipartisan Policy Center.
Enhanced Senior Deduction
Allows an additional $6,000 deduction per senior (age 65 or older) through 2028. The deduction supplements the existing additional senior deduction ($2,000 for single filers, $1,600 per qualifying spouse for joint filers), and the new deduction is available to taxpayers who itemize. It phases out at a 6 percent rate for incomes above $75,000 (single) and $150,000 (married filing jointly), fully phasing out at $175,000 and $250,000, respectively.
The 2025 Tax Bill: Additional $6,000 Deduction for Seniors, Simplified, Emerson Sprick, Bipartisan Policy Center.
Domestic Car Loan Deduction
Allows an above-the-line deduction of up to $10,000 in car loan interest for vehicles purchased between 2025 and 2028. To qualify, the vehicle must be new and assembled in the United States. The deduction phases out for incomes between $100,000–$150,000 for single filers and $200,000–$250,000 for married couples filing jointly.
Trump Accounts
Creates child savings accounts that function like Roth IRAs, with less favorable tax treatment for investment gains. For babies born before 2029, the accounts are seeded with a $1,000 federal deposit.
Trump Accounts Won’t Replace Social Security or Help Americans Build Significant Wealth, Adam Michel, Cato Institute.
Scholarship Granting Organizations
Establishes a permanent, nonrefundable federal credit of up to $1,700 per taxpayer for contributions made to qualified Scholarship Granting Organizations (SGOs). SGOs must be 501(c)(3) organizations operating in states that opt into the program, spend at least 90 percent of donations on scholarships that assist families making less than 300 percent of the local median with K-12 tuition, supplies, tutoring, and related education expenses.
The OBBBA’s Tax-Credit Scholarship Program is a Mess that Might be Worth Opting into Anyway, Jon Valant, Brookings Institution.
Remittance Tax
Imposes a one percent excise tax on money transfers from individuals in the United States to recipients abroad, beginning in 2026. The tax applies regardless of the sender’s citizenship or immigration status.
Budget Law Adopts Modified Version of Flawed Tax on Remittances, Alan D. Viard, American Enterprise Institute.
Endowment Tax
Replaces the prior-law 1.4 percent excise tax on net investment income of colleges and universities with large endowments with a new graduated tax rising to 8 percent. The new levy applies to institutions with 3,000 or more tuition-paying students, replacing the previous limitation to institutions with assets over $500,000 per student.
The Endowment Tax Serves No Clear Purpose, Sandy Baum, Tax Policy Center.
International Tax Reform
Reshapes international tax rules, first enacted in 2017. It drops the qualified business asset investment (QBAI) exclusion from both GILTI and FDII, converting them into simpler regimes that effectively raise taxes on foreign operations while favoring domestic production. The law also aligns US international rates more closely with the OECD’s 15 percent Pillar Two standard, simplifying credits for foreign taxes and expense allocation. It also made several technical fixes, such as downward attribution and permanently extending the controlled foreign corporation look-through rules.
Reviewing the International Tax Provisions in the One Big Beautiful Bill Act, Alan Cole, Patrick Dunn, Tax Foundation.