2025 tax law changes: Key OBBBA updates for preparers

The One Big Beautiful Bill Act (OBBBA) will have a big impact on upcoming tax filings. As one of the most significant shifts since the Tax Cuts and Jobs Act (TCJA) of 2017, tax professionals are making the necessary adjustments for next year’s tax filing, and also answering questions from clients.

Let’s break down the 2025 tax law changes, provide a short One Big Beautiful Bill Act summary, and provide a checklist for tax firms.

Areas of high importance include:

• What is the One Big Beautiful Bill Act (OBBBA)?
• Key 2025 Tax Law Changes Under OBBBA
• Tax Credits and Deductions to Watch
• How OBBBA Affects Individual Taxpayers
• Estate Planning Under OBBBA
• Tools to Track Tax Law Updates
• OBBBA Compliance Checklist for Taxpayers
• Moving From Tax Preparation to Advisory Services

What is the One Big Beautiful Bill Act (OBBBA)?

The OBBBA tax law 2025 is now in effect, codifying some of the key provisions in the TCJA and subsequent amendments.

OBBBA vs TCJA comparison

The TCJA was more focused on corporate rate reductions and providing some temporary relief for individuals. By comparison, the OBBBA takes a more balanced approach, addressing income brackets, deductions, and credits for both individuals and businesses.
OBBBA makes the Qualified Business Income (QBI) deduction permanent and increases the standard deduction based on inflation. It also provides an adjustment to estate taxes and locks in some of the provisions in the TCJA that were set to expire at the end of the year.

While most provisions under OBBBA take effect during the 2025 tax year, there are some adjustments for corporations that will phase in over the next two years.

Key 2025 tax law changes under OBBBA

The OBBBA introduces updates that will shape filing strategies for the next several years. Let’s take a look at the temporary vs permanent tax changes under OBBBA.

Permanent changes

Some changes are permanent.

Standard deduction increase

For 2025, the standard deduction increases to adjust for inflation and reflect cost-of-living increases.

QBI deduction

Introduced in the TJIA, the Qualified Business Income (QBI) deduction becomes permanent under OBBBA. Eligible self-employed individuals and small business owners can continue deducting up to 20% of qualified business income.

Estate and gift tax exemption

The estate and gift tax is permanently indexed to inflation. For 2025, the exemption threshold of $13.9 million increases to $15 million starting in 2026. This makes estate transfers more flexible, allowing you to better structure wealth transfer strategies without the immediate risk of reversion to pre-TCJA levels.

Temporary changes

There are also some new tax deductions in 2025 that are temporary.

Tip and overtime income exclusions

One of the most discussed new tax deductions for 2025 is the exclusion of a portion of tip and overtime income through 2028.

Designed to support service-sector and hourly workers, this provision allows up to $25,000 of qualified tip income and overtime pay to be excluded from taxable wages, subject to filing and income limits.

Senior tax deduction

The senior tax deduction 2025 helps offset medical costs and reduced income during retirement years. For taxpayers 65 or older, there is an additional deduction of $6,000 for individuals or $12,000 for qualified married couples. This is in addition to the standard deduction and is valid through 2028.

Car loan interest deduction

For the first time in decades, OBBBA introduces a temporary deduction for car loan interest. To qualify, vehicles must be for personal use, financed, and secured by a lien. This deduction only applies to new vehicles and allows a maximum deduction of $10,000 with a phase-out for those with an AGI above $100,000 for single filers/$200,00 for joint filers.

SALT deduction cap increase

The State and Local Tax (SALT) deduction lets filers deduct state income taxes, property taxes, and sales taxes on their federal forms. Key provisions of the SALT deduction for 2025 include:

• Deduction cap increases: The limit rises from $10,000 to $40,000 in 2025, then grows by 1% annually through 2029 before dropping back to $10,000 in 2030.
• Income-based phaseout: High earners begin losing the deduction at $500,000 AGI in 2025, phasing out by 30% of income above the threshold.
• Minimum protection: Even with phaseouts, taxpayers can still claim at least $10,000 in SALT deductions.

Tax credits and deductions to watch

Several new and expanded credits under OBBBA redefine how preparers will need to structure client returns.

Child tax credit increase

The child tax credit 2025 goes up from $2,000 to $2,200 for each eligible child. There are built-in adjustments each year starting in 2026 (based on inflation) with phase-outs starting at $200,000 for individuals and $400,000 for joint returns.

Trump Savings Accounts

The Trump Savings Account is a new feature, creating a $1,000 government-backed deposit for eligible children born between 2025 and 2028. Families can also contribute up to $5,000 in after-tax dollars. Employers can also contribute.

While there are no additional new tax deductions in 2025 for contributions, earnings are tax-deferred until withdrawal, which is then treated as ordinary income, similar to how a Roth IRA works. In most circumstances, funds cannot be withdrawn before the child is 18 years old.

529 plan and adoption credit updates

OBBBA also modernizes 529 Plans, allowing funds to be used for homeschooling expenses and credentialing programs. The adoption credit has also been indexed to inflation.

How OBBBA affects individual taxpayers

The new law’s impact varies across income levels, but most taxpayers will experience some level of benefit.

Income-level impacts

Lower and middle-income taxpayers gain the most through standard deduction increases, expanded child tax credits, and new savings vehicles. High earners will also benefit from the permanent QBI deduction and the higher estate exemption, though some itemized deductions will still face phase-out limits.

Filing status considerations

Married couples filing jointly gain slightly more under the new brackets, while single and head-of-household filers see moderate benefits.

Compliance and documentation updates

For tax professionals, your OBBBA checklist for taxpayers includes updated documentation requirements. Electronic recordkeeping for deductions like car loan interest and education expenses is now encouraged under IRS guidance.
Preparers should also ensure that clients are aware of income thresholds tied to new exclusions, especially those affecting tip income and the senior tax deduction 2025.
Ultimately, how OBBBA affects individual taxpayers depends on their specific financial situation.

Estate planning under OBBBA

Estate planners and financial advisors should pay close attention to estate planning under OBBBA and how it impacts long-term strategies. There are some new advantages to expanded flexibility in trusts and gift rules that allow higher amounts of transfers (tax-free) between family members.
Keep in mind that there can be significantly different applications in federal and state tax provisions, and you will want to counsel clients on the impact of both before making decisions. Your OBBBA checklist for taxpayers needs to include trust documents and wills, which may also need to be amended to clearly meet requirements regarding beneficiaries.

Tools to track tax law updates

Your clients look to you for clear and accurate advice. To do so, you need to make sure you have the right tools to track tax law updates.

The Wolters Kluwer OBBBA Resource Center

As a busy tax professional, it can be challenging to stay up-to-date on both settled and evolving aspects of the OBBBA. Lean on the expertise of Wolters Kluwer Tax & Accounting for accurate, updated information to understand this far-reaching law and its impact on your tax customers. Make a point to bookmark our One Big Beautiful Bill Act Resource Center | Wolters Kluwer on all of your work devices.

IRS and state alerts

Make sure you’re signed up for IRS e-News for Tax Professionals and any applicable state resources. These updates provide early notice of regulatory clarifications and implementation guidance related to OBBBA provisions.

AI-powered platforms for compliance

AI tools are becoming increasingly important, helping you to flag discrepancies, identify eligible deductions, and help explain changes to clients in easy-to-understand terms. The best solutions will integrate seamlessly with your tax software and update automatically as changes occur or new forms roll out.

Real-time update tools for tax preparers

Platforms that consolidate both federal and state updates, including dashboards that sync with client management software, are becoming essential. They allow you to cross-check eligibility for deductions, such as the new tax deductions 202, and ensure filings remain fully compliant.

OBBBA compliance checklist for taxpayers

Tax preparers can streamline planning and filing by following this OBBBA checklist for taxpayers, designed to cover the most important action items for 2025:

• Confirm income documentation, including any eligible tips and overtime exclusions.
• Update withholding amounts to reflect the new standard deduction and credits.
• Review eligibility for new and expanded deductions, such as the car loan interest deduction and senior tax deduction for 2025.
• Evaluate eligibility for Trump Savings Accounts and new 529 Plan rules.
• Reassess estate planning documents in light of the updated exemption thresholds.
• Track compliance deadlines using tools to track tax law updates and verify all IRS guidance for 2025.
• Maintain electronic records for all deduction-related expenses, especially those subject to caps or temporary provisions.

For preparers, this checklist can also help you with client communication, allowing you to stay in touch with clients throughout the year. Keeping them informed about how OBBBA affects individual taxpayers.

Moving from tax preparation to advisory services

As you can see, the One Big Beautiful Bill Act summary represents significant changes, stabilizing some long-term provisions while extending targeted, temporary relief. Proactive planning can help taxpayers leverage the 2025 tax law changes, and that’s an opportunity for tax professionals to shift from just tax preparation to advisory services.
The OBBA tax law 2025 provisions are broad. Reaching out to your clients now with recommendations can help you grow your book of business.