R2 Insights · Tax & Compliance
OBBBAA 2025–2032 Explained: Tax Deductions, Credits, and Compliance Strategies
Signed July 4, 2025, OBBBAA reshapes deductions, credits, and compliance rules with changes rolling out through 2032.
Introduction: What Is the OBBBAA and Why It Matters
The One Big Beautiful Bill Act (OBBBAA) introduces sweeping reforms that affect both individuals and businesses. At R2 Advisors, we know clients are asking:
- What new deductions can I take advantage of?
- How do 2025 and 2026 reforms affect my planning?
- What deadlines should I watch before benefits expire?
Before 2025: Retroactive Tax Opportunities
- R&E Deductions: Small businesses may elect simplified treatment for 2022–2024 within one year of enactment.
- Employee Retention Credit: 2021 claims barred unless filed before Jan 31, 2024.
- Extended Limitation Periods: ERC-related assessments and refunds now fall under a six-year statute.
2025: A Transition Year With Immediate Changes
Permanent Adjustments
- Elimination of personal exemptions; higher standard deduction.
- 100% bonus depreciation for property acquired after Jan 19, 2025.
- Child Tax Credit: $2,000 per child, $1,400 refundable.
- Higher Sec. 179 expensing thresholds and full R&E expensing.
Temporary Deductions (2025–2028)
- Cash tips: up to $25,000.
- Overtime pay: up to $12,500.
- Auto loan interest: up to $10,000.
- Senior deduction: $6,000 for taxpayers aged 65+.
Other Highlights
- SALT deduction cap: $40,000.
- Energy-efficient home credits through Dec 31, 2025.
Key Milestones in 2025
- July 4, 2025: 529 plan distributions expanded; K–12 limit raised to $20,000.
- Sept 30, 2025: Clean vehicle credits apply to new and used EVs acquired before this date.
2026: Permanent Reforms Take Hold
- Lowered individual tax rates.
- Reshaped itemized deductions and higher AMT thresholds.
- Charitable deduction capped at $1,000 ($2,000 MFJ).
- Estate basis step-up capped at $15M.
- Corporate rules: 1% floor on charitable deductions, expanded casualty loss, tighter SALT cap.
- Trump Accounts: pilot program available only for 2026 contributions.
Beyond 2026: Planning Through 2032
- 2027: New Opportunity Zone designations launch.
- Dec 31, 2027: Clean electricity and hydrogen credits expire.
- Dec 31, 2032: Final sunset of clean energy investment credits.
The OBBBAA Timeline at a Glance
Activation / major change
Windows / sunsets
2025
Transition reforms: higher standard deduction, bonus depreciation, child tax credit, temporary deductions, SALT cap, home credits.
Jul 4
529 plans expanded; $20k K–12 limit.
Sep 30
Clean vehicle credits for EVs acquired by this date.
2026
Permanent reforms: lower rates, deduction changes, estate cap, Trump Accounts.
2027
Opportunity Zones; 12/31/2027 clean energy/hydrogen credits sunset.
2032
12/31/2032: Final sunset of clean energy investment credits.
Final Takeaway
Act early and plan deliberately. Because many provisions are temporary or phased, timing drives outcomes. To make the most of OBBBAA:
- Calendar key dates: Jul 4, 2025 (529 changes); Sep 30, 2025 (EV credits); Dec 31, 2027 and Dec 31, 2032 (energy credit sunsets).
- Review retroactive options: Assess 2022–2024 R&E elections within one year of enactment.
- Capture 2025–2028 deductions: Align payroll and purchase timing to leverage tips, overtime, auto interest, and senior deductions.
- Model 2026 rules now: Run rate/AMT/SALT scenarios to inform compensation, charitable giving, and state-tax exposure.
- Update estate & corporate plans: Consider the $15M basis step-up cap and corporate charitable/casualty rules.
“Taxpayers who act early will have the greatest opportunity to maximize credits and deductions before phase-outs and sunsets take effect.”
