OBBB Act vs TCJA: What Changed in 2025?

The One Big Beautiful Bill Act (OBBB) signed in July 2025 is the biggest change to US tax law since the Tax Cuts and Jobs Act (TCJA) of 2017. But understanding what's new versus what stayed the same can be confusing.

This guide breaks down the key differences between the two laws, explains what changed and what didn't, and helps you understand how these changes affect your taxes.

The Quick Summary

TCJA (2017): Lowered tax rates and increased the standard deduction, but most individual provisions were temporary and set to expire after 2025.

OBBB Act (2025): Made those TCJA provisions permanent AND added new temporary deductions for tips, overtime, car loan interest, and seniors.

Think of it this way: The OBBB Act is "TCJA 2.0"—it keeps everything good from 2017 and adds new benefits on top.

What Stayed the Same (Made Permanent)

The OBBB Act made permanent all the popular individual provisions from the TCJA that were set to expire:

Lower Tax Rates

The TCJA lowered tax rates across the board. These rates are now permanent:

• 10%, 12%, 22%, 24%, 32%, 35%, 37%
• Without the OBBB Act, the top rate would have returned to 39.6%

Higher Standard Deduction

The TCJA roughly doubled the standard deduction. The OBBB Act keeps and slightly increases it:

• Single: $15,750 in 2025 (was $15,000 in 2024)
• Married: $31,500 in 2025 (was $30,000 in 2024)

Enhanced Child Tax Credit

The TCJA increased the Child Tax Credit from $1,000 to $2,000. The OBBB Act makes this permanent and increases it to:

• $2,200 per child in 2025 (indexed for inflation)

Pass-Through Deduction (Section 199A)

The TCJA created a 20% deduction for pass-through business income. The OBBB Act makes this permanent.

Estate Tax Exemption

The TCJA doubled the estate tax exemption. The OBBB Act makes it permanent and increases it to $15 million per person in 2026.

What Changed (New in OBBB Act)

Here's what the OBBB Act added that wasn't in the TCJA:

Provision	TCJA (2017)	OBBB Act (2025)
No Tax on Tips	Not included	Up to $25,000 deductible (2025-2028)
No Tax on Overtime	Not included	Up to $12,500 deductible ($25k married) (2025-2028)
Car Loan Interest	Not deductible	Up to $10,000 deductible (2025-2028)
Senior Deduction	Not included	$6,000 per person 65+ (2025-2028)
SALT Cap	$10,000 permanent	$40,000 temporary (2025-2029), then back to $10,000
Standard Deduction	$12,000 single / $24,000 married (2018)	$15,750 single / $31,500 married (2025)

The Four New Deductions Explained

1. No Tax on Tips ($25,000 max)

Who benefits: Restaurant workers, bartenders, delivery drivers, hairstylists, valets

What changed: Under TCJA, all tip income was fully taxable. Now you can deduct up to $25,000.

Example savings: $3,000-5,500/year for full-time tipped workers

2. No Tax on Overtime ($12,500/$25,000 max)

Who benefits: Nurses, manufacturing workers, hourly employees

What changed: Under TCJA, all overtime was fully taxable. Now you can deduct the "premium" portion.

Example savings: $1,000-3,000/year for regular overtime workers

3. Car Loan Interest ($10,000 max)

Who benefits: Anyone buying a new, US-assembled vehicle

What changed: Under TCJA, car loan interest wasn't deductible. Now it is.

Example savings: $500-2,500 over life of loan

4. Senior Deduction ($6,000 per person)

Who benefits: Taxpayers age 65+

What changed: Seniors already got a higher standard deduction under TCJA. Now they get an additional $6,000 deduction.

Example savings: $700-1,500/year per qualifying senior

Business Provisions: OBBB vs TCJA

What Stayed the Same

• 21% Corporate Tax Rate: The TCJA lowered it from 35% to 21%. OBBB keeps it at 21%.
• Pass-Through Deduction: 20% deduction for qualified business income (Section 199A) made permanent

What Changed

• Bonus Depreciation: TCJA had 100% bonus depreciation through 2022, then phasing down. OBBB restores and makes permanent 100% bonus depreciation.
• R&D Expensing: TCJA required R&D to be amortized starting 2022. OBBB restores immediate expensing for domestic R&D.
• Green Energy Credits: OBBB phases out most IRA green energy credits over 2-3 years.

The Big Picture: What This Means for You

If You Benefited from TCJA...

You'll continue to benefit. All those tax cuts are now permanent. You won't see a tax increase in 2026 like would have happened without the OBBB Act.

If You're a Service Worker...

You now have access to tax benefits (tips and overtime deductions) that didn't exist under TCJA. These are brand new.

If You're Buying a Car...

You now get a deduction that wasn't available under TCJA. This is completely new.

If You're a Senior...

You already had a higher standard deduction under TCJA. Now you get an additional $6,000 deduction on top of that.

Permanent vs Temporary: The Timeline

Permanent Provisions (No Expiration)

• Lower tax rates (10-37%)
• Higher standard deduction
• Enhanced child tax credit
• Pass-through deduction
• Estate tax exemption
• $10,000 SALT cap (starting 2030)

Temporary Provisions (2025-2028)

• No tax on tips
• No tax on overtime
• Car loan interest deduction
• $6,000 senior deduction
• $40,000 SALT cap (2025-2029)

The temporary provisions were designed this way for budget scoring purposes. There's a possibility they get extended or made permanent in future legislation, but for now, plan on them expiring after 2028.

Who Wins and Who Loses?

Clear Winners

• Tipped workers: Brand new $25,000 deduction
• Overtime workers: Brand new deduction for premium pay
• Seniors 65+: Extra $6,000 deduction on top of existing benefits
• New car buyers: Interest deduction not available before
• Middle class families: Tax cuts made permanent, avoiding 2026 tax increase
• Small businesses: Pass-through deduction permanent, bonus depreciation restored

Minimal Impact

• Very high earners: Top rate stays at 37% (would have returned to 39.6% without OBBB)
• People who don't work overtime or receive tips: TCJA benefits continue, but no new deductions

Potential Concerns

• Federal deficit: The permanent provisions add significantly to long-term deficits
• Complexity: The temporary nature of some provisions adds complexity
• Uncertainty post-2028: Will the temporary provisions be extended?

Common Misconceptions

Myth: "The OBBB Act repealed the TCJA"

Reality: False. The OBBB Act extended and built upon the TCJA. It made TCJA provisions permanent and added new benefits.

Myth: "I have to choose between TCJA benefits and OBBB benefits"

Reality: False. You get both. TCJA benefits are now baseline, and OBBB deductions are additional.

Myth: "The OBBB Act only helps the wealthy"

Reality: False. The new deductions specifically target working-class Americans (tipped workers, overtime workers) and middle-class car buyers.

Myth: "These tax cuts are only for 2025"

Reality: Partially false. The TCJA provisions are now permanent. Only the four new OBBB deductions are temporary (2025-2028).

How to Maximize Your Benefits

1. Claim all deductions you qualify for: Don't leave money on the table
2. Track eligible income: Document tips, overtime, and other qualifying income
3. Time major purchases: If buying a new car, do it while the deduction is available
4. Review annually: Tax laws change—make sure you're getting all available benefits
5. Use tax software or a professional: The rules are complex; get help if needed

What Happens Next?

The OBBB Act is now law. Here's what to expect:

• 2025 (This Year): First year to claim all four new deductions
• 2026: File your 2025 return in early 2026 with these new deductions
• 2027-2028: Continue claiming benefits
• 2029 (and beyond): The four temporary deductions expire unless extended by Congress

Between now and 2028, monitor any IRS guidance on implementation. The IRS is issuing clarifications on who qualifies and how to report these deductions.

Bottom Line: OBBB vs TCJA

The OBBB Act isn't replacing the TCJA—it's building on it. Think of it as:

TCJA = Foundation (lower rates, higher standard deduction, child tax credit)
OBBB = Addition (tips, overtime, car loans, senior deduction)

Together, they represent the most significant tax relief for working Americans in decades. The TCJA provisions are now permanent (no tax increase in 2026), and the OBBB provisions add extra savings for millions of workers, families, and seniors.

Make sure you understand which provisions you qualify for and claim every deduction available to you.