One Big Beautiful Bill Act - Six Takeaways

The professionals at Old National Wealth Advisors are affiliated with LPL Financial, a leading independent broker/dealer and registered investment advisor. The content of this article was provided by LPL Research.

In classic Washington style, Congress pushed the limits of drama and delay, passing a sweeping reconciliation bill just hours before President Donald Trump’s self-imposed July 4, 2025 deadline. After intense negotiations, squabbles within the Republican Party, and nearly an all-night House session, the “One Big Beautiful Bill Act (OBBBA)” squeaked through with a 218–214 vote on July 3, following the Senate’s narrow 51–50 passage, with Vice President JD Vance casting the tiebreaker. Trump signed the legislation into law during a celebratory White House ceremony on July 4, marking a major victory for his second-term agenda.

While there is a lot to unpack within the 869-page text, here are six key takeaways from the bill.

 

Increased Spending and Work Requirements

As the saying goes, beauty is in the eye of the beholder, so we’ll leave the debate over how “beautiful” the bill is to the media, politicians, and the public. However, most would agree it checked the box for “big.” According to the nonpartisan Congressional Budget Office (CBO), the bill includes $4.5 trillion in tax cuts over the next decade. Given the White House’s focus on national security, the bill boosted defense and border enforcement spending by a total of $300 billion, with $25 billion of that amount earmarked for the “Golden Dome” missile defense system.

To help offset the costs, the bill included $1.2 trillion in cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP). New work requirements were also introduced to qualify for assistance. For Medicaid, “able-bodied” individuals without children aged 19 to 64 are required to work at least 80 hours a month to be eligible for assistance (participation in community service, education, or work programs also qualifies). The bill introduced similar, stricter work requirements for SNAP eligibility and mandates that states share at least 5% of the benefit costs starting in 2028.

Overall, the CBO estimates the entire OBBBA will add around $3.3 trillion to the deficit over the next decade.

 

2017 Tax Provisions Made Permanent

Many of the individual and estate tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) have been made permanent. This ensures that the current seven tax brackets will remain unchanged, preventing potential increases of 1–4% across most income ranges next year. The increased standard deductions from the TCJA are also now permanent. Additionally, the bill includes several notable changes: the lifetime gift and estate tax exemption has been permanently increased to $15 million; enhanced child credits have been raised; and the 20% qualified business income (QBI) deduction has been made permanent.

According to Strategas Research, cementing the TCJA tax provisions helped middle-class families avoid around a $400 billion tax increase in 2026.

 

Federal Deductions Temporarily Increased

The limit on federal deductions for state and local taxes (SALT) was temporarily raised from $10,000 to $40,000 ($20,000 for married couples filing separately) starting in 2025. The bill also included a 1% annual increase to the deduction amount until 2029, after which it reverts back to $10,000 in 2030. The deduction amount begins to decrease for incomes exceeding $500,000 ($250,000 for single filers).

The increase to the SALT deduction sparked controversy, as it not only added to the total cost of the bill but also because many believe it primarily benefits wealthy residents of high-tax states, such as New York and California. Residents of high-tax states, particularly upper-middle-class and high-income households who itemize deductions, will benefit most. According to the Tax Foundation, earners in the 95th to 99th income percentiles would see a 0.6% relative increase in after-tax income, while the bottom 80% of earners could see no benefit.

 

Clean Energy Programs Targeted

Clean energy-related programs received notable cuts. The bill accelerates the phase-out of energy tax credits introduced by the Inflation Reduction Act of 2022. This particularly affects solar and wind facilities, which now face shortened deadlines to qualify for credits. Specifically, projects must begin construction within 12 months of the bill's enactment to qualify for federal credits, while projects starting after this period must be in service by December 31, 2027. Furthermore, any projects owned by or using material assistance from Prohibited Foreign Entities (PFE) may lose credit eligibility. (PFEs include certain foreign governments, military companies, and entities with significant foreign ownership or influence.)

Other tax credits related to battery storage, hydro, geothermal, nuclear, carbon capture, and clean fuel remain in place.

For electric vehicles (EVs), the OBBBA eliminated the $7,500 Clean Vehicle Credit for new EVs and the $4,000 credit for used EVs for vehicles acquired after September 20, 2025. This is a notable change from the prior law, which allowed the credit for vehicles purchased through December 31, 2032.

 

New Deductions

The bill introduced new deductions for auto loan interest, overtime pay, tips, and Social Security payments.

Consumers who purchase a new car assembled in the United States can deduct up to $10,000 per year in interest paid on qualifying auto loans. The tax break incorporates purchases made between 2025 and 2028, and you won’t need to itemize to claim the deduction.

For Americans reliant on tips, eligible workers can deduct up to $25,000 in reported tip income from their federal income tax starting in 2025 (the deduction is phased out for incomes exceeding $150,000 and is set to expire in 2028). Workers can also deduct up to $12,500 in overtime pay, but similarly to tips, the deduction sunsets in 2028.

The bill also introduced a $6,000 tax deduction for seniors 65 or older who earn up to $75,000 a year (or $150,000 for couples) from 2025 to 2028. The deduction amount is lowered for incomes above that level and eventually phased out for higher incomes.

 

Increased Support for Businesses

New business expense and deduction provisions could boost growth and help offset headwinds from tariffs. Domestic research and development (R&D) costs can be 100% expensed in the year incurred or capitalized and amortized over five years (previous law). Qualifying capital equipment purchases can also be immediately expensed (100%) up until 2029. This allows companies to significantly reduce their tax burden in the year of the asset purchase and encourages businesses to invest in new property and equipment.

The bill also changes the way a company can claim interest expenses. The previous law allowed businesses to deduct interest expenses if they were less than 30% of earnings before interest and taxes (EBIT). However, the OBBBA now allows a business to deduct interest expenses up to 30% of earnings before interest, tax, depreciation, and amortization (EBITDA). Without getting into accounting, companies prefer the EBITDA approach because it simply means more interest expenses would be deductible (EBITDA is a larger figure than EBIT). This change could bode well for companies with higher debt burdens and/or higher amounts of depreciation and amortization expenses (small caps could be a notable beneficiary here).

 

Summary

There is a little bit of everything packed into President Trump’s OBBBA. Proponents tout its simplification of the tax code, the removal of uncertainty over the sunsetting TCJA tax provisions, pro-growth initiatives, an America-first framework, and its focus on protecting our borders and national security. Opponents believe it is too expensive, benefits the wealthy, threatens clean energy initiatives, and leaves too many Americans without healthcare or SNAP benefits. From an investor standpoint, healthcare insurers, especially with high Medicaid populations, the renewable energy space, and even longer-duration Treasuries could face headwinds from the bill, while small caps, defense and border security companies, and capital equipment and R&D intense firms could be outsized beneficiaries.

The bill does bring some certainty to the market regarding tax policy and the debt ceiling (the debt ceiling was raised by $5 trillion as part of the reconciliation bill), but it also raises questions about how economic growth and tariffs counterbalance its cost. While the White House has been flexible on tariff rates and timing, there have been limited trade deals and little clarity regarding where things stand with several of our major trading partners. Trump also announced that he would no longer extend or pause tariffs after August 1.

While the path to policy clarity may be bumpy, potential upside catalysts make us comfortable suggesting portfolio risk levels stay near benchmarks. Anticipate modest gains for stocks over the next six months with volatility in between.

 

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