One Big Beautiful Bill Act: 10 Key Provisions

On July 4, 2025, the legislative behemoth known as The One Big Beautiful Bill Act (OBBBA) became law in the U.S. The OBBBA will touch nearly every facet of American life, from healthcare and housing to work and wages. Although it’s too early to assess the OBBBA’s full impact, there are several key provisions worth examining, some directly affecting military service members.

Let’s take a closer look at the Act and these 10 selected provisions:

Permanent Extension of Tax Cuts & Jobs Act (TCJA) Individual Tax Rates

What changed? The TCJA of 2017 was a seismic shift in U.S. tax policy, reducing income tax rates across nearly all brackets. These brackets, indexed each year to account for inflation, are extended permanently under the OBBBA.

What’s the impact? This is expected to stabilize tax planning for all income levels, which means individuals and families can make long-term financial decisions about things like retirement contributions, charitable giving, or investment strategies, without worrying that income tax rates will suddenly change. By reducing that uncertainty, filers can more effectively forecast future tax liabilities and optimize deductions.

Expanded and Permanent Standard Deduction

What changed? The OBBBA makes the expanded standard deduction a permanent feature of the tax code. For 2025, the deduction amounts are:

Single Filers		$15,750
Married Filing Jointly		$31,500
Head of Household		$23,625

These amounts are also indexed to inflation, meaning they’ll adjust annually to keep pace with cost-of-living changes.

What’s the impact? This provision is expected to simplify tax filing and reduce taxable income for most Americans. According to IRS data summarized by the Tax Policy Center, over 90% of taxpayers claimed the standard deduction in 2022. However, that share may shift with the new State and Local Tax (SALT) provision, which could make itemizing a more attractive option in high-tax states.

Enhanced Child Tax Credit

What changed:

• Increased to $2,200 per child starting in 2025
• Refundable portion ($1,700) indexed for inflation
• Phaseout thresholds remain high: $200,000 (single), $400,000 (joint)

What’s the impact? Families with children get some financial relief.

Military note: This enhancement will help offset some of the expenses associated with childcare for service members, who often experience unique strain when dealing with childcare issues and family stability.

New “No Tax on Tips” Deduction

What changed? Workers in “customarily and regularly” tipped occupations can deduct up to $25,000 in qualified tips from federal income tax. This provision does not apply to Social Security or Medicare payroll taxes, which remain due on tip income. The deduction expires Dec. 31, 2028.

What’s the impact? Service industry workers such as waiters, bartenders and stylists can reduce their taxable income and keep more of their earnings.

Subject to phase out: Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

Definition of qualified tips: To be deductible, tips must meet IRS rules:

• Method of payment: Cash, credit/debit card charges, electronic payments, or tip‑sharing/pooling arrangements.
• Reporting requirement: Tips must be reported to the employer (generally if $20 or more in a month).
• Voluntary nature: Tips must be freely given by the customer, not fixed service charges.
• Employer records: Reported tips must be included in wage statements (Form W‑2).

Note: To view the list of professions ‘customarily and regularly tipped’, click here.

No Tax on Overtime Deduction

What changed? Overtime pay is now partially tax-exempt, with a deduction for the premium portion — the additional 0.5x in time-and-a-half above the employee’s regular hourly rate — capped at $12,500 for single filers and $25,000 for joint filers. This provision expires Dec. 31, 2028.

What’s the impact? Benefits working-class taxpayers who rely on overtime pay.

Subject to phase out: Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

New Car Loan Interest Deduction

What changed? Borrowers may now deduct up to $10,000 in interest on loans for vehicles with final assembly in the United States (linked to the VIN) purchased for personal use. The deduction applies only to interest paid in the current year.

The deduction begins to phase out once income exceeds $100,000 modified adjusted gross income (MAGI) for single filers and $200,000 MAGI for joint filers, with the benefit reduced progressively as income rises above those thresholds. This provision expires Dec. 31, 2028.

What’s the impact? This deduction lowers the cost of vehicle ownership for many middle‑income Americans, while encouraging demand for domestically assembled cars. The income phase‑out ensures the benefit is targeted toward households most likely to feel the affordability boost.

Senior Bonus Deduction

What changed? Taxpayers aged 65 and older may claim an additional $6,000 deduction on top of the standard deduction. Married couples filing jointly can claim up to $12,000 if both spouses qualify. The deduction phases out starting at $75,000 MAGI for single filers and $150,000 MAGI for joint filers, reducing by 6% of income above those thresholds, and is fully eliminated at $175,000/$250,000. This provision expires on December 31, 2028.

What’s the impact? The deduction provides meaningful tax relief for seniors, lowering taxable income and easing the burden for households on fixed incomes. While it does not eliminate taxation of Social Security benefits, it helps many retirees keep more of their benefits.

Military note: Veterans over 65, especially those relying on Social Security and VA benefits, may see significant relief.

State and Local Taxes (SALT) Provisions

What changed? The SALT deduction cap increases to $20,000 for single filers and $40,000 for joint filers, up from $5,000 and $10,000 respectively. Both the deduction amounts, and the phase‑out thresholds are adjusted annually through 2029. For higher‑income taxpayers, the expanded cap gradually phases out, reducing the benefit back to the original $10,000 limit. The provision expires at the end of 2029.

What’s the impact? Middle‑income households in high‑tax states gain meaningful relief, making itemizing more attractive and boosting disposable income. The expanded benefit applies fully to lower and middle-income earners, while high earners see the benefit phased out and ultimately revert to the $10,000 cap.

Military note: Service members in high‑tax states (e.g., California, New York) may benefit from the higher cap, especially if they own property or file jointly with a civilian spouse.

Changes to Charitable Deductions

What changed? 

• Beginning in 2025, taxpayers who take the standard deduction may also claim a charitable deduction of up to $1,000 (single) or $2,000 (joint).
• These qualified charitable deductions apply only to contributions made directly to eligible public charities; donations to donor‑advised funds (DAFs) and private foundations are excluded.
• For itemizers, only the portion of charitable contributions that exceeds 0.5% of adjusted gross income (AGI) is deductible (the new “floor”).
• Separately, for high‑income taxpayers, the value of charitable deductions is capped at the 35% rate. For example, a $100,000 donation yields a maximum deduction of $35,000.

What’s the impact? The new standard‑deduction charitable option in 2025 opens the door for millions of lower‑ and middle‑income households to receive tax benefits for giving, broadening support for nonprofits. The AGI floor ensures deductions are meaningful relative to income, while the high‑earner cap limits the tax value of very large gifts.

Enhancements to Service Member’s Qualify of Life

What changed? The OBBBA mandates 7.3 billion in mandatory funding and 1.24 billion in direct spending to improve the quality of life for service members.

What’s the impact? Increases are expected for Basic Allowance for Housing, and over $1 billion for upgrades to unaccompanied housing and barracks. Also, there will be an increase in Temporary Lodging Allowances, from 14 to 21 days, to help cover out-of-pocket expenses during Permanent Change of Station moves. There will also be additional expansions to child care programs, educational opportunities and professional licensure assistance.

Navigating the OBBBA Strategically

Attempting to read and understand the sprawling OBBBA — which spans hundreds of pages — would be quite daunting. Instead, if you have questions about how the OBBBA may affect your financial future, consult a tax professional for guidance and talk to your financial advisor.

Frequently Asked Questions

When does the OBBBA take effect?

Many of these provisions are already in effect and will impact 2025, and other provisions will take effect Jan. 1, 2026. Certain changes that are related to health-care programs and housing assistance will roll out gradually over the next several years. Additionally, four provisions expire in 2028: No Tax on Tips, No Tax on Overtime, New Car Loan Deduction, and the Senior Bonus Deduction.

Will the OBBBA affect my SNAP benefits?

Possibly — the bill is expected to remove several work exemptions for the Supplemental Nutrition Assistance Program (SNAP), including those previously granted to veterans. This could impact over 1.4 million veterans who rely on SNAP to meet food needs.

Does the OBBBA change healthcare coverage through the VA?

Not directly — but it includes over $1 trillion in cuts to federal health-care programs like Medicaid and Affordable Care Act Marketplace plans. If you or your family rely on non-VA coverage, you may feel the effects.

Could my military retirement or disability benefits be affected?

There are no direct cuts to VA disability or military retirement pay in the bill. However, changes to tax deductions and healthcare subsidies could indirectly affect your household budget.

Are there any new tax deductions or benefits specific to the military?

While the OBBBA introduces deductions for tips and overtime, it does not specifically carve out new tax benefits for active-duty military. However, existing military tax benefits remain intact.

First Command does not provide legal or tax advice, and this article does not contain any legal or tax advice. Any recommendations provided to you in this article are strictly for financial planning purposes only. Should you require legal or tax advice, you should consult with your attorney or tax advisor.