One Big Beautiful Bill Act
The One Big Beautiful Bill Act or the Big Beautiful Bill, is a U.S. federal statute passed by the 119th United States Congress containing tax and spending policies that form the core of President Donald Trump's second-term agenda. The bill was signed into law by Trump on July4, 2025. Although the law is popularly referred to as the One Big Beautiful Bill Act, this official short title was removed from the bill during the Senate amendment process. Therefore, the law officially has no short title.
The OBBBA contains hundreds of provisions. It permanently extends the individual tax rates Trump signed into law in 2017, which were set to expire at the end of 2025. It raises the cap on the state and local tax deduction to $40,000 for taxpayers making less than $500,000, with the cap reverting to $10,000 after five years. The OBBBA includes several tax deductions for tips, overtime pay, auto loans, and creates Trump accounts, allowing parents to create tax-deferred accounts for the benefit of their children, all set to expire in 2028. It includes a permanent $200 increase in the child tax credit, a 1%tax on remittances, and a tax hike on investment income from college endowments. It phases out some clean energy tax credits that were included in the Biden-era Inflation Reduction Act, and promotes fossil fuels over renewable energy. It increases a tax credit for advanced semiconductor manufacturing and repeals a tax on silencers.
It raises the debt ceiling by $5trillion while making a significant 12%cut to Medicaid spending. The OBBBA expands work requirements for SNAP benefits recipients and makes states responsible for some costs relating to the food assistance program. The OBBBA includes $150billion in new defense spending and another $150billion for border enforcement and deportations. The law increases the funding for Immigration and Customs Enforcement from $10billion to more than $100billion by 2029, making it the single most funded federal law enforcement agency.
The Congressional Budget Office estimates the law will increase the budget deficit by $2.8trillion by 2034 and cause 10.9million Americans to lose health insurance coverage. Further CBO analysis estimated the highest 10% of earners would see incomes rise by 2.7% by 2034 mainly due to tax cuts, while the lowest 10% would see incomes fall by 3.1% mainly due to cuts to programs such as Medicaid and food aid. Several think tanks, experts, and opponents criticized the bill over its regressive tax structure, described many of its policies as gimmicks, and argued the bill would create the largest upward transfer of wealth from the poor to the rich in American history, exacerbating inequality among the American population. It has also drawn controversy for rolling back clean energy incentives and increasing funding for immigration enforcement and deportations. According to multiple polls, a majority of Americans oppose the law.
Democratic opposition to the health spending cuts included in the OBBBA contributed to the 2025 United States federal government shutdown.
Background
Following the 2024 United States elections, in which the Republican Party retained the House of Representatives and won the Senate, Republicans began negotiations on passing then-president-elect Donald Trump's domestic policies. In a meeting with Senate Republicans in December 2024, Senate majority leader John Thune outlined an approach involving initial legislation on border security, energy production, and the military while reserving tax policy. Trump, in contrast, advocated for a singular bill to resolve an impending lapse in tax cuts implemented in the Tax Cuts and Jobs Act in 2017. However, this strategy faced risks from defecting members.In January 2025, Republicans met in Fort Lesley J. McNair. At the meeting, Speaker of the House Mike Johnson stated that Trump sought "one big, beautiful bill" to enact his policies. To more easily pass the bill, Republicans chose to use the budget reconciliation process, which allowed them to avoid the 60-vote Senate filibuster, which carried importance as they hold 53 seats out of 100 in the Senate. This requires the House and the Senate to pass identical instructions before passing the actual reconciliation bill.
Before being signed into law, the Senate approved the bill 51–50 on July 1, 2025, with Vice President JD Vance casting a tiebreaking vote in support. It passed the House of Representatives, 218–214, on July 3, 2025. It passed over universal Democratic opposition in both houses.
Provisions
The One Big Beautiful Bill Act includes hundreds of provisions, and over a ten-year period is estimated to add roughly $3trillion to the national debt and to cut approximately $4.46trillion in tax revenue.Individual income taxes
Extending 2017 tax cuts
The law permanently extends the individual tax rates Trump signed into law in 2017, which were set to expire at the end of 2025.Tax deduction for qualified overtime income
The law creates a new tax deduction of up to $12,500 of qualified overtime pay, effective January 1, 2025.Qualified overtime pay is compensation that an employer is required to pay an employee under the Fair Labor Standards Act, Section 7 because the employee worked more than 40 hours during the same workweek. The employee may take a tax deduction only for the extra half-time pay above their usual hourly rate they are paid for working more than 40 hours during the same workweek, not all the pay they receive for working those hours. Overtime paid that is either paid voluntarily by an employer, is paid based on contractual agreements, or is only required by state or local laws is not eligible for the tax deduction. Overtime pay continues to be subject to Social Security tax and Medicare tax.
The deduction begins to phase out for individuals whose modified adjusted gross income is more than $150,000, and is eliminated at $400,000.
Individuals may take a tax deduction for the amount of qualified overtime compensation that appears on their Form W-2, which employers will be required to include on it. Employers may use a reasonable method to approximate the amount to put on a Form W-2 for 2025, or via an alternate method. The Internal Revenue Service will release new procedures for federal tax withholding effective 2026.
Tax deduction for qualified tip income
The law creates new tax deductions for tips of up to $25,000 per year received by workers earning less than $150,000, with the tax deduction set to expire in 2028.In order to be eligible, a tip must be paid voluntarily by the payor, and the payor must determine the amount of the tip. The payor must not be subject to a penalty if they do not pay a tip, and the tips must not be subject to any negotiation. The tip must be given to a workers working one of 68 different job types. The recipient of the tip must put their social security number on their income tax return to be eligible.
Tax deductible for loan interest for U.S.-assembled cars
The law allows individuals to deduct up to $10,000 per year in auto loan interest for new cars that had their final assembly in the United States and were purchased between January 1, 2025, and December 31, 2028.The vehicle must be for personal use, rather than business use. It must be a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds. All-terrain vehicles, trailers, campers, used vehicles, and leased vehicles are not eligible. The vehicle's Automobile Information Disclosure label must show that the place of its final assembly was the United States. The maximum tax deduction is reduced out for individuals whose modified adjusted gross income is greater than $100,000, and it is eliminated for individuals whose modified adjusted gross income is greater than $150,000. A taxpayer is not required to itemize their tax deductions in order to take the tax deduction.
From 2025 to 2028, auto loan lenders are required to report loan details to the Internal Revenue Service if they receive at least $600 of interest on qualifying vehicle loans.
Increased limit for tax deductions for state and local taxes
From January 1, 2025, to December 31, 2029, individuals may take a tax deduction for up to $40,000 of state and local taxes, which is an increase from $10,000 previously. There is a reduction to the limit for the tax deduction for individuals whose modified adjusted gross income is over $500,000 but it never goes below $10,000.This provision has an estimated cost of $142billion. Republican representatives Elise Stefanik, Mike Lawler, Nick LaLota, and Andrew Garbarino of New York, Representative Young Kim of California, and Representative Tom Kean Jr. of New Jersey cut this deal with House speaker Mike Johnson in exchange for their votes.