The One Big Beautiful Bill Act (OBBBA), or the Big Beautiful Bill (P.L. 119-21), 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 Act 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 has no official 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 firearm 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 (formerly called "food stamps") 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 (ICE) from $10billion to more than $100billion by 2029, making it the single most funded federal law enforcement agency.
The Congressional Budget Office (CBO) 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 ($25,000 if married filing jointly) of qualified overtime pay, effective January 1, 2025.Wood, Christopher (July 22, 2025). "Retroactive tax law for tips and overtime demands immediate action, payroll expert cautions". Thomson Reuters. A worker who is married but files separately from their spouse is not eligible for the tax deduction. A worker must have a social security number in order to be eligible for the tax deduction.
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."What to Know about “No Tax on Overtime” and “No Tax on Tips”". National Association of Home Builders. 2025."One Big Beautiful Bill Act Impact on Employee Benefits". Crowell & Moring LLP. 2025.
The tax deduction begins to phase out for individuals whose modified adjusted gross income is more than $150,000 (or $300,000 if married filing jointly), and is eliminated at $400,000 (or $550,000 if married filing jointly).
Individuals may take a tax deduction for the amount of qualified overtime compensation that appears on their Form W-2, up to annual limits. For 2025, employers may use a reasonable method to approximate the amount to put on a Form W-2 or via an alternate method. For 2026 and subsequent years, qualified overtime compensation must be reported on Form W-2, box 12, code TT."FS-2026-13 Updates to questions and answers about the new deduction for qualified overtime compensation". IRS Fact Sheet. Internal Revenue Service. August 2026. Employers must report all qualified overtime compensation without regard to the tax limit of $12,500 ($25,000 if married filing jointly).
An employee who is actively engaged in the management of their employer and owns at least a 20-percent equity interest in it is not eligible to take the tax deduction.
Overtime compensation is not excluded or exempt from gross income."How the OBBBA affects tax treatment of compensation and benefits". RSM US LLP. July 10, 2025. Employers continue to be required to withhold income taxes, social security taxes, and Medicare taxes from workers' overtime pay. An employee is allowed, however, to give their employer an updated Form W-4 that includes their acticipated tax deduction for qualified overtime compensation in Step 4(b).
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."[Notice 2025-69: Guidance for Individual Taxpayers who received Qualified Tips or Qualified Overtime Compensation in 2025 Notice 2025-69 https://www.irs.gov/pub/irs-drop/n-25-69.pdf]". Internal Revenue Service. 2025. 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 workers working one of 68 different job types."Early Guidance Issued under H.R. 1, The One Big Beautiful Bill Act". ADP. September 15, 2025."Occupations That Customarily and Regularly Received Tips on or Before December 31, 2024". U.S. Department of Treasury. September 2, 2025.
Tips received while performing a service that is a felony or misdemeanor are not eligible. Tips received for prostitution or pornography are not eligible.
Tips received as part of a tip pool are generally eligible. Tips received directly by a supervisor or manager are eligible only if they are for services they provided in a qualified occupation and not as part of a tip pool.
If the customer is charged a service charge or an automatic tip amount that is not voluntary on the part of the customer, then the service charge or tip is not eligible. This includes if the company requires a customer to pay a service charge or a particular tip amount on parties greater than a certain size. Voluntary tips above such a minimum or mandatory charge are eligible. Recommended tips are eligible if they are optional on the part of the payer.
If the customer is required to select a tip amount but does not have the option to choose to not tip at all, the minimum possible tip amount is not eligible but any tips exceeding that minimum are eligible.
If a customer has the right to receive additional goods or services in exchange for a voluntary tip, the tip is not eligible.
The tax deduction is not allowed if the individual is married and files their federal income tax return separately from their spouse.
The tax deduction is not allowed if the individual does not include their social security number on their federal income tax return or if the social security number was issued on or after the due date, including extensions, of the federal income tax return .
For a self-employed individual who receives tips in the course of their trade or business, eligible tips are tax deductible but they cannot create a net loss for the trade or business.
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.