The One Big Beautiful Bill (OBBB) introduced sweeping changes to tax credits and deductions that will impact individuals and families across all income levels.
Whether you’re just starting your career, raising a family or planning for retirement, these changes are likely to impact your bottom line. Here’s what you need to know:
- Dependent care assistance. The OBBB raises the annual tax-free limit for employer-provided dependent care assistance to $7,500 ($3,750 for married filing separately), effective for tax years beginning after 2025.
- Moving costs. Also effective for tax years after 2025, the OBBB eliminates the moving expense deduction and exclusion for most taxpayers. Exceptions remain for active-duty armed forces members relocating due to military orders and permanent change of station, as well as a new exception added for U.S. intelligence community employees and appointees relocating due to assignment changes.
- Bicycle commuting expenses. The OBBB ends the tax-free treatment of employer bicycle commuting reimbursements.
- 529 plans post-secondary credentialing expenses. The OBBB expands 529 plan qualified expenses to include “post-secondary credentialing expenses.” Eligible credentials include state or federally issued occupational/professional licenses, apprenticeship completion certificates registered with the Department of Labor and credentials defined under the Workforce Innovation and Opportunity Act.
- Information reporting, Forms 1099-NEC and 1099-MISC. Beginning with 2026 payments, the reporting threshold increases from $600 to $2,000 (with inflation adjustments starting in 2027). Backup withholding requirements are updated accordingly.
- Tips deduction. There’s a new deduction allowing up to $25,000 for “qualified tips,” phasing out for taxpayers with a modified adjusted gross income (MAGI) over $150,000 ($300,000 joint filers). The IRS must publish a list of tip-receiving occupations and update withholding procedures by 2026. This deduction expires after 2028.
- Overtime deduction. The new deduction allows up to $12,500 ($25,000 for joint filers) for qualified overtime compensation as defined under the Fair Labor Standards Act, with the same MAGI phaseout thresholds as the tips deduction. This deduction expires after 2028.
Keeping more money in your pocket
Stay informed as additional guidance becomes available, and consider how these changes might affect your personal tax situation. Don’t hesitate to reach out to the experts at Magone & Company for guidance on optimizing your tax strategy.
This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your business situation.