Summary of the Impacts of the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA) is a comprehensive tax and spending package that extends most of the 2017 tax cuts, introduces new deductions and credits, and makes major changes to estate, business, and investment taxes. While it provides near-term stimulus and clarity for planning, it also raises concerns about long-term fiscal sustainability and sectoral shifts in the economy.

Macroeconomic Impacts

OBBBA delivers substantial short-term fiscal stimulus through tax cuts and expanded deductions, but increases the federal deficit by an estimated $3–4 trillion over the next decade (as per The
Congressional Budget Office (“CBO”)(i).  The near-term economic impact is expected to be mildly stimulative, coming from the lower taxes to key segments of the population (retail workers, older people). It is hard to speak about deficits without also factoring in the new tariff policy. Although far from certain, we believe it is likely the US is headed towards a world of modest 10-15% tariffs that will generate $100-150bn/yr in tax revenue that is not factored into the deficit projections by the CBO. If 80% of the increase in tariffs is absorbed by non-domestic producers (as was the case in 2018), then the residual 20% hit to domestic consumers amounts to $30bn/yr or only 0.1% per annum on a $30tn/yr economy.

Equities

Permanent middle-class tax relief and higher standard deductions are expected to boost consumer spending and corporate earnings. Enhanced child tax credits and tax relief on tips/overtime may benefit retail and service sector stocks. Full expensing and the pass-through deduction support capital spending, especially for small/mid-cap and industrial firms. The end of green energy tax credits may shift investment toward traditional energy and industrial sectors.

Bonds and Rates

OBBBA modestly worsens the US fiscal position. The sharp rise in US deficits and debt has been a cause for concern as the CBO projects that the bill adds more than $3 trillion in deficits over ten years, plus roughly another trillion in additional interest costs at current interest rates (~$4 trillion total), excluding any tariff revenue. By 2034, the CBO expects annual deficits to drive the federal debt to an unprecedented 125–130% of GDP (ii). Fiscal expansion also complicates the Federal Reserve’s policy outlook in the near-term. Before the bill passed, the market was expecting the Federal Reserve to cut rates twice in the following year, although that may be less likely with the Fed’s perception that inflation risks are elevated and the labor market is still tight. In our view the Fed has been inconsistent on whether it cares about realized inflation or forecasted inflation over the past several years. In the current moment, it seems to think that it cares about forecasted inflation – so it is possible that it may cut rates less than what is priced into the market, resulting in higher yields and also supportive of the US dollar. However, the passage of this bill has been fairly well-advertised and 10-year treasury yields are 50bps higher than before the US elections in November 2024. Given that 5y forward 10y rates in the treasury markets are currently at 5.7%, we believe much of the Treasury bearishness that is possible is currently priced into the Treasury market.

Details of OBBBA

Signed into law on July 4, 2025, OBBBA introduces sweeping changes to the US tax code and federal spending. Spanning nearly 900 pages, OBBBA extends nearly all the tax cuts established in the 2017 Tax Cuts and Jobs Acts, as well as creates a wide range of new tax provisions affecting individuals, businesses, and investors. Most changes take effect in 2026 unless otherwise noted. (iii)

Income Taxes

  • SALT Deduction (State and Local Taxes): The cap on state and local tax (SALT) deductions rises from $10,000 to $40,000, increasing 1% annually through 2029 before reverting to $10,000 in 2030. For high earners, the deduction phases out above $250,000 (single) or $500,000 (married), and is fully phased out at $600,000 (married). The popular Pass-Through Entity Tax (PTET) workaround remains available. (iv)
  • Charitable Giving: Itemizers must now exceed a 0.5% adjusted gross income (AGI) floor before charitable deductions count, though unused deductions can be carried forward. Non-itemizers can now deduct up to $1,000 (single) or $2,000 (married) for cash donations to qualified charities. (v)
  • Itemized Deductions: Only about 10% of taxpayers still itemize since the standard deduction has increased to $15,000 (single) or $30,000 (married). Under OBBBA, taxpayers in the highest tax bracket will see a cap on the value of itemized deductions, receiving a tax benefit of 35 cents per dollar deducted (down from 37 cents). (vi)
  • Taxes on Tips and Overtime: From 2025 to 2028, workers can deduct up to $25,000/year in tips and up to $12,500/year ($25,000 for couples) in overtime from federal taxable income. These deductions phase out for higher earners but individuals earning up to $150,000 ($300,000 married) qualify for the full deduction. Note that this deduction applies only to federal income taxes, not to state taxes or payroll taxes like Social Security and Medicare. (vii)
  • Auto Purchase Incentives: Taxpayers can deduct up to $10,000 in interest on loans for U.S.-made cars (2025–2028), phasing out above $100,000 income. Electric vehicle tax credits expire September 30, 2025. (viii)
  • Senior Deduction: Individuals over 65 can deduct up to $6,000 ($12,000 for couples) from taxable income if their income is below $75,000 ($150,000 for couples), with the deduction phasing out at higher income levels. (ix)
  • Alternative Minimum Tax: Higher AMT exemption amounts are made permanent, but the phaseout threshold is lowered, so high-income taxpayers may be subject to AMT at lower income levels. (x)

Estate Taxes

  • Estate and Gift Tax Exemption: The new law increases the federal unified estate, gift, and generation-skipping transfer (GST) tax exemption to $15 million per person (or $30 million for married couples), with the amount set to rise annually with inflation. For comparison, the current exemption is $13.99 million. Without this legislation, the exemption would have dropped by roughly half to about $7 million at the end of 2025. The fact that the exemption has been made permanent is positive as shifting exemption levels and sunset provisions made long-term estate planning difficult. (xi)

Investment Taxes

  • Opportunity Zones: The Opportunity Zone (OZ) program is made permanent and enhanced, providing ongoing tax incentives for investments in designated low-income communities. This provides long-term certainty for investors and communities, and encourages sustained capital flows into OZ-designated area. (xii)
  • Qualified Small Business Stock (QSBS): To incentivize long-term venture and growth equity investments, the bill significantly expands the tax break for investments in small-business stock (Section 1202). Under prior law, a gain on QSBS held more than five years was 100% excluded, up to $10 million per issuer. The OBBBA broadens this benefit as follows:
    • It creates a tiered exclusion (50% for stock held >3 years, 75% for >4 years, and 100% for >5 years)
    • It raises the per-issuer exclusion ceiling from $10 million to $15 million (indexed to inflation starting 2027).
    • It increases the threshold to qualify as a “small business” from $50 million to $75 million.
  • Trump Accounts: New tax-advantaged accounts for children under 18 are created, with $5,000 annual contribution limits and a one-time $1,000 government deposit for qualifying children. (xiii)
  • 529 Plans: Qualified K–12 expenses now include tutoring, textbooks, online learning, test fees, and special education support, not just tuition.

Business Taxes

  • Qualified Business Income Deduction: The 20% deduction for qualified business income (Section 199A) is extended and enhanced, benefiting pass-through businesses such as S corporations, partnerships, and sole proprietors. This has impacts on some REIT-related debt investments as well. (xiv)
  • Business Full Expensing and Interest Deduction: Businesses can fully expense (immediately deduct) the cost of certain business property and domestic research and experimental expenditures, encouraging investment. The limitation on business interest deductibility is modified, potentially allowing more interest to be deducted. (xv)

Summary

OBBBA is a comprehensive tax and spending package that extends most of the 2017 tax cuts, introduces new deductions and credits, and makes major changes to estate, business, and investment taxes. While it provides near-term stimulus and clarity for planning, it also raises concerns about long-term fiscal sustainability and sectoral shifts in the economy. From a positioning perspective, given how well telegraphed this bill passing was, we don’t expect material market moves, nor are we changing our neutral positioning across asset classes.

 

References and Important Disclosures

(i): https://www.forbes.com/sites/kellyphillipserb/2025/07/04/what-the-one-big-beautiful-bill-act-will-mean-for-you-and-your-business/
(ii): https://bipartisanpolicy.org/explainer/paying-the-2025-tax-bill-a-cap-on-itemized-deductions/
(iii): https://waysandmeans.house.gov/2025/07/03/passed-the-one-big-beautiful-bill-the-largest-tax-cut-in-american-history/, https://www.forbes.com/sites/kellyphillipserb/2025/07/04/what-the-one-big-beautiful-bill-act-will-mean-for-you-and-your-business/
(iv): https://www.cohnreznick.com/insights/proposed-changes-salt-cap-what-to-know
(v): https://www.yeoandyeo.com/resource/what-nonprofits-need-to-know-about-the-one-big-beautiful-bill-act, https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/
(vi): https://bipartisanpolicy.org/explainer/paying-the-2025-tax-bill-a-cap-on-itemized-deductions/
(vii): https://www.maynardnexsen.com/publication-preparing-for-payroll-changes-what-employers-need-to-know-about-the-no-tax-on-tips-act-and-obbba
(viii): https://www.kiplinger.com/taxes/new-gop-car-loan-tax-deduction
(ix): https://www.kiplinger.com/taxes/tax-deduction-change-for-those-over-65
(x): https://www.kiplinger.com/taxes/big-gop-tax-bill-could-change-your-estate-planning
(xi): https://www.kiplinger.com/taxes/big-gop-tax-bill-could-change-your-estate-planning
(xii): https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/
(xiii): http://waysandmeans.house.gov/2025/07/03/passed-the-one-big-beautiful-bill-the-largest-tax-cut-in-american-history/
(xiv): http://bipc.com/one-big,-beautiful-bill-.-.-.-simplified
(xv): http://bipc.com/one-big,-beautiful-bill-.-.-.-simplified

This report has been prepared by GenTrust LLC for informational and educational purposes only. It does not consider the specific investment needs, objectives, or tolerances of any recipient and is not intended to provide personalized tax, legal, or accounting advice. You should consult with your own independent tax, legal, and financial advisors before making any investment decisions.

The opinions expressed are those of GenTrust’s Investment Team as of July 6, 2025, and are subject to change without notice. This material may contain estimates and forward-looking statements (e.g., regarding expected consumer spending, corporate earnings, bond yields, and the Federal Reserve’s policy outlook). These statements are based on current expectations, estimates, and projections, and involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to differ materially from those expressed or implied. There is no guarantee that any forecasts or opinions will be accurate. We undertake no obligation to update or revise any forward-looking statements. Reliance on this information is at the reader’s discretion.

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The information regarding tax law changes, including those related to the One Big Beautiful Bill Act (OBBBA) and Section 1202 Qualified Small Business Stock (QSBS), is for general informational purposes only. OBBBA was signed into law on July 4, 2025. Unless otherwise noted, most tax changes discussed are effective for tax years beginning in 2026. Specifically, regarding Section 1202 QSBS, for newly issued QSBS (effective July 5, 2025), the Act has increased the maximum exclusion to $15 million and the qualifying asset threshold to $75 million, provided specific holding period and company requirements are met. Individual tax situations vary; consult a tax professional. Tax laws are complex, subject to change, and their application depends on your individual circumstances. Always consult with a qualified professional for personalized advice.

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