House Passes ‘One Big Beautiful Bill’: Big Tax Changes You Must Know

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A historic milestone has been reached: the One Big Beautiful Bill (OBBBA) has officially been signed into law by the president. This comprehensive 869-page legislation marks a significant change in federal tax and spending policy. It consolidates a wide range of tax provisions and funding measures, and it is expected to have a substantial impact on key areas of the economy for years to come.

First, let’s start with the basics.

What is One Big Beautiful Bill?

Officially titled the One Big Beautiful Bill Act (OBBBA), this sweeping piece of legislation was passed by the 119th United States Congress in 2025. Often referred to simply as the Big Beautiful Bill, it combines a broad mix of tax reforms, spending adjustments, and policy shifts—all wrapped into an 869-page package.

The bill is being called one of the most consequential budget reconciliation laws in recent years. Its scope touches nearly every corner of government and personal finance, from federal taxation and entitlement programs to defense and border security. Key goals of the bill include delivering tax relief to the middle class, reworking major social safety nets, and significantly increasing funding for national defense.

A revival of the 2017 Trump Tax Cuts and Jobs Act (TCJA)

One of the most notable elements in the bill is the extension of provisions from the 2017 Tax Cuts and Jobs Act (TCJA)—a hallmark of President Trump’s first term. The TCJA introduced major tax reductions for both corporations and individuals, with the aim of spurring economic growth. While the law sparked ongoing debate over who benefited most, several of its tax breaks were set to expire at the end of this year.

The new budget bill aims to make many of those provisions permanent, cementing the TCJA’s influence on the U.S. tax code for the foreseeable future.

Legislative Timeline of the One Big Beautiful Bill – May 16, 2025: Bill Introduced Introduced in the House by Rep. Jodey Arrington (R–TX) as H.R. 1. – May 18, 2025: Committee Approval Passed by the House Budget Committee with a narrow vote of 17–16. – May 22, 2025: Passed the House Passed the full House of Representatives in a close 215–214 vote, with one member voting “present.” – July 1, 2025: Passed the Senate Passed the Senate with a tie-breaking vote by Vice President J.D. Vance: 51–50. – July 3, 2025: Final House Approval House agreed to the Senate’s amendment in a final vote of 218–214, clearing the way for the presidential signature. – July 4, 2025: Bill Signed Into Law President Donald Trump signed the bill into law, meaning it is now in effect.

Key highlights of the bill

A major area of impact in the One Big Beautiful Bill is information reporting, especially Forms 1099 and W-2. Here’s what businesses, payroll providers, and gig platforms need to know:

1. Form 1099-NEC: Higher Reporting Threshold for Nonemployee Compensation

• Under the current rules, businesses must file Form 1099-NEC for any nonemployee they pay $600 or more in a tax year. This includes payments to freelancers, independent contractors, and gig workers.
  
• The new bill increases this threshold to $2,000. This means businesses will only need to file Form 1099-NEC if they pay a nonemployee $2,000 or more during the calendar year.

Effective Date: The new rules will take effect for payments made on or after January 1, 2026. This means the existing threshold of $600 will apply for the next tax year (2025).

2. Repeal of Lower 1099-K Threshold (Third-Party Payment Reporting)

• The bill repeals the controversial $600 reporting threshold for Form 1099-K, which had been scheduled to take effect following changes made by the American Rescue Plan Act.

• Instead, the bill reinstates the previous threshold:
  • $20,000 in gross payments and
  • 200 transactions per year

• This applies to payments processed through platforms such as Venmo, PayPal, Stripe, Square, Etsy, and others, which are commonly used by gig workers, casual sellers, creators, and small businesses.

Effective Date: This reversion applies to calendar years beginning after December 31, 2024 — so it will take effect starting Tax Year 2025, with the first Forms 1099-K reflecting this issued in January 2026.

3. Social Security Taxes and Tax Breaks for Seniors

• While the bill does not eliminate taxes on Social Security income, it provides targeted relief for older Americans by:
  • Increasing the standard deduction by up to $4,000 for individuals aged 65 and older
  • This applies for tax years 2025 through 2028
  • It’s intended to reduce taxable income for seniors living on retirement benefits or fixed incomes
    

4. No Tax on Overtime, Tips, and Other Key Changes

• In a win for service industry workers and hourly employees, the bill creates special tax relief for:
  • Tips
  • Overtime pay
  • Interest on car loans (for qualifying individuals)

• Under this provision:
  • A portion of tip income and overtime compensation can be excluded from taxable income
  • The benefit phases out for individuals earning more than $150,000 and joint filers earning more than $300,000
  • The exclusion is temporary and will expire at the end of 2028 unless extended
    

5. Expanded Child Tax Credit

• The bill raises the Child Tax Credit (CTC):
  • From $2,000 to $2,200 per qualifying child
  • Parents must have Social Security Numbers to qualify under the House version of the bill
  • Senate proposals offered more relaxed requirements, but the final details will depend on reconciliation or administrative guidance
    

6. Debt Ceiling Raised by $5 Trillion

• The bill includes a major fiscal provision: raising the federal debt ceiling by $5 trillion, enabling the U.S. government to:
  • Continue funding programs already approved by Congress
  • Avoid shutdowns or default on obligations like Social Security, Medicare, military pay, and more

• This provision exceeds the $4 trillion ceiling increase proposed in earlier legislation
  

Summary of what’s changing and when

Provision	New Rule	Effective Tax Year
1099-NEC threshold	Increased to $2,000	2026 (filed in 2027)
1099-K threshold	Restored to $20K + 200 txns	2024 (filed in 2025)
No tax on tips/overtime	Partial exemption phases out	2025–2028
Senior deduction	+$4,000 standard deduction	2025–2028
Child Tax Credit	Increased to $2,200	2025 onward
Debt ceiling	Raised by $5 trillion	Immediate

Final thoughts

This article outlines key tax provisions included in the recent legislation. In addition to tax matters, the bill addresses significant policy areas, including healthcare, social assistance programs, and federal spending caps.

We will continue to monitor developments and report on further guidance and implementation details

Stay connected with TaxBandits for the latest updates, expert insights, and practical advice on how these changes may affect your business or clients.