The One Big Beautiful Bill Act: What Investors Need to Know Now

Markets don’t generally move on slogans; they move when cash‑flow math and supply chains change. With OBBBA (“One Big Beautiful Bill Act,” [Public Law 119-21]) now on the books, investors can expect changes to both.  Its impact is far reaching - touching household tax rules to corporate capital plans, and much in between. What follows is a plain-English synopsis and our take on how it reshapes the market backdrop. 

What changed, at a glance 

OBBBA is a practical package that touches households (tax relief and deductions), communities & capital formation (housing and local investment incentives), education & health (Pell and Medicaid mechanics), and energy & resources (leasing cadence and the SPR). We begin with the details of the bill and then draw the line to the market mechanics driving outcomes.

Taxes & paychecks

• 2017 Tax Cuts and Jobs Act (TCJA) Individual Tax Rates: The individual income tax rates and brackets, which were set to expire at the end of 2025, are now permanently set by OBBBA. 
  
  • Why this matters: This provides long-term tax certainty for households and allows for confident multi-year financial planning without the risk of a significant tax increase.
• TCJA Standard Deduction: The bill makes permanent the increased standard deduction from the TCJA. 
  
  • Why this matters: This simplifies tax filing for millions of Americans and provides a stable, higher baseline for tax relief.
• Estate & Gift Tax Exemption: The current federal estate and gift tax exemption will be permanently set at $15M per person starting in 2026, indexed to inflation thereafter. This allows individuals and couples to transfer substantial wealth to heirs or through lifetime gifts, without triggering federal estate or gift taxes.
  
  • Why this matters: If you have a larger estate, this permanence provides clarity and the ability to plan confidently for wealth transfer without concern of the exemption “sunsetting” in 2026.
• SALT deduction cap: A federal tax rule that limits how much of your state and local taxes you can deduct on your federal return. Raised to $40,000 for 2025; increases +1% per year through 2029, then reverts to $10,000 in 2030. The $40,000 cap is phased down for filers with a MAGI over $500,000, but never below the original $10,000 cap. Thresholds index up ~1% annually from 2026–2029. (Title VII — Finance/Tax)
  
  • Why this matters: If you live in a high-tax state, this higher cap could mean thousands more in deductible state and local taxes through 2029.
    
• “No tax on tips” deduction (2025–2028): Up to $25,000 for qualified, reported tips; phases out above $150k/$300k (single/joint). The IRS will publish the official list of tipped occupations by Oct 2, 2025, and is granting transition relief for TY2025 reporting.
  
  • Why this matters: If you are in a tipped profession, more of your income stays in your pocket, instead of taxes.
    
• “No tax on overtime” deduction (2025–2028): Deduct the premium portion of overtime pay, up to $12,500 ($25,000 joint); same $150k/$300k phase-out. Transition relief applies for TY2025 employer/payor reporting.
  
  • Why this matters: If you regularly work overtime, this deduction lowers the tax hit on your extra earnings.
    
• Auto-loan interest deduction (2025–2028): Up to $10,000 annually on auto loans originated after December 31, 2024; phases out above $100k/$200k (single/joint). The vehicle must be new and U.S.-assembled, and you must list the VIN on your return. Lender reporting gets TY2025 transition relief.
  
  • Why this matters: This makes financing a car more affordable, especially if you are purchasing U.S.-made vehicles.
    
• Senior Bonus Deduction (2025–2028): If you’re age 65 or older, you can deduct up to $6,000 of your earned income each year ($12,000 for couples filing jointly). The deduction phases out once income is above $75,000 for single filers ($150,000 for couples).
  
  • Why this matters: If you are over 65, this deduction could meaningfully reduce your taxable income and boost after-tax retirement security.
    
    

Business & Innovation

• Permanent Expensing for Research & Development (R&D): The bill permanently restores the ability for companies to immediately expense their domestic R&D costs. Under previous law, these costs were required to be amortized over five years, which was a significant drag on cash flow and a disincentive for domestic innovation. 
  
  • Why this matters: This change, effective for tax years beginning after December 31, 2024, provides a powerful incentive for businesses to invest in U.S.-based R&D.
• Permanent 100% Bonus Depreciation: OBBBA makes 100% bonus depreciation permanent for qualified property acquired and placed in service after January 19, 2025. This allows businesses to deduct the full cost of eligible assets, such as machinery, equipment, and certain tangible property, in the year they are placed in service. 
  
  • Why this matters: This provides an immediate and substantial tax benefit that improves cash flow and makes capital investments more attractive.
• Business Interest Deduction: The law permanently restores the more favorable calculation for the business interest expense deduction under Section 163(j). This provision allows businesses to add back depreciation, depletion, and amortization (DDA) when calculating their adjusted taxable income (ATI), effectively basing the deduction on earnings before interest, taxes, depreciation, and amortization (EBITDA).
  
  • Why this matters: This is a significant benefit for capital-intensive companies, as it increases the amount of deductible interest expense, particularly when combined with permanent bonus depreciation.

Community development & housing

• Low Income Housing Tax Credit (LIHTC) access expanded: The 4% credit’s bond‑financing test drops from 50% to 25% (for projects placed in service after 2025, with at least 5% financed by post‑2025 bonds). The 9% credit ceiling rises +12% starting 2026. Both support the development of more units.
  
  • Why this matters: Expanded credits mean more affordable housing projects can be built, which could open up investment opportunities and help stabilize local housing markets.
    
• New Markets Tax Credit (NMTC) made permanent and grows over time: $5B annual allocation with inflation indexing; Opportunity Zones extended and modernized.
  
  • Why this matters: Permanence and growth of these programs create more ways to invest in underserved communities, with potential tax benefits and long-term social impact.

Health & education

• Pell Grants: Addresses the FY2026 Pell shortfall (~$10.5B) and launches Workforce Pell beginning with the 2026–27 award year. The Education Department has begun implementation and rulemaking.
  
  • Why this matters: Students and families will have more support paying for higher education and job training programs, helping reduce out-of-pocket costs.
• Medicaid directed payments: Statutory step‑down from commercial‑rate to Medicare‑rate benchmarks begins on the law’s schedule, but Centers for Medicare & Medicaid Services (CMS) rulemaking is pending (watch for an interim final rule by mid‑2026). 
  
  • Why this matters: This change affects hospitals, providers, and state budgets, potentially influencing the quality and availability of care for Medicaid beneficiaries.

Energy & resources

• Offshore leasing: BOEM/DOI have set the first Gulf lease sale for December 10, 2025, with a structured schedule of sales through 2040.
  
  • Why this matters: More offshore leases mean increased opportunities for U.S. energy production, with potential long-term impacts on energy prices and investment opportunities.
• Coal leasing: Interior must make ≥4,000,000 acres of federal land available for coal leasing within 90 days of enactment (deadline ≈ Oct 2, 2025).
  
  • Why this matters: Expanding coal leasing supports energy supply but may have environmental trade-offs that affect communities and markets.
• SPR: Appropriations through FY2029 for maintenance and oil purchases, and cancellation of previously mandated drawdowns.
  
  • Why this matters: A stronger reserve can improve U.S. energy security and helps cushion against global oil price shocks.

How this affects the market backdrop

We see OBBBA changing where activity shows up more than the overall pace of growth. The permanence of R&D expensing and 100% bonus depreciation provides a powerful, long-term incentive for companies to pull forward capital expenditures. This aligns with the bill’s focus on re-shoring and domestic production, which we believe will keep industrial backlogs healthier for longer. We’ll watch durable/core capital-goods orders, supplier lead times, and company guidance for confirmation.

On rates and the curve, mechanics matter most: how Treasury splits bills vs. coupons, auction demand, and the Fed’s balance sheet. Those choices can leave long-term yields a bit firmer and nudge the curve from flat toward slightly upward over time.

Inflation looks two-sided. Additional domestic energy supply leans disinflationary over multi-year horizons, while the same tax incentives that encourage domestic production can create localized price pressure and periodic bottlenecks in key sectors as supply chains adjust. The net effect is a wider distribution of outcomes, not a single point forecast.

For companies, we’re focused on cash-flow visibility. Policy-aligned cash flows - defense primes and suppliers, integrated energy and midstream, select industrials/materials - appear to have clearer multi-year runways due to those permanent incentives. Areas losing subsidies or facing reimbursement pressure may become more idiosyncratic, widening the spread between leaders and laggards.

What we’re watching (next 3–12 months): Treasury refunding language (coupon/bill mix), auction coverage and tails; durable/core capex orders; energy capex and production; CMS rulemaking on Medicaid directed payments; BOEM lease cadence and bidding dynamics.

Closing thought

At Savvy, our job is to try to turn policy noise into market signals. OBBBA doesn’t rewrite market physics, but it does nudge where cash flows show up and what belongs on the dashboard - Treasury refunding mix, order books, and agency rulemaking. We’ll keep reading the footnotes and watching the signposts, and we’ll update you as facts change. In the meantime, clarity, tax awareness, and real diversification remain the constants.

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