Here are some important highlights about The One Big Beautiful Bill.
Lots of back-door deals were made in a bid to secure Republican holdouts. Here are a few examples: The $10,000 cap on state and local tax deductions was hiked to $40,000 to gain the support of GOPers from high-tax states. A tax break for whalers and clean-energy tax easings helped to lure Sen. Lisa Murkowski (R-AK). And a tax break for the space industry pushed by Sen. Rick Scott (R-FL) made it in.
The GOP’s use of budget reconciliation procedures complicated the process. Budget reconciliation requires only a simple-majority vote in the Senate, thus overriding the need for 60 votes in the chamber to defeat a Democratic filibuster. But it has lots of technical rules. We discuss two of these rules below. First, each provision must have a budgetary impact, meaning a change in revenues or expenditures. The Senate parliamentarian ruled against proposals to scrap IRS’s Direct File program, impose red tape on earned income credit filers, deregulate gun silencers, and cut an estimated $250 billion in health care spending.
Second, the bill’s provisions can’t increase deficits outside a 10-year window. This is the reason that many tax changes affecting individuals in the 2017 tax law, which was also passed in Congress using budget reconciliation, were temporary. However, GOPers pushed to make many OBBB tax provisions permanent… Which, under normal accounting rules, violates the 10-year requirement. So GOPers used a controversial accounting gimmick to mask the bill’s cost.
Child Care
Here’s a tutorial on the rules for claiming the dependent care credit. Expenses for the care of your kids under age 13 and other qualifying relatives must be incurred so you can work or look for employment. If you’re taking the credit to help care for a relative who isn’t a qualifying child, such as an aging parent, that person needs to have lived with you for more than six months during the year and be unable to care for him- or herself. You calculate the credit on Form 2441.
The One Big Beautiful Bill would make the credit more generous. For 2025, the credit is worth 20% to 35% of up to $3,000 in care expenses…$6,000 if you have two or more dependents needing care. That makes the maximum credit for 2025 $1,050 for one dependent and $2,100 for two or more dependents. The OBBB would make the credit worth 20% to 50% of up to $3,000 in expenses…$6,000 for two or more dependents. That would make the top credit $1,500 or $3,000 for 2026. If you’re a working parent who would qualify for the dependent care credit… Check whether your employer offers a dependent care FSA benefit option that you can fund with pretax wages. For 2025, you can contribute up to $5,000 to this flexible spending account. The OBBB would hike the cap to $7,500 in 2026. Employers that provide child care for workers can get a tax credit to offset up to 10% of child care resource and referral expenditures and 25% of facility costs. The maximum annual credit is capped at $150,000. Firms use Form 8882 to claim it. The OBBB would hike the credit for facility costs to as much as 40% of expenditures… 50% for small firms…and it would increase the yearly total credit limit to $500,000… $600,000 for small firms. Additionally, more employer costs would be credit-eligible.