One Big Beautiful Bill Act: Key provisions that will impact tax-exempt organizations

The One Big Beautiful Bill Act (OBBBA or Act) was signed into law by President Trump on July 4, 2025. The Act has several provisions that affect tax-exempt organizations and higher education institutions, although many proposed elements from the House bill did not make it into the OBBBA. Not-for-profit organizations should become familiar with the new provisions and consult their tax advisors to determine the impact of these changes.

Other notable provisions

No tax on overtime

Prior law: Not applicable.

OBBBA provision: Allows for a maximum deduction qualified overtime income of $12,500 ($25,000 for joint returns). Phasing out deduction for joint filers with adjusted gross income over $300,000 ($150,000 for other filers). Employers are required to separately state the amount of qualified overtime on their employee's Form W-2. This provision is effective for years beginning after Dec. 31, 2024 and ending before Jan. 1, 2029.

Trump Accounts

Under the OBBBA, a new tax-favored account similar to a nondeductible IRA was created for U.S. citizens under age 18. Trump Accounts intend to give families the opportunity to provide their children with a substantial head start on retirement saving.

Extension of increased estate and gift tax exemption amounts and permanent enhancement

Current law: This increased estate and lifetime gift tax exemption amount is set to expire after Dec. 31, 2025.

OBBBA provision: This provision permanently extends the estate and lifetime gift tax exemption, increasing the exemption amount to $15 million per individual in 2026 and indexes the exemption amount for inflation going forward.