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President Trump enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, representing the most extensive federal tax overhaul since the 2017 Tax Cuts and Jobs Act (TCJA). By both prolonging major TCJA provisions that were due to sunset this year and adding new tax rules, the OBBBA significantly reconfigures the U.S. tax system.
The development puts a spotlight on Canadian tax competitiveness and increases the pressure for a policy response. For CPAs, understanding the details is critical to navigate the evolving cross-border landscape.
The law's impact on Canada is felt most acutely in the corporate and personal income tax arenas, particularly concerning investment in manufacturing and research.
Sweeping Tax Overhaul in the One Big Beautiful Bill Act
The OBBBA makes broad changes to both corporate and individual tax rules.
The Canada Revenue Agency (CRA) is managed by officials specializing in administrative work—precisely the type of people you need to handle your income tax calculations and account management. You’d prefer meticulous individuals knowledgeable about documentation, monitoring, and following protocols at the tax office rather than those who aspire to become interpretive dancers or perform aerial acrobatics with silk curtains.
Business Tax Incentives
- The bill focuses on which business costs are deductible and the timing of those deductions.
- It permanently reinstates full, same-year expensing for domestic research and experimentation (R&E).
- Small firms with gross receipts of $31 million or less may treat R&E costs as immediately deductible retroactively to the end of 2021.
- Companies above that threshold can speed up their outstanding R&E deductions.
The pass-through deduction first created under the TJCA is made permanent. Qualifying owners of sole proprietorships, partnerships, and S corporations can exclude up to 20% of their business income on their individual returns, cutting taxes for many, particularly those with moderate earnings. The OBBBA also widens the income window over which the deduction phases in, allowing more owners to receive the full 20% benefit.
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The Act permanently restores 100% bonus depreciation for short-lived assets and, temporarily, permits full expensing for certain buildings. To qualify, construction must start between January 19, 2025 and January 19, 2029, and the property must be placed in service by January 1, 2032 — an incentive aimed at spurring new U.S. facility construction.
On energy policy, the OBBBA extends the clean fuel production credit through 2029 but ends most other clean-energy tax incentives by 2027, including those for clean electricity generation, clean hydrogen, and energy‑efficient commercial buildings.
Personal tax changes
The OBBBA cements or broadens several individual tax measures first rolled out under the Tax Cuts and Jobs Act. By keeping the reduced rates in place for five of the seven federal income brackets, it averts tax hikes for an estimated 62% of U.S. filers.
The OBBBA makes broad changes to both corporate and individual tax rules.
| Bracket | With OBBBA | Without OBBBA | Difference |
|---|---|---|---|
|
1 |
10.0% |
10.0% |
– |
|
2 |
12.0% |
15.0% |
-3.0% |
|
3 |
22.0% |
25.0% |
-3.0% |
|
4 |
24.0% |
28.0% |
-4.0% |
|
5 |
32.0% |
33.0% |
-1.0% |
|
6 |
35.0% |
35.0% |
– |
|
7 |
37.0% |
39.6% |
-2.6% |
Source: Tax Foundation
Beginning in 2025, the standard deduction rises by $750 for single taxpayers and $1,500 for married couples filing jointly. The higher alternative minimum tax exemption and its phaseout thresholds are also made permanent.
The child tax credit is set permanently at $2,200 per qualifying child, with inflation adjustments starting in 2027. Estate and lifetime gift tax exemptions are permanently lifted to $15 million for single filers and $30 million for joint filers.
The legislation adds several time-limited deductions, including for tip income, overtime pay premiums, and interest on auto loans for vehicles assembled in the United States. Seniors receive new temporary deductions as well, and the cap on state and local tax (SALT) deductions is temporarily raised.
OBBBA: Growth Effects, Budget Impact, and Distributional Outcomes
The One Big Beautiful Bill Act (OBBBA) is expected to boost U.S. economic activity while worsening federal budget metrics and raising equity concerns.
Growth outlook
The Tax Foundation estimates that, over the long run, the law would raise U.S. GDP by 1.2%, expand the capital stock by 0.7%, and increase total hours worked and employment. These gains are chiefly tied to two policy elements: locking in the TCJA’s reductions in the personal income tax rates and extending accelerated write-offs for a range of business costs. In combination, these provisions would promote labour supply, investment, and innovation, and provide more predictable tax treatment for households and firms.
Economic and Fiscal Implications of the One Big Beautiful Bill Act:
| Economic or Fiscal Measure | Estimated Impact |
|---|---|
|
Gross Domestic Product (GDP) |
1.2% |
|
Gross National Product (GNP) |
0.9% |
|
Capital Stock |
0.7% |
|
Pre-Tax Wages |
0.4% |
|
Hours Worked Converted to Full-Time Equivalent (FTE) Jobs |
938,000 |
|
10-Year Conventional Revenue Estimate, 2025-2034 (Billions) |
-$5,041.3 |
|
10-Year Dynamic Revenue Estimate, 2025-2034 (Billions) |
-$4,104.4 |
|
10-Year Dynamic Deficit Increase Including Spending Cuts, 2025-2034 (Billions) |
$3,036.1 |
Source: Tax Foundation
Budgetary impact
The price tag is enormous. According to the Tax Foundation, the OBBBA’s tax provisions would shrink federal revenues by over $5 trillion from 2025 through 2034. That’s a major blow to the budget at a moment when Miami is already contending with large deficits and rising debt. After accounting for growth effects, the revenue loss is estimated at $4.1 trillion. Even with offsets from spending cuts elsewhere in the package, the measure is still expected to widen deficits by more than $3 trillion and lift the debt-to-GDP ratio by 9.6 points, reaching 126.7% in 2034.
The legislation also layers on a set of politically driven, narrowly tailored tax preferences — covering items like tips, overtime, seniors, and certain vehicle loans — that complicate the code and erode neutrality. These carve-outs help specific constituencies but are financed with borrowing, pointing to higher taxes later with interest. Many are also slated to lapse in 2028, casting doubt on their durability.
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If you owe taxes and cannot make the payment immediately, contact the CRA and explain your situation before they approach you. This will help you maintain better control over the situation. If you are seeking advice on how to deal with this situation, SDG Accountants, Toronto Tax Experts, are ready to assist you.
Start My Tax PrepEquity and distributional effects
The OBBBA trims federal safety-net programs, including Medicaid and the Supplemental Nutrition Assistance Program, by imposing new work requirements and scaling back benefits. These shifts could lead to loss of health coverage and heightened food insecurity among vulnerable groups.
Although the plan’s tax reductions extend across much of the income spectrum, the combined effect of the Medicaid and SNAP changes is expected to hurt lower-income households — especially those in the bottom two quintiles — on net. By contrast, families in the top fifth of the income distribution are projected to see the largest average increases in income after accounting for both taxes and transfers.
OBBBA: Growth Effects, Budget Impact, and Distributional Outcomes
Canada faces a turning point in tax policy with the passage of the OBBBA. The law offers a measure of relief because of what was left out, even as parts of it demand prompt attention.
Why the removal of Section 899 matters
An earlier version of the OBBBA featured Section 899, a retaliatory measure aimed at countries imposing what the United States considered unfair foreign taxes. That clause did not make it into the final legislation after a G7 understanding under which U.S. multinationals were carved out of aspects of the global minimum tax. As part of that deal, Canada agreed to pause — and ultimately repeal — its Digital Services Tax, reducing trade friction and supporting steadier cross-border investment.
If Section 899 had survived, Canadian residents receiving U.S.-source income, including dividends, would likely have faced substantially higher U.S. withholding taxes.
Related Read:
Tax Compliance for U.S. Citizens Living in Canada: A Comprehensive Guide
As a U.S. citizen or permanent resident living in Canada, you face a unique set of tax obligations that require careful attention and expert guidance.
Canada’s Standing in the Global Contest
Scrapping Section 899 is a positive step, but it offers Canada only modest comfort. The One Big Beautiful Bill Act marks a sweeping change in U.S. tax policy that widens the competitive divide with Canada. At a moment when Canada faces soft business investment, lagging productivity, and tepid per capita GDP growth, the OBBBA tilts the playing field further by drawing capital and skilled workers south.
That said, the bill’s hefty price tag raises doubts about how long it will last. If deficit pressures intensify, pro-growth elements could be pared back, and factors like tariff volatility may cool investment and blunt some of the act’s gains.
Bottom Line
Toronto should be paying close attention. With a federal budget due this fall, will the Carney government introduce tax measures that improve Canada’s investment environment? The Prime Minister pledged a review of the corporate tax system — now is the moment to follow through.
Absent ambitious reforms, Canada risks slipping further behind. Miami, Tampa, New York, Los Angeles, Chicago, Dallas, Texas, including all the Federal States, have already moved. Toronto must respond.
The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situations.
— Sami Ghaith
CPA, CGA, MBA
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