Navigating the One Big Beautiful Bill Act: What Credit Unions Need to Know
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings sweeping changes to tax and financial policy. Several of the law’s provisions warrant specific attention from credit unions, especially if involved in education lending, charitable initiatives, or community investment. Below are some of the new law’s most impactful provisions for credit unions.
OBBBA introduces a 1% excise tax on foreign electronic remittance transfers, effective after December 31, 2025. Fortunately, transfers made through banks, credit unions, and U.S.-issued cards are exempt. Credit unions offering remittance services should still review the fine print to ensure continued compliance.
New “Trump Accounts”, long-term savings accounts for children under 18, are created under the new law and may be opened beginning next year. These accounts allow for government-funded $1,000 seed deposits and employer matches, in addition to annual contributions. Trump Accounts create opportunities for credit unions to explore product opportunities tailored to families focused on education or future planning.
On the employer side, credit unions should prepare for the provision in the OBBBA which allows workers to deduct eligible overtime pay between 2025 and 2028. Individuals are allowed to deduct the premium portion of qualified overtime pay up to a limit of $12,500 annually ($25,000 for married couples filing jointly). There will be additional guidance on this, and the IRS will provide transitional relief in 2025 for both employers and taxpayers, but now is a great time to consider how payroll and W-2 systems are tracking and reporting overtime pay.
Credit unions should be aware of expanded rules around the 21% excise tax on compensation over $1 million. Per OBBBA, excise tax on excessive compensation to employees of tax-exempt entities applies to all current and former employees, rather than only the five highest-paid employees, beginning for tax years after December 31, 2025. Additionally, several charitable giving incentives have been made permanent, including a non-itemizer deduction ($1,000 Individual/$2,000 married filing jointly) and new credit for donations to scholarship-granting organizations, presenting strategic engagement opportunities for credit union foundations.
OBBBA also makes permanent the limitation on the deductibility of home mortgage interest for loans exceeding $750,000 ($375,000 for married individuals filing separately). Under this provision, mortgage interest expense remains deductible only up to these loan amounts. Additionally, mortgage insurance premiums continue to be deductible. The disallowance of interest expense on home equity debt is also made permanent, unless the debt is used to buy, improve, or expand the home. These changes are effective for tax years beginning after December 31, 2025.
The reporting threshold for Form 1099-MISC and Form 1099-NEC have been increased from $600 to $2,000 under OBBBA and will be indexed for inflation beginning after 2026. This change is effective for tax years starting after December 31, 2025. The previous Form 1099-K reporting thresholds have been reinstated, requiring reporting only if both conditions are met: more than 200 transactions and an aggregate amount exceeding $20,000. This reinstatement is retroactive to tax years beginning after December 31, 2021, as if originally included in the American Rescue Plan Act of 2021. Corresponding backup withholding rules will also take effect.
Though several clean energy credits and incentives are being phased out under OBBBA, several key programs remain. Opportunity Zones and other low-income community investment incentives also remain, supporting credit unions’ impact-oriented lending.
OBBBA’s sweeping changes to the federal student loan program, like the elimination of Grad PLUS loans, are expected to increase demand for private education loans. With new borrower segments emerging, credit unions can now expand lending programs, refine underwriting and strengthen member education.
From charitable giving and clean energy credits to education lending reforms, OBBBA presents credit unions with both operational challenges and strategic opportunities. Early planning and close attention to evolving IRS guidance are key to navigating these changes while continuing to meet members’ needs.
About Authors:
As
director of tax technical at The Bonadio Group, Jess LeDonne serves as a key
resource on tax legislation, technical guidance and policy developments that
impact clients’ businesses. Jess oversees the firm’s specialized tax technical
teams, ensuring they deliver innovative, consistent and practical solutions.
She closely monitors the evolving legislative and regulatory landscape to
provide clients with clear, actionable insights that drive informed
decision-making.
Grace
Gonzalez is an Assurance Partner at Bonadio, serving financial institutions, philanthropic
organizations, and employee benefit plans. Grace is a frequent speaker on
accounting matters at regional and national conferences and a trusted advisor
to organizations ranging in asset size from a few million to over seven billion. Grace’s blend of technical expertise
in audit and advisory services makes her an indispensable business partner to
her clients.