OBBBA Tax Law

The One Big Beautiful Bill Act (OBBBA), enacted in mid-2025, represents the most consequential tax legislation for traders and investors since the 2017 Tax Cuts and Jobs Act (TCJA). Chapter 18 of Green’s 2026 Trader Tax Guide explains how OBBBA permanently reshaped the federal tax framework beginning with the 2025 and 2026 tax years, replacing years of uncertainty with long-term planning clarity for active traders, trading businesses, and pass-through entities.

Permanent Extension of Core TCJA Provisions

OBBBA permanently extended many TCJA provisions that were previously scheduled to expire after 2025. For traders, this eliminates the recurring “sunset risk” that complicated multi-year tax planning. Key provisions made permanent include:

Individual tax rate brackets and the 37% top marginal rate
The 20% Qualified Business Income (QBI) deduction under §199A
The suspension of miscellaneous itemized deductions (investment expenses)
Net Operating Loss (NOL) limitations and carry-forward rules

This permanence fundamentally improves predictability for traders operating businesses year after year.

Trader-Specific Benefits Preserved and Strengthened

Chapter 18 emphasizes that OBBBA preserved—and in some cases clarified—trader-focused tax advantages:

Trader Tax Status (TTS) remains intact as a facts-and-circumstances determination.
Section 475 mark-to-market (MTM) accounting remains available exclusively to TTS traders, allowing ordinary gain/loss treatment, exemption from wash-sale rules, and avoidance of the $3,000 capital-loss limitation.
Section 475 ordinary income qualifies as QBI, enabling eligible traders to claim the 20% QBI deduction on trading profits—a compelling benefit made permanent by OBBBA.

Excess Business Loss (EBL) Rules Made Permanent

OBBBA permanently codified the Section 461(l) Excess Business Loss limitation and indexed the thresholds annually for inflation. Losses exceeding the EBL threshold are carried forward as NOLs and remain subject to the 80% taxable-income limitation. Chapter 18 explains how this framework interacts with:

TTS and Section 475 ordinary losses
NOL planning across volatile trading years
Differences between 2025 and 2026 thresholds caused by OBBBA’s inflation-reset methodology

Expanded Inflation Indexing and Planning Stability

A core theme of Chapter 18 is stability. OBBBA expanded automatic inflation indexing across multiple provisions relevant to traders, including:

QBI income thresholds and phase-out ranges
EBL limits
Standard deductions and tax brackets
Retirement contribution limits

This indexing significantly improves forward-looking planning for trading businesses, especially those using entities, retirement plans, and salary strategies.

SALT Cap Relief and Entity Planning

OBBBA temporarily increased the individual SALT deduction cap while preserving the pass-through entity tax (PTET) workaround, allowing traders operating through partnerships and S-Corporations to deduct state taxes at the entity level without limitation. Chapter 18 reinforces the importance of entity selection and state-specific PTET elections as part of an integrated tax strategy.

Bottom Line for Traders

Chapter 18 concludes that OBBBA transformed what had been a temporary and unstable tax regime into one of the most favorable and predictable environments for professional traders in decades. Traders who qualify for TTS and implement timely elections—especially Section 475—now benefit from permanent statutory support for ordinary loss treatment, QBI deductions, indexed thresholds, and entity-level planning strategies.

For active traders and trading businesses, OBBBA is not merely an extension of TCJA—it is a structural reset that rewards professional trading activity with long-term tax certainty and planning efficiency.