How the “BBB” reshapes the road ahead for community banks and credit unions

On July 4, 2025, the “One Big Beautiful Bill Act” (OBBBA) was signed into law, ushering in a new chapter for U.S. economic policy while leaving financial institutions with a laundry list of implications to digest. The legislation makes sweeping tax cuts permanent, introduces new incentives, and refrains from tightening financial regulation, while stirring up everything from auto loans to agricultural lending.

For community banks and credit unions, the bill brings both opportunity and complexity. While some provisions create a tailwind for lending and digital investment, others reinforce old competitive tensions and raise new compliance considerations. 

Below, we break down the most relevant impacts so your institution can move from reaction to readiness.

Lending gets a lift. But so does the competition.

The ACRE Act supercharges rural lending—by exempting interest income on agricultural and rural home loans from federal taxes, the law gives community banks a chance to offer lower rates and finally compete more effectively with Farm Credit. Banks and credit unions should expect a rush of opportunity in towns under 50,000 residents.

‍For the first time in decades, car loan interest is (temporarily) tax-deductible with up to $10,000 per year for loans on U.S.-assembled vehicles. That’s a marketing gift. Both banks and credit unions should expect heightened demand and tailor campaigns accordingly.

‍Homeowners in states like New York and California will benefit from the raised deduction cap, potentially leading to an uptick in refinances or new home loans. The window closes in 2028, so now’s the time to lean in. This creates a chance for community banks and credit unions to position themselves as local experts, offering personalized guidance and outreach to borrowers navigating the new deduction landscape.

New savings accounts = Future relationships

The law introduces MAGA (Money Accounts for Growth and Advancement) accounts: $1,000 government-seeded savings plans for every child born from 2025–2028. Parents can contribute up to $5,000 annually, and funds grow tax-deferred. Banks and credit unions should act now to capture this future customer base, offering compliant custodial accounts and positioning themselves as long-term partners in financial education. It’s a new reason to engage young families and build loyalty from birth.

Digital Banking, Fintech, and the compliance status quo

The repeal of the $600 reporting threshold means apps like Venmo and PayPal dodge burdensome tax forms and keep their convenience edge. For banks and credit unions, it’s a signal to double down on seamless P2P alternatives and user experience improvements.

‍Tech write-offs just got friendlier—with 100% bonus depreciation and expanded Section 179 expensing back on the table, banks have fresh justification for IT upgrades. Whether it's core systems or mobile banking tools, the tax code now rewards digital investment.

‍The bill sidesteps any new rules on digital assets, so crypto compliance remains a “watch and wait” area for now. Track statements from the Fed, OCC, and CFPB—having a flexible strategy allows you to move quickly when guidance changes. Additionally, use this moment to publish “what we’re watching” content for members or customers. It builds trust and establishes your institution as a forward-looking voice, even if you're not directly touching crypto today.

Who won the tax tug-of-war?

Despite heavy lobbying from the banking sector, credit unions emerged untouched. Their federal income tax exemption is safe, meaning they can continue using retained earnings to offer competitive rates.

Community banks (S-corps) get relief too—the pass-through deduction (Section 199A) was not only preserved, it was slightly enhanced. Owners of qualifying community banks can deduct up to 23% of business income, a valuable offset to the corporate flat tax rate. The bottom line: No change in the rules of engagement, but banks should use these savings to invest in modernization such as digital onboarding, service delivery, and differentiation.

Business borrowing gets a boost

Expect demand for commercial loans—businesses can now expense capital investments in full, instantly. That’s a green light for purchases of vehicles, machinery, and technology. Community banks should prepare for a surge in financing needs while ensuring strong underwriting to avoid over-leveraged borrowers chasing deductions.

CRA, Community Gaps, and Local Impact

While the law leaves CRA obligations untouched, cuts to social programs like Medicaid and SNAP could deepen financial strain in lower-income communities. Banks and credit unions should brace for more demand for small-dollar loans, hardship accommodations, and financial counseling.

This is where mission-driven banking matters—institutions that step up support for nonprofits, rural health providers, and struggling members will not only fulfill their role, but also earn long-term trust and goodwill. Now would be a great time to identify one high-impact community cause to support this quarter.

Macroeconomic Watchouts: Growth Now, Pain Later?

With nearly $3 trillion in new debt projected, interest rates may rise over time. That’s good for net interest margins, until it isn’t. ALCO teams should stress-test for multiple rate scenarios and ensure balance sheet resilience.

‍Some consumers win, others lose. Middle-income households may spend more with tax cuts and deductible overtime. But low-income households face shrinking benefits and greater financial risk. Expect divergence in borrower performance, and adapt your support strategies accordingly.

Final Takeaway: Plan Strategically, Act Locally

The “Big Beautiful Bill” is a rewiring of economic incentives that will ripple through your branches, loan portfolios, and digital platforms. For community banks and credit unions, the challenge is to harness the opportunities while bracing for the second-order effects: rising deficits, shifting consumer behavior, and deeper divides in financial well-being.

‍Use the windfalls (tax breaks, loan demand, and digital investment incentives) to fortify your institution, but don’t lose sight of your  members and customers, your mission, and your risk posture.

‍The financial landscape has changed. Now is the time to capitalize on these seismic shifts.

‍Drop us a line if you would like to learn more about how Digital Onboarding can assist with capturing these opportunities and more.