Legal Analysis and Tax Liability Projections: A 2025 Case Study on the One Big Beautiful Bill Act (OBBBA) and Arizona Conformity

This legal research study provides a comprehensive statutory and computational analysis of a hypothetical 2025 married-filing-jointly tax scenario under the Internal Revenue Code as amended by the One Big Beautiful Bill Act (OBBBA) and Arizona’s conformity legislation under House Bill 2785. Applying the Issue–Rule–Application–Conclusion (IRAC) methodology, the paper evaluates above-the-line deductions, the standard versus itemized deduction threshold test, newly enacted Schedule 1-A “below-the-line” deductions, and resulting federal and state income tax liabilities. The analysis demonstrates that the taxpayers benefit significantly from the permanently expanded federal standard deduction and from targeted OBBBA provisions, including the overtime premium deduction and enhanced senior deduction. However, the automobile loan interest deduction is fully disallowed due to failure to meet the statute’s strict domestic final-assembly requirement, illustrating the compliance risks embedded within supply-chain-dependent tax incentives. After applying allowable adjustments and deductions, the taxpayers’ federal income tax liability is calculated at $7,093.20, resulting in a nominal refund of $6.80, while their Arizona tax liability under the state’s 2.5% flat tax regime equals $1,402.50, producing a minor balance due of $2.50. Beyond the numerical computation, the case study highlights broader policy implications, including the structural decoupling of adjusted gross income from taxable income under Schedule 1-A, the administrative burdens imposed by FLSA-defined overtime reporting, and the fiscal consequences of state fixed-date conformity to federal tax reform. The findings underscore the increasing complexity of post-OBBBA tax compliance and the necessity for rigorous statutory interpretation in both federal and state tax planning.