The One, Big, Beautiful Bill Act Individual Tax Provisions
On July 4, President Trump signed into law far-reaching legislation known as the One, Big, Beautiful Bill Act (OBBBA). With this legislation comes extension of many of the provisions of the 2017 Tax Cuts and Jobs Act (TCJA); enacted during the first Trump administration. It also has created many new opportunities; many of which were campaigned on, and although available only for a limited time, individuals will have the chance to take advantage of these deductions.
Here’s a breakdown of the key changes affecting individual taxpayers. Except where noted, these changes are effective for tax years beginning in 2025.
Key changes affecting individuals
Makes permanent the individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%
Sets the standard deduction for 2025 to $15,750 for single filers, $23,625 for heads of households and $31,500 for joint filers, with annual inflation adjustments going forward
Permanently increases the child tax credit to $2,200, with new annual inflation adjustments going forward
Temporarily increases the limit on the deduction for state and local taxes (the SALT cap) to $40,000 subject to income phaseouts, with a 1% increase each year through 2029, after which the $10,000 limit will return
Permanently reduces the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers) but reinstates the deductibility of mortgage insurance premiums as deductible interest
Permanently establishes business loss limitations, resetting limits in 2026 to be indexed for inflation, excess losses will continue to be treated as net operating losses in subsequent years
Permanently eliminates the deduction for interest on home equity debt
Permanently limits the personal casualty deduction for losses resulting from federally declared disasters and certain state-declared disasters
Permanently eliminates miscellaneous itemized deductions except for unreimbursed educator expenses
Permanently eliminates the moving expense deduction (with an exception for active members of the military and their families in certain circumstances)
Expands the allowable expenses that can be paid with tax-free Section 529 plan distributions to include elementary and secondary tuition expenses. In addition, the annual limitation of expenses eligible for payment has been increased to $20,000 per beneficiary
Makes permanent the TCJA’s increased exemption and income phase-out thresholds for individual alternative minimum tax (AMT), exemption and income phase-out thresholds will be resetting in 2026 to begin indexing for inflation again in years after
Permanently increases the federal gift and estate tax exemption amount to $15 million for individuals and $30 million for married couples beginning in 2026, with annual inflation adjustments going forward
For 2025–2028, creates an above-the-line deduction (meaning it’s available regardless of whether a taxpayer itemizes deductions) of up to $25,000 for tip income in certain industries, with income-based phaseouts (payroll taxes still apply)
For 2025–2028, creates an above-the-line deduction of up to $12,500 for single filers or $25,000 for joint filers for qualified overtime pay, with income-based phaseouts (payroll taxes still apply)
For 2025–2028, creates an above-the-line deduction of up to $10,000 for qualified passenger vehicle loan interest on the purchase of certain new American-made vehicles, with income-based phaseouts
For 2025–2028, creates an additional above-the-line deduction of up to $6,000 for taxpayers age 65 or older, with income-based phaseouts
Limits itemized deductions for taxpayers in the top 37% income bracket to 35% of the taxpayers adjusted gross income, beginning in 2026
Establishes tax-favored “Trump Accounts,” which will provide eligible newborns with $1,000 in seed money if elected, beginning in 2026
Makes the adoption tax credit partially refundable up to $5,000, with annual inflation adjustments (no carryforwards allowed)
Restricts eligibility for the Affordable Care Act’s premium tax credits
Early termination of certain EV, Fuel, and Residential energy credits. Key termination dates will be September 30, 2025, December 31, 2025 and June 30, 2026
EV purchase credits will expire for vehicles purchased after September 30, 2025
Alternative fueling energy credits (i.e. EV charging credit) will expire on June 30, 2026
Residential energy property credits will expire December 31, 2025 or June 30, 2026 depending on the credit
Creates a permanent charitable contribution deduction for non-itemizers of up to $1,000 for single filers and $2,000 for joint filers, beginning in 2026
Imposes a 0.5% floor on charitable contributions for itemizers, beginning in 2026
Be Prepared
We’ve only briefly covered some of the most significant OBBBA provisions here. There are additional rules and limits that apply. Everyone’s tax situation is unique and will cause each of these items to be applicable in various ways. Individuals will have the opportunity to incorporate these new legislation changes into their 2025 tax planning. With 3rd quarter estimates due soon this could provide taxpayers an opportunity to reduce or potentially eliminate additional estimated tax payments for 2025.
Navigating the changes enacted with the OBBBA will be critical for individuals to take advantage of the new changes, and in some cases receive benefits before they sunset. Turn to us for help navigating the new law and its far-reaching implications to minimize your tax liability.
