Here’s a summary of the key provisions of the new law commonly referred to as the One Big Beautiful Bill Act (OBBBA) and what it could mean for your taxes in 2025 and beyond.

Quick Takeaways

• The new law extends many TCJA provisions that had been set to expire in 2025.
• It provides new tax breaks, including exemptions for tips and auto loan interest.
• Key provisions will expire at the end of 2028 unless extended again.
• Taxpayers should familiarize themselves with the tax law changes and work with their tax advisor to optimize tax outcomes for 2025 and beyond.

Income Tax Rates and Brackets

Prior Law: For 2018 through 2025, the TCJA contains seven tax rate brackets, but six of the rates were lower than under prior law. The top marginal rate was temporarily reduced from 39.6% to 37%. Here are the individual rates and brackets for 2025:

Without congressional action, starting in 2026, the rates and brackets would have reverted to those available under prior legislation with inflation adjustments.

OBBBA Changes: The new law permanently extends the individual tax rates and brackets under the TCJA, keeping the top rate at 37%. The brackets will continue to be adjusted annually for inflation.

Standard Deduction

Prior Law: For 2018 through 2025, the TCJA suspended personal exemptions, but it nearly doubled the standard deduction. For 2025, the inflation-adjusted standard deductions were set to be:

• $15,000 for single taxpayers,
• $30,000 for married taxpayers who file jointly, and
• $22,500 for heads of households.

Taxpayers who are blind or age 65 or older can claim an additional standard deduction of $2,000 ($1,600, if married) for 2025. 

Without congressional action, starting in 2026, personal exemptions would have been reinstated, and the standard deduction would have reverted to the levels available under prior law with inflation adjustments. 

OBBBA Changes: The new law permanently repeals personal exemptions and extends the higher standard deduction. For 2025, the standard deduction increases to:

• $15,750 for single taxpayers,
• $31,500 for married taxpayers who file jointly, and
• $23,625 for heads of households.

The standard deduction will be adjusted annually for inflation after 2025.

In addition to the additional standard deduction for seniors, the OBBBA temporarily provides a $6,000 personal exemption deduction for qualifying seniors from 2025 through 2028. (Married couples who file jointly may claim a $12,000 deduction if both spouses are 65 or older.) The exemption for seniors would phase out for individuals with modified gross income above $75,000 ($150,000 for married couples who file jointly). The law includes a Social Security number requirement to claim the senior exemption.

Estate Tax Lifetime Exemption

Prior Law: For 2025, the federal estate tax applies to estates exceeding $13.99 million for individuals and $27.98 million for married couples. Before the TCJA, the exemption thresholds were roughly half those amounts.

OBBBA Changes: Under the new law, the higher estate tax exemption amounts are permanent and increase starting in 2026:

• Single filers can exclude up to $15 million from estate taxes.
• Married couples filing jointly are exempt from up to $30 million.

The exemption will be adjusted annually for inflation after 2026. 

Child Tax Credit 

Prior Law: For 2018 through 2025, the TCJA increased the Child Tax Credit from $1,000 to $2,000 for each dependent child under age 17 at year end. Up to $1,700 of the credit is refundable for 2025. The TCJA also increased the phaseout levels for this credit, allowing more taxpayers to benefit. For 2025, the credit phases out at the following income ranges: 

• $200,000 to $240,000 for single taxpayers and heads of households, and
• $400,000 to $440,000 for married taxpayers who file jointly.

Additionally, for 2018 through 2025, the TCJA provided a $500 credit for other qualifying dependents. It was subject to the same income-based phaseouts as the Child Tax Credit and could be claimed for a qualifying dependent child over the age limit or a qualifying dependent elderly parent.

Without congressional action, starting in 2026, the Child Tax Credit would have been only $1,000, the credit for other dependents would have been eliminated and the income-based phaseouts would have dropped significantly.

OBBBA Changes: The new law permanently increases the base amount of the child tax credit to $2,200, starting in 2025, with annual inflation adjustments. It would remain partially refundable and subject to the same income-based phaseouts as under prior law. The OBBBA adds a requirement for Social Security numbers to claim the credit. 

It also permanently extends the $500 credit for other qualifying dependents. This credit remains subject to the same income-based phaseouts as the Child Tax Credit. 

Itemized Deduction for State and Local Taxes

Prior Law: For 2018 through 2025, the TCJA limited the deduction for state and local income and property taxes (SALT) to a combined total of $10,000 ($5,000 for married people who file separately). Alternatively, you can opt to deduct state and local general sales taxes instead of state and local income taxes. Foreign real property taxes aren’t deductible under the TCJA.

Without congressional action, starting in 2026, taxpayers who itemize would have been allowed to deduct an unlimited amount of personal state and local income and property taxes (or general sales taxes instead of state and local income taxes). 

OBBBA Changes: For 2025 through 2029, the new law temporarily increases the SALT cap to $40,000 ($20,000 for married couples who file separately) for taxpayers with incomes under $500,000 ($250,000 for married couples who file separately). For 2026, the SALT cap is $40,400 ($20,200 for married couples who file separately) for taxpayers with incomes below $505,000 ($252,500 for married couples who file separately).

After 2026, the SALT cap is subject to 1% annual inflation adjustments, and the income-based phaseout will be adjusted annually for inflation. The SALT limit would decrease by 30% of income over the phaseout threshold, not to fall below the prior-law cap of $10,000 ($5,000 for married couples who file separately).

Starting in 2030, the cap is scheduled to revert to the $10,000 limit under prior law.

In addition to extending certain TCJA provisions, the OBBBA introduces several new tax breaks for individuals, including:

Exemptions for Tips and Overtime

For 2025 through 2028, the new law provides temporary deductions for qualified cash tips and overtime pay. It caps the temporary deduction for tip income at $25,000 and the temporary deduction for qualified overtime pay at $12,500 ($25,000 for married couples who file jointly). Both deductions phase out for individuals with modified gross income above $150,000 ($300,000 for married couples who file jointly). Social Security numbers must be reported to claim either deduction. 

Expanded Standard Deduction for Seniors

On the campaign trail, President Trump promised to eliminate federal income taxes on Social Security benefits. The new law provides a temporary exemption of $6,000 for seniors from 2025 through 2028, subject to income-based phaseouts (see above). Seniors who itemize can claim this exemption. 

Auto Loan Interest Deduction

For 2025 through 2028, the new law allows an above-the-line deduction of up to $10,000 for personal loan interest incurred to purchase qualified domestically assembled passenger vehicles. This provision generally covers cars, minivans, vans, sports utility vehicles, pickup trucks and motorcycles.

The deduction is available to those who itemize deductions and those who claim the standard deduction. However, it’s phased out for people earning more than $100,000 ($200,000 for married couples). This provision has several restrictions. For instance, commercial vehicle loans, lease financing and related-party loans are specifically excluded.

Trump Accounts

The new law creates tax-favored "Trump accounts" that are similar to individual retirement accounts for minors. Under this provision, eligible children born after December 31, 2024, and before January 1, 2029, will receive a one-time deposit of $1,000 from the U.S. government. To qualify, a child must be a U.S. citizen at birth and have a Social Security number.

Starting in 2027, annual contributions are capped at $5,000 per account (adjusted annually for inflation). In general, no distributions from Trump accounts are allowed before the account beneficiary turns 18, unless rolled over into another account.

Important: All these new tax breaks are scheduled to expire at the end of 2028.

FAQs: The One Big Beautiful Bill Act

1. Have the lower tax rates from the TCJA been extended?
   Yes.
2. Are tips and overtime really going to be tax-free?
   For some workers, yes, but only temporarily and only if they meet specific criteria.
3. What happens to the Child Tax Credit in 2025?
   It permanently increases to $2,200 with annual inflation adjustments and remains partially refundable for some taxpayers. The $500 credit for other dependents has also been made permanent.
4. Are Social Security benefits tax-exempt?
   No, but seniors may temporarily be eligible for a special exemption if they meet specific criteria.

Looking for the Business Tax Provisions?
The OBBBA also includes major tax changes for businesses. From extended bonus depreciation and revised pass-through deductions to updates in international tax rules, these provisions could significantly impact your company’s tax strategy. For a full breakdown of the key business-related changes, read our latest blog on what the OBBBA means for business owners.

Stay Tuned- This overview captures just some of the tax provisions included in the OBBBA. The IRS is expected to issue guidance in the coming months to clarify the changes. However, much of the tax planning uncertainty is now resolved, clearing the way for mid-year tax planning. Complete the form below to contact us for additional information about these and other tax-law provisions that may apply to your situation.