The One Big Beautiful Bill Act: What Taxpayers Need to Know

The One Big Beautiful Bill Act (OBBB) introduces several significant changes for individual taxpayers, with both permanent and temporary effects:

• Standard Deduction: The increased standard deduction from the 2017 TCJA is made permanent and further raised for 2025 to $15,750 for single filers, $31,500 for joint filers, and $23,625 for head of household. These amounts will be indexed for inflation after 2025.

• Individual Income Tax Rates: The OBBB makes the lower TCJA tax rates and brackets permanent, including the top rate of 37% and the bottom rate of 10%.

• SALT Deduction Cap: The cap on the state and local tax (SALT) deduction is temporarily increased to $40,000 ($20,000 for married filing separately) through 2029, with inflation adjustments. For incomes above $500,000, the deduction phases down but never below $10,000. The cap reverts to $10,000 in 2030.

• Child Tax Credit: The credit is made permanent and increased to $2,200 per child starting in 2025, with annual inflation adjustments beginning in 2026.

• Mortgage Interest Deduction: The limitation for qualified residence interest deduction on the first $750,000 of home mortgage debt is made permanent.

• Charitable Deductions:

  • Non-Itemizers: Starting in 2026, non-itemizers can deduct up to $2,000 (joint filers) or $1,000 (others) for charitable contributions.

  • Itemizers: Charitable deductions are reduced by 0.5% of AGI.

• Above-the-Line Deductions (2025–2028):

  • Tips: Up to $25,000 per individual in tip income can be deducted, phased out for AGI above $150,000 ($300,000 joint).

  • Overtime: Up to $12,500 per individual or $25,000 for joint filers, with the same income phaseout.

  • Car Loan Interest: Up to $10,000 can be deducted, phased out for AGI above $100,000 ($200,000 joint).

• Senior Deduction: An additional $6,000 deduction for taxpayers age 65 or older with AGI below $75,000 ($150,000 joint) for 2025–2028.

• Estate and Gift Tax Exemption: The exemption is permanently increased to $15 million per individual ($30 million for married couples), indexed for inflation.

• Other Provisions:

  • Elimination of Personal Exemptions: The personal exemption deduction is permanently eliminated.

  • Alternative Minimum Tax (AMT): The exemption is maintained at $500,000 ($1 million joint), with a higher phaseout rate.

  • Miscellaneous Itemized Deductions: Permanently eliminated.

These changes generally benefit individual taxpayers by providing higher deductions, preserving lower tax rates, and expanding credits, while also introducing new temporary deductions and increasing the estate and gift tax exemptions.