One Big, Beautiful Bill Act: What It Means For You

On July 4, 2025, President Trump signed into law the One Big, Beautiful Bill Act (“OBBBA”). OBBBA includes the largest tax overhaul since the Tax Cuts and Jobs Act of 2017 (“TCJA”), and it will affect almost every individual and business in the United States. The provisions in the new law go into effect on various dates, but most of the key ones affecting individuals apply to the current tax year.

Here’s a brief breakdown of what’s changing – and what’s staying the same – in the tax code. Whether you’re a taxpayer, investor, or small business owner, this guide answers the questions you need to plan ahead.

What Tax Provisions Remain Unchanged Under OBBBA?

• Tax Rates and Brackets. OBBBA makes permanent the current tax rates, which were set to revert to higher rates at the end of 2025. Tax brackets will continue to be indexed for inflation. For 2025, the top rate (37 percent) kicks in at $751,600 of taxable income for joint filers, $375,800 for married taxpayers filing separately, and $626,350 for all other individual taxpayers.
• Estate Tax Exemptions. OBBBA makes permanent the current estate tax exemptions and increase the amounts for 2026 to $15 million per individual from $13,990,000 in 2025 ($30 million per couple filing jointly), which were set to revert at the end of 2025. Tax exemptions will continue to be indexed for inflation.
• Personal Exemptions and Standard Deductions. TCJA repealed the personal exemption deductions, but nearly doubled the standard deduction amounts for taxpayers who do not itemize their deductions. OBBBA makes these changes permanent and increases the standard deduction for the 2025 to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married filing jointly. These amounts will be indexed for inflation in future years.

What New Tax Benefits Does OBBBA Introduce?

• Bigger SALT Deduction for State and Local Taxes. For taxpayers who itemize, TCJA capped the deduction for state and local taxes at $10,000. OBBBA provides relief by increasing the cap to $40,000 for 2025. The amount is increased to $40,400 for 2026 and then indexed for inflation annually before reverting to the current $10,000 limit in 2030. The enhanced cap is phased out for taxpayers with modified adjusted gross income over $500,000.
• New Deduction for Tip Income (No Tax on Tips). OBBBA creates a new deduction of up to $25,000 for qualified tips received by an individual in an occupation which customarily and regularly receives tips during a given tax year. The deduction is allowed for both employees and independent contractors. The deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). The deduction, which is allowed for the 2025-2028 tax years, is available regardless of whether you itemize or take the standard deduction.
• New Deduction for Overtime Pay (No Tax on Overtime). OBBBA creates a new deduction for up to $12,500 ($25,000 in the case of a joint return) for “qualified overtime compensation” (defined as overtime compensation paid to an individual under Section 7 of the Fair Labor Standards Act). The deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). The deduction, which is allowed for the 2025-2028 tax years, is available regardless of whether you itemize or take the standard deduction.
• New Senior Deduction (No Tax on Social Security). OBBBA adds a deduction for all individuals who have reached age 65 before the end of the tax year. The deduction amount is $6,000 per individual. The senior deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $75,000 ($150,000 in the case of a joint return). The deduction, which is allowed for the 2025-2028 tax years, is available regardless of whether you itemize or take the standard deduction.
• Charitable Contribution Deduction. Beginning in 2026, OBBBA provides a charitable contribution deduction for non-itemizers of up to $1,000 in cash contributions for single filers ($2,000 for married filing jointly). For individuals who elect to itemize, OBBBA imposes a new 0.5-percent adjusted gross income floor on charitable contributions (i.e., it reduces any deduction by 0.5-percent of adjusted gross income).
• New Deduction for Car Loan Interest. OBBBA creates a new deduction of up to $10,000 for interest paid on debt incurred after December 31, 2024 for the purchase of a qualifying new vehicle assembled in the U.S. The deduction is allowed for tax years 2025 through 2028 and begins to phase out when the taxpayer’s modified adjusted gross income exceeds $100,000 ($200,000 in the case of a joint return). The deduction is available regardless of whether you itemize or take the standard deduction.
• Trump Accounts. OBBBA creates a new type of tax-exempt savings account administered by banks and other financial institutions. Starting in 2026, parents of any child under age 18 may open a Trump account for their child. Aggregate contributions are limited to $5,000 annually, but the limit does not apply to contributions from tax-exempt entities such as private foundations. Beginning at age 18, account holders may access up to 50 percent of funds for a limited set of purposes, including higher education. At age 25, the 50 percent limitation is lifted. At age 30, account holders have access to their full balance for any purpose. Under a pilot program, for U.S. citizens born between January 1, 2024, and December 31, 2028, the federal government will contribute $1,000 per child into every eligible account.

What Other Key Tax Changes Will Take Effect?

• Enhancements to 529 Plans. Beginning in 2026, OBBBA increases the annual limit on distributions from 529 savings plans from $10,000 to $20,000. It also allows distributions to be used for additional educational expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school, including: curriculum and curricular materials; books or other instructional materials; online educational materials; tutoring or educational classes outside the home; certain testing fees; fees for dual enrollment in an institution of higher education; and certain educational therapies for students with disabilities.
• Child Tax Credit. OBBBA permanently increases the child tax credit to $2,200 per child beginning in 2025 and indexes it for inflation.
• Adoption Credit. OBBBA makes the adoption tax credit partially refundable up to $5,000 (indexed for inflation) beginning in 2025.
• Deduction for Mortgage Insurance Premiums. Beginning in 2026, OBBBA permanently restores the deduction for mortgage insurance premiums (previously available from 2018 through 2021) by treating such premiums as interest on acquisition indebtedness. As before, the deduction is phased out for taxpayers with adjusted gross income above $100,000 ($50,000 for married filing separately).
• Termination of Clean Energy Credits. OBBBA terminates the new clean vehicle credit and the previously-owned clean vehicle credit for vehicles acquired after September 30, 2025. It also terminates the energy efficient home improvement credit and residential clean energy credit at year’s end.

How Might OBBBA Reshape My Tax Strategy?

1. This opens the opportunity for many to itemize through SALT deductions, increasing the cap to $40,000 for 2025, which may lead to greater tax savings. 
2. Lower rates and higher deductions mean there are now greater opportunities to convert larger amounts to Roth IRAs for tax-free growth.
3. There will be a greater amount of money remaining in many retirees’ pockets through the expanded 65+ deductions, resulting in potentially lower tax withholding amounts on Social Security and other benefits. 

This new law is broad and complex, but you don’t have to navigate it alone. Let’s schedule a time to talk through how these changes may affect your 2025 financial picture and beyond. Together, we can explore strategies to help you make the most of the new rules.