On July 4, 2025, the One, Big, Beautiful Bill (OBBB) was signed into law, introducing significant tax changes that will affect individuals, families, and businesses starting in the 2025 tax year. Many of the provisions made under the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent, while new deductions and planning opportunities have also been added.
Here are 10 key tax changes from the OBBB and how they may impact your financial planning:
1. Individual Tax Rates Made Permanent
The OBBB permanently enshrines the individual income tax rates that were initially introduced under the TCJA. The seven tax brackets remain in place: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These rates apply based on income levels that vary by filing status.
This creates a more stable long-term tax environment for individuals, offering more predictability for future planning.
2. Higher Standard Deduction Locked In
The increased standard deduction amounts are now permanent:
$31,500 for joint filers
$15,750 for single filers
These figures will be adjusted annually for inflation, beginning in 2025. For many taxpayers, this could reduce the need to itemize deductions.
3. Estate and Gift Tax Exemptions Increased and Made Permanent
Starting in 2026, individuals can exempt up to $15 million from estate and gift taxes. For married couples, the exemption doubles to $30 million. These amounts will be indexed to inflation going forward.
This presents significant planning opportunities for wealth transfer and legacy strategies, especially for high-net-worth individuals and families.
4. State and Local Tax (SALT) Deduction Cap Temporarily Increased
The cap on the SALT deduction increases to $40,000 in 2025 and will grow by 1% annually through 2029. However, it is subject to a phaseout for taxpayers with adjusted gross incomes over $500,000. In 2030, the cap will revert to $10,000.
This change may offer some short-term relief to taxpayers in high-tax states, but the benefit is time-limited and income-sensitive.
5. New Senior Tax Deduction
From 2025 through 2028, taxpayers aged 65 and older can claim a new deduction of $6,000 per eligible filer. This deduction phases out for those with modified adjusted gross income exceeding:
$75,000 for single filers
$150,000 for married filing jointly
This change provides targeted tax relief to retirees and seniors on fixed incomes.
6. Tip Income Deduction
For the years 2025 through 2028, individuals who work in industries where tipping is customary can deduct up to $25,000 of tip income from their federal taxable income. The deduction phases out at:
$150,000 for single filers
$300,000 for joint filers
This is a meaningful benefit for workers in hospitality, food service, and related fields.
7. Overtime Pay Tax Relief
Overtime earnings are also eligible for a temporary deduction:
Up to $12,500 for single filers
Up to $25,000 for joint filers
This deduction also applies for tax years 2025 through 2028 and begins phasing out at the same income thresholds as the tip deduction.
8. Car Loan Interest Deduction
For vehicles purchased and assembled in the United States between 2025 and 2028, interest on auto loans becomes deductible—up to $10,000 total. This deduction phases out for incomes above:
$100,000 for single filers
$200,000 for joint filers
This provision aims to support domestic manufacturing while offering middle-income earners a tax break on transportation costs.
9. Child Tax Credit Increased and Made Permanent
Beginning in 2026, the Child Tax Credit will increase to $2,200 per qualifying child. It is now permanent and will be adjusted for inflation annually, offering greater long-term value to families with children.
10. New “Trump Accounts” for Kids
The OBBB introduces a new type of children’s savings account. Key features include:
Annual contribution limit of $5,000 by parents or guardians
One-time $1,000 federal deposit for children born between 2025 and 2028
This initiative provides a jumpstart for long-term savings and may become a useful planning tool for education or future expenses.
Final Thoughts
The One, Big, Beautiful Bill brings a mix of permanent tax reforms and temporary incentives. Some provisions create long-term planning certainty, while others offer short-lived opportunities that may require action within the next few years.
As with all tax legislation, it’s crucial to align these changes with your individual or business financial goals. If you're unsure how these updates apply to your situation, speak with a qualified financial advisor or tax professional.
Have questions about how to prepare for these changes? Let’s talk about strategies that fit your goals and timelines.
This blog is not a recommendation to buy, sell, hold, or roll over any asset, adopt an investment strategy, retain a specific investment
manager, or use a particular account type. It does not consider the specific investment objectives, tax and financial condition or particular needs
of any specific person. Investors should work with their financial professional to discuss their specific situation.
Federal income tax laws are complex and subject to change. This is based on current interpretations of the law
and is not guaranteed.