With the passage of the One Big Beautiful Bill Act (OBBBA) in mid-2025, taxpayers now have greater clarity and more complexity when it comes to planning for the year ahead. Much more than a simple extension of the Tax Cuts and Jobs Act (TCJA), the OBBBA modifies, expands, and in some cases, eliminates several key provisions. Here’s what you need to know.
Key Changes for Individuals
1. Standard Deduction Increases (Midyear Boost)
- Single filers: $15,750
- Heads of Household: $23,625
- Joint filers: $31,500
These changes apply mid-2025, but the IRS will not adjust withholding tables, meaning most taxpayers won’t see the benefit until they file.
2. Expanded Child Tax Credit
- Increased to $2,200 for 2025 and indexed for inflation beyond 2025.
3. State and Local Tax (SALT) Deduction
- Raised from $10,000 to $40,000 with a MAGI phase-out beginning at $500,000.
4. New Deductions for Tip and Overtime Income
- Tip deduction: Up to $25,000, with income limits.
- Overtime deduction: Up to $12,500 ($25,000 for joint filers), only for the additional pay over regular time.
5. Car Loan Interest
- Deductible up to $10,000 for post-2024 loans on qualified U.S.-assembled vehicles.
6. Senior Deduction
- A new $6,000 deduction for individuals 65+ with income below $75,000 ($150,000 for couples).
7. Charitable Giving Incentives
- A new $1,000 deduction ($2,000 for joint filers) for non-itemizers begins in 2026.
- Charitable contribution floor of 0.5% starts in 2026—consider accelerating 2025 donations.
8. Education & Family Provisions
- Adoption credit is now refundable up to $5,000.
- 529 plan rules expanded to include curriculum and instruction costs, standard testing fees, credentialing exams, and special needs therapies.
9. “Trump Accounts” for Children
- Launch in 2026 with $1,000 federal seed money, $5,000 annual contribution cap, and rollover options to ABLE accounts (for children born Jan 2025 – Dec 2028).
Business-Focused Updates
1. Bonus Depreciation Restored
- 100% bonus depreciation for qualifying assets placed in service after Jan. 19, 2025.
2. Section 179 Expansion
- Cap raised to $2.5 million for 2025; phase-out starts at $4 million.
