Individual Tax Changes Under the "One Big Beautiful Bill Act"

On July 4th, the president signed into law the "One Big Beautiful Bill Act" (OBBBA). This legislation includes changes to how individuals will be taxed.

The OBBBA made the "Tax Cuts and Jobs Act (TCJA) permanent. The TCJA was the large bill passed during President Trump's first term, which was set to expire at the end of 2025. This means the following tax provisions have been made permanent.

• Individuals will continue to be taxed at the lower rates enacted by the TCJA.

  • The seven tax brackets remain at: 10%, 12%, 22%, 24%, 32%, and 37%.

• Standard deductions remain higher and continue to be adjusted yearly for inflation.

  • $15,750 single and married filing separate.

  • $23,625 for head of household filings.

  • $31,500 for married filing jointly.

• The Child Tax Credit increases to $2,200 per child.

• Estate and gift tax exemption increased to $15 million, adjusted for inflation.

• Mortgage interest deduction is capped for new debt up to $750,000.

• Other miscellaneous itemized deductions (like unreimbursed job expenses) are ended.

• The moving expense deduction was ended other than for Armed Forces.

  
  

The tax provisions didn't just preserve the older tax cuts; it also added a few new deductions and credit. Here are a few highlights:

• A charitable deduction for non-itemizers is added. You can now deduct up to $1,000 in charitable donations ($2,000 for couples) even if you don't itemize your deductions.

• No tax on tips. Employees who receive tips can claim a deduction up to $25,000 against their tip income subject to phase out limits and limited to certain occupations. This deduction expires after 2028.

• No tax on overtime. Employees will be able to claim a deduction of up to $12,500 against overtime wages subject to income limitations. This deduction expires after 2028.

• A bonus deduction for seniors aged 65+ in the amount of $6,000 is now available subject to income phase outs.

• A new auto loan interest deduction is available. If you finance your new vehicle purchase, you can deduct up to $10,000 in interest expenses. This deduction will be limit based on income limits and other factors such as if the vehicle was assembled in the United State or not.

• Creation of Trump Accounts. These are special retirement accounts for kids. Contributions are tax-deductible. Some accounts may receive a $1,000 government funded deposit subject to limitations.

• The state and local tax deduction limit has been increased to $40,000 (currently $10,000) adjusted for inflation through 2030 at which point it converts back to the $10,000 limit.

Final Thoughts

This new law keeps the tax code favorable for many families and adds extra relief for workers, seniors, and parents. If you're unsure how these changes impact your situation, consider speaking with a tax professional to make the most of the new rules.

Disclaimer: This post is for informational purposes only and should not be considered tax, legal, or financial advice. Every individual's financial situation is unique, and tax laws are complex and frequently change. Please consult a qualified tax advisor or attorney for guidance tailored to your specific circumstances.