The One, Big, Beautiful Bill Act (OBBBA) brings significant updates to the tax landscape for individuals. From expanded deductions and new credits to permanent provisions from the Tax Cuts and Jobs Act (TCJA), understanding these changes is crucial for year-end planning and beyond.
Let’s walk through the most notable changes and what they mean for your tax strategy in 2025 and beyond.
State and Local Tax (SALT) Deduction
Starting in 2025, the SALT deduction cap increases to $40,000 for joint filers and $20,000 for married filing separately — with a 1% increase each year through 2029. In 2030, the original $10,000 cap returns.
High-income taxpayers with MAGI above $500,000 ($250,000 if married filing separately) will see a reduction in their SALT cap. To maximize your deduction, consider strategies to reduce MAGI, like increasing retirement contributions or making qualified charitable distributions from IRAs.
Child Tax Credit (CTC) & Credit for Other Dependents (COD)
The Child Tax Credit is now permanently set at $2,200 per child, starting in 2025, with annual inflation adjustments. Additionally:
- The $1,400 refundable portion is made permanent (increased to $1,700 in 2025).
- The $500 COD for non-qualifying dependents is also permanent.
- Income phaseouts remain at $400,000 for joint filers and $200,000 for others.
Education-Related Tax Breaks
OBBBA expands the scope of 529 plans:
- Tax-free distributions can now be used for credentialing programs and a wider range of K–12 expenses (books, tutoring, materials, testing fees).
- The annual K–12 distribution cap doubles from $10,000 to $20,000 in 2026.
A new tax credit of up to $1,700 is available for contributions to scholarship organizations for K–12 students in households earning up to 300% of the area median income.
Student Loan Benefits
Employer-paid student loan repayment remains excluded from income (up to $5,250/year), with inflation adjustments starting in 2026.
However, from 2026 on, only forgiven loans due to death or permanent disability will qualify for tax-free treatment. Other forgiven student loans will be taxable — unless Congress extends current relief. Be aware: some states may tax forgiven debt, even if federally excluded.
Charitable Contribution Deductions
Starting in 2026:
- A new nonitemized charitable deduction of up to $1,000 ($2,000 for joint filers) is available.
- A 0.5% AGI floor will apply to itemized charitable deductions. For example, with $100,000 AGI, only donations above $500 will be deductible.
Qualified Small Business Stock (QSBS)
OBBBA introduces partial exclusions for shorter QSBS holding periods:
- 75% exclusion for 4-year holdings
- 50% exclusion for 3-year holdings
The asset cap for QSBS eligibility also increases to $75 million, adjusted for inflation. These changes apply to stock acquired after July 4, 2025.
Premium Tax Credit (PTC) Changes
Beginning in 2026, if you receive excess PTCs, you’ll need to repay the full amount unless your actual income is under 100% of the poverty level.
From 2028 on, recipients must annually verify eligibility factors like income, immigration status, and residence — automatic re-enrollment ends.
Temporary Deductions for 2025–2028
These apply whether you itemize or not:
Tips Deduction
Deduct up to $25,000 in reported tips if you work in an occupation with customary tipping. Starts phasing out at $150,000 MAGI ($300,000 joint).
Overtime Pay Deduction
Deduct the “overtime premium” (extra pay beyond regular rate) up to $12,500 or $25,000 for joint filers. Phaseouts match the tips deduction.
Auto Loan Interest Deduction
Deduct up to $10,000 of interest on new vehicle loans (U.S.-assembled, under 14,000 lbs., post-2024 loans). Begins phasing out at $100,000 MAGI ($200,000 joint).
“Senior” Deduction
Taxpayers age 65+ can deduct $6,000 starting in 2025. This is independent of whether they receive Social Security. The deduction begins to phase out at $75,000 MAGI ($150,000 joint).
Trump Accounts for Children
Launching in 2026, Trump Accounts are savings accounts for children under 18 with Social Security numbers.
- Annual contribution limit: $5,000 per child
- Initial $1,000 federal contribution available for U.S.-born citizens (2025–2028)
- Funds grow tax-deferred, and accounts must remain invested in approved index funds
- Withdrawals permitted after age 18
Permanent TCJA Provisions Made Law
The OBBBA makes permanent many key Tax Cuts and Jobs Act (TCJA) measures:
- Individual tax rates of 10%, 12%, 22%, 24%, 32%, 35%, 37%
- Increased standard deduction
- Repeal of personal exemptions
- Limit on SALT deduction
- AMT exemption increases
- Mortgage interest deduction cap at $750,000
- Deductibility of mortgage insurance premiums resumes after 2025
- Repeal of home equity loan interest unless used for home improvement
- Casualty loss deduction limited to federally and certain state-declared disasters
- Elimination of miscellaneous itemized deductions
- Elimination of moving expense deduction (with narrow exceptions)
While labeled “permanent,” Congress could still amend these provisions in the future.
Time to Reassess Your Tax Strategy
These updates — plus other changes like limits on itemized deductions for high earners and gambling loss restrictions — make it more important than ever to review your personal tax plan.
Whether you’re a wage earner, investor, retiree, or parent, we can help you adjust your strategy and take full advantage of the new provisions under OBBBA.
Let’s Talk Tax Strategy
Want to know how OBBBA will impact your 2025 return?
Our team is here to help you navigate the changes and uncover opportunities. Contact us today to schedule your personalized tax planning session.
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