On July 4, 2025, President Trump signed the "One Big Beautiful Bill Act" (OBBBA) into law. This significant tax bill permanently extends many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire and introduces new deductions and tax breaks.
Although the bill may "beautify" the tax situation for many, it's important to recognize that it's a comprehensive package with both benefits and potential drawbacks depending on individual circumstances. Most changes will not take effect until 2026.
Here are some of the more notable features that may "beautify" your tax situation:
• Permanent Tax Brackets: The current individual income tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) that have been in place since 2018 are now made permanent.
• Senior Tax Bonus: An additional deduction of $6,000 per person is available for individuals aged 65 or over, effective for tax years 2025 through 2028. This is in addition to the existing standard deduction for seniors and can be claimed by both itemizers and non-itemizers. Social Security remains taxable above certain income limits.
• Standard Deduction Increased: The OBBBA permanently extends the higher standard deduction amounts. For 2025, the standard deduction for single taxpayers increased by $1,150 to $15,750, and for joint taxpayers increased by $2,300 to $31,500. It's important to note that these changes also came alongside the permanent elimination of the personal exemption deduction.
• SALT Deduction Increased: The State and Local Tax (SALT) deduction cap rises from $10,000 to $40,000 for most taxpayers, but it is phased out once adjusted gross income exceeds $500,000. This cap and income threshold will adjust annually by 1% from 2026 through 2029, reverting to $10,000 in 2030.
• Mortgage Insurance Premium Deductible: The deduction for mortgage insurance premiums (PMI) associated with acquisition debt has been made permanent.
• Gambling Losses Limited: Under the new tax law, gambling losses are limited to 90% and the deduction is only available if you itemize deductions on Schedule A. Gambling gains remain fully taxable.
• Educator Unreimbursed Expenses: Starting in 2026, educators (teachers, coaches, etc.) will no longer be able to claim an above-the-line deduction for out-of-pocket expenses and will have to itemize to claim them.
• Charitable Deduction: The new tax law allows a maximum deduction of $1,000 for singles and $2,000 for joint filers if you do not itemize.
• Limits Tax on Tips: The tax bill introduces a deduction of up to $25,000 for qualified tips received by employees and self-employed individuals, effective for 2025 through 2028. This deduction is available for both itemizing and non-itemizing taxpayers.
• Limits Tax on Overtime: The bill provides a deduction for qualified overtime compensation. The maximum annual deduction is $25,000 for joint filers and $12,500 for single filers, effective for 2025 through 2028. This deduction is available for both itemizing and non-itemizing taxpayers.
• New Vehicle Deduction: A new temporary tax deduction for interest paid on loans used to purchase qualified new vehicles allows a deduction of up to $10,000 of interest per year. This applies to vehicles purchased for personal use and assembled in the U.S., for tax years 2025 through 2028. This deduction can be claimed even if you do not itemize your deductions.
• Estate Tax Exemption: The estate tax exemption increased to $15 million per person and will be adjusted for inflation each year. While this primarily benefits those with substantial estates, it can have a significant impact on them.
• Expanded List of 529 Plan Expenses: The list of qualified expenses that can be paid from 529 plans has expanded to include online education materials, tutoring outside the home, exam fees, and educational therapy costs, providing more flexibility for educational savings.
• Trump Account: This is a new type of tax-deferred savings account with a one-time government contribution of $1,000 for eligible U.S. citizens born between January 1, 2025, and December 31, 2028. Contributions of up to $5,000 per year can be made by parents, relatives, or others, and grow tax-deferred until the child turns 18. Additionally, employers can contribute up to $2,500 per year to the child's account, and this contribution will not be considered taxable income to the employee. There is no upfront tax deduction for contributions (except for employer contributions).
• Opportunity Zone Extended: The Opportunity Zone Fund program, designed to spur economic development in distressed areas, has been extended permanently with significant modifications. For investments made after December 31, 2026, capital gains can be deferred for five years, at which point a 10% step-up in basis is granted, reducing the capital gains owed. Furthermore, if the investment is held for at least ten years, any capital gains from the sale of the Opportunity Zone Fund investment are entirely exempt from tax. The updated program also includes stricter criteria for designating new Opportunity Zones and enhanced reporting requirements for funds.
As you can see, these changes provide benefits for individuals in various tax situations. If you want to see how the new tax bill impacts your specific case, please call our office or click the link, and we will gladly arrange an appointment.
For specific tax advice, please consult a qualified tax advisor or CPA.