The One Big Beautiful Bill Act was signed into law on July 4, 2025, and contains several tax provisions. The provisions are temporary for only a few years unless otherwise noted, and the Treasury Department will need to issue guidance to clarify several of the provisions.
Extension of 2017 Tax Cuts and Jobs Act Provisions -
Income Tax Rates – The bill permanently extends the income tax brackets set under the 2017 TCJA, which are as follows: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The income thresholds for each tax bracket will continue to be adjusted for inflation.
Permanent Standard Deduction – The 2017 TCJA increased the standard deduction for all taxpayers, eliminating the need to itemize deductions for many taxpayers. The bill increases the standard deduction to $15,750 (single)/$31,500 (Married Filing Jointly) beginning in 2025. These amounts will be adjusted for inflation for future tax years. The personal exemption is terminated.
Increased Standard Deduction for Seniors - The new tax law grants for 2025-2028 an additional senior standard deduction (for individuals 65 years or older) to $6,000 per person. This deduction is available to both those itemizing deductions and those claiming the standard deduction. The deduction is subject to a phase-out to the extent that the adjusted gross income exceeds $75,000 (single)/$150,000 (Married Filing Jointly).
State and Local Income Tax (SALT) Deduction Cap – The bill increases the amount of state and local income and property taxes that taxpayers may deduct for federal income tax purposes. The cap is increased from $10,000 (single or Married Filing Jointly) to $40,000 (single or Married Filing Jointly). The increased cap is subject to a phase-out for those with an adjusted gross income exceeding $500,000 (single or Married Filing Jointly). This provision will lapse back to the $10,000 limit beginning in tax year 2030.
Gift and Estate Tax Exemption – The bill permanently increases the lifetime exemption of wealth that an individual can pass to others either through lifetime gifting or upon death without triggering federal gift and estate taxes. The lifetime exemption is increased from $13.99 million for an individual and $27.98 million for a married couple to $15 million for an individual and $30 million for a married couple beginning in 2026. The exemption amount will be indexed for inflation in future tax years.
Charitable Deductions - The new law allows taxpayers taking the standard deduction to also deduct up to $1,000 (single)/$2,000 (Married Filing Jointly) in charitable donations starting in tax year 2026. Only cash contributions qualify for this deduction, not donations of property or securities.
Taxes on Tips and Overtime – For tax years 2025-2028, qualified tip income from eligible occupations, to be later determined by the Treasury Department, is eligible for a $25,000 deduction. The deduction is phased out for incomes above $150,000 (single)/$300,000 (Married Filing Jointly). Taxpayers may also deduct up to $12,500 (single)/$25,000 (Married Filing Jointly) of qualified overtime compensation, which is phased out at the same income levels as the taxes on tips.
Trump Accounts – The bill also signed into law “Trump Accounts”, a new tax-advantaged account available for the benefit of any US citizen child. Each eligible child born from 2025 to 2028 will automatically receive a one-time $1,000 credit to their Trump Account when a parent files a tax return listing the child. Others may contribute up to $5,000 per year combined per child. Employers will also be able to contribute up to $2,500 per year, tax-free to the employee and deductible for the employer, but counting toward the $5,000 limit. No distributions are allowed until the beneficiary turns 18. Funds in the Trump Account will grow tax-deferred until funds are distributed. Upon distribution, any withdrawals in excess of contributions will be subject to ordinary income taxation.
Miscellaneous Itemized Deductions – Miscellaneous itemized deductions (ex. investment fees and tax preparation fees, unreimbursed employee expenses) are made permanently nondeductible.
Home Mortgage Interest – Interest on home equity loans remains nondeductible except to the extent the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan on up to $750,000 in debt.
Car Loan Interest – A deduction of up to $10,000 of interest expense is allowed for qualified passenger cars for 2025-2028 for vehicles with final assembly in the United States. The deduction phases out if adjusted gross income exceeds $100,000 (single) or $200,000 (Married Filing Jointly).
Energy Tax Credits – The Act repeals or phases out many of the clean energy tax credits by the end of the year with the electric vehicles credit to expire on September 30, 2025.
If you have questions regarding the Act, please contact our offices at 319-363-0101 or via email.