What the OBBB Act Means for Individual Taxpayers

July 15, 2025

On July 4, 2025, President Trump signed the One Big Beautiful Bill (OBBB) Act into law, ushering in sweeping changes to the U.S. tax code. This legislation makes permanent provisions from the Tax Cuts and Jobs Act (TCJA), introduces new deductions and credits, and eliminates several green energy incentives. Here’s a breakdown of what individuals need to know.

Income Tax Rates: Permanently Set

The OBBB Act locks in the current seven-bracket structure for individuals:

  • 10%, 12%, 22%, 24%, 32%, 35%, and 37%

For trusts and estates, the brackets remain at:

  • 10%, 24%, 35%, and 37%

A key change is the adjustment to inflation calculations, especially for the 10% bracket, which will now capture more income due to an extra year of inflation indexing.

Child Tax Credit: Expanded and Adjusted

The child tax credit (CTC) sees several important updates:

  • Increased to $2,200 per qualifying child under 17 for 2025, adjusted annually for inflation.
  • The $500 credit for other dependents (ODC) remains unchanged and is not indexed for inflation.
  • The refundable portion (ACTC) is capped at $1,400, indexed for inflation ($1,700 for 2025).
  • Phaseout thresholds are now permanent:
    • $400,000 for joint filers
    • $200,000 for others
  • SSNs are required for both the child and the taxpayer (or one spouse on a joint return).

Personal and Dependency Exemptions: Permanently Repealed

The OBBB Act permanently repeals the personal and dependency exemption deductions starting in 2026. However, the rules for determining dependents still apply for other tax benefits like the child tax credit.

Temporary Senior Deduction

From 2025 through 2028, seniors aged 65+ can claim a $6,000 deduction, subject to income phaseouts:

  • Begins phasing out at $75,000 (single) or $150,000 (joint)
  • Reduced by 6% of income over the threshold
  • SSNs are required for both spouses on a joint return

Standard Deduction: Increased

  • $31,500 for joint filers
  • $23,625 for heads of household
  • $15,750 for single and married filing separately

These amounts will be adjusted annually for inflation.

SALT Deduction Cap: Temporarily Raised

The State and Local Tax (SALT) deduction cap is:

  • $40,000 for 2025, increasing 1% annually through 2029
  • Reverts to $10,000 in 2030
  • Phased down for high earners (subject to phaseout for MAGI greater than $500,000 in 2025)

New Deductions for Workers

Two new deductions are introduced (2025–2028):

  • Tips Deduction: Up to $25,000, phased out above $150,000 AGI ($300,000 joint)
  • Overtime Pay Deduction: Up to $12,500 ($25,000 joint), same phaseout rules
  • Available to both itemizers and non-itemizers, but SSNs are required

Automobile Loan Interest Deduction

From 2025 to 2028, individuals can deduct up to $10,000 in interest on auto loans for cars purchased after 2024. This applies to both itemizers and non-itemizers.

Trump Accounts for Newborns

A new tax-favored savings vehicle called Trump Accounts is introduced:

  • Seeded with $1,000 for each newborn
  • Operate similarly to IRAs but are designed for children

Education and Charity Enhancements

  • 529 Plans now cover elementary, secondary, and home schooling expenses
  • Charitable deduction for non-itemizers is reinstated
  • Tax credit for donations to scholarship-granting organizations

Estate Tax Exemption Increased

The estate tax exemption is raised to $15 million for decedents dying in 2026, indexed for inflation thereafter.

Green Energy Credits Terminated

The OBBB Act eliminates several green energy incentives after 2025, including:

  • Clean vehicle credits
  • Alternative fuel refueling property credit
  • Energy-efficient home improvement credit
  • Residential clean energy credit

Final Thoughts

The OBBB Act brings significant and lasting changes to the tax landscape for individuals. While many provisions offer expanded benefits and deductions, others—like the repeal of personal exemptions and green energy credits—may impact planning strategies.

Need help navigating these changes? Contact your tax advisor to understand how the OBBB Act affects your specific situation.

Download a two-page summary of Effective OBBB Dates for Individual Taxpayers here.

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Robert Ingrasci

Robert Ingrasci

CPA

Partner

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