The "One Big Beautiful Bill" Act Has Passed

Major tax reform is here. Signed into law in July 2025, the One Big Beautiful Bill Act (OBBBA) introduces a mix of permanent tax policy changes and temporary new deductions, alongside significant reforms to government spending.

Here is a breakdown of what these updates mean for you.

Permanent Provisions: A Look at the Long Term

The OBBBA makes several key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) permanent, offering stability and predictability for taxpayers well beyond 2025:

  • Individual Income Tax Rates: The current seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are made permanent, preventing them from expiring at the end of 2025.
  • Standard Deduction: The increased standard deduction amounts are now permanent and indexed for inflation. For tax year 2026, the amounts increase to $32,200 for married couples filing jointly and $16,100 for single filers.
  • Estate & Gift Tax: The higher basic exclusion amount is permanent, increasing to $15 million per individual in 2026 (or $30 million per married couple).
  • Business Deductions: The 20% deduction for pass-through entities (QBI) is permanent. The Act also permanently reinstates 100% bonus depreciation for qualified property and allows for the immediate expensing of domestic R&D costs.

Temporary Tax Breaks (2025-2028): What’s New?

The OBBBA introduces new, temporary tax breaks designed to offer relief over the next few years. These are set to expire after the 2028 tax year:

  • New Deduction for Seniors: Taxpayers aged 65 and older can claim an additional deduction of $6,000 ($12,000 for qualifying married couples), available even if you don’t itemize. This benefit phases out for those with a Modified Adjusted Gross Income (MAGI) over $75,000 (single) and $150,000 (joint).
  • Tips and Overtime Pay: You can now claim above-the-line deductions of up to $25,000 of qualified tip income and up to $12,500 of qualified overtime pay.
  • Auto Loan Interest: Deduct up to $10,000 in interest paid on loans for new, U.S.-assembled personal vehicles purchased between 2025 and 2028.
  • Child Tax Credit Boost: The maximum credit increases to $2,200 per child starting in 2025 and is indexed to inflation thereafter.

Other Notable Changes

  • SALT Cap Raised: The State and Local Tax (SALT) deduction cap is raised from $10,000 to $40,000 through 2029, though income phaseouts apply starting at $500,000 MAGI.
  • Charitable Giving: A new floor of 0.5% of AGI is applied to itemized charitable deductions starting in 2026, and a new limited above-the-line deduction is introduced for non-itemizers.
  • Clean Energy Credits Eliminated: Most clean energy credits, including many related to electric vehicles, were phased out or eliminated in late 2025.
  • “Trump Accounts”: A new, temporary savings vehicle has been established for children born between 2025 and 2028, seeded with a one-time $1,000 government deposit for U.S. citizen children.

For detailed guidance on how these changes affect your specific financial situation, we recommend consulting a tax professional or visiting the IRS website.

Disclaimer: This newsletter is for informational purposes only and does not constitute tax advice. Please consult with a qualified tax professional regarding your individual circumstances.