The OBBBA and Other Key Tax Changes
The United States recently saw the enactment of significant tax legislation, notably the "One Big (fill in the blank) Bill Act" (OBBBA), signed into law on July 4, 2025. This comprehensive bill introduces a range of changes impacting individuals and families across the nation. Here are some of the biggest takeaways:
Permanence of TCJA Provisions and Individual Tax Changes
A major theme of the OBBBA is the permanent extension of many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire.
Individual Tax Rates and Brackets: The seven federal income tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) from the TCJA have been made permanent for individual taxpayers. These rates, along with their corresponding income thresholds, will continue to be adjusted for inflation.
Standard Deduction Increase and Senior Deduction: The increased standard deduction amounts from the TCJA have been made permanent and are further expanded for 2025. Additionally, a new temporary deduction of $6,000 for each qualifying individual age 65 and older is available from 2025 through 2028, phasing out at income levels above $75,000/$150,000 for singles/couples.
Child Tax Credit (CTC) Enhancements: The OBBBA permanently extends the $2,000 per child credit amount from the TCJA. The maximum credit is increased to $2,200 per qualifying child and the refundable portion of the CTC is also permanently extended and adjusted for inflation. The phase-out thresholds for the CTC remain at $200,000 for single and $400,000 for married taxpayers.
State and Local Tax (SALT) Deduction Cap: The bill temporarily raises the SALT deduction cap to $40,000 for taxpayers with modified adjusted gross income under $500,000 in 2025. This cap phases down for those earning above $500,000.
Alternative Minimum Tax (AMT): The increased individual AMT exemption amounts from the TCJA are permanently extended and the exemption phase-out thresholds revert to their 2018 levels, indexed for inflation.
New Deductions for Tips and Overtime Pay: For tax years 2025 through 2028, individuals in customarily tipped industries may deduct up to $25,000 of qualified tip income and certain workers can deduct up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation. These deductions also include income-based phase-outs.
Auto Loan Interest Deduction: From 2025 through 2028, a new temporary deduction for interest paid on loans used to purchase new, US-assembled vehicles for personal use is available. It is capped at $10,000 and subject to income phase-outs.
Business Tax Provisions
The OBBBA also brings significant changes for businesses:
Qualified Business Income (QBI) Deduction: The Section 199A QBI deduction is made permanent, retaining the 20% deduction rate.
Business Interest Deduction Limitation: The bill permanently allows for the add-back of depreciation, amortization, and depletion deductions when computing adjusted taxable income, providing a more generous measure of deductible interest expense, retroactive to the beginning of 2025.
Other Notable Changes
Electric Vehicle (EV) and Residential Energy Credits: The bill permanently eliminates certain clean vehicle credits for vehicles acquired after September 30, 2025 as well as residential energy credits for home improvements after 2025.
Increased Gift and Estate Tax Exemptions:The lifetime estate and gift tax exemption rises to $13.99 million per individual.
Gives us a call if you have any questions or reach out to your tax professional to see how these new laws will impact your personal or business situation.
