Signed into law on July 4, 2025, the One Big, Beautiful Bill Act (OBBBA), changes funding for various federal programs, raises the debt ceiling, and makes numerous revisions to the Internal Revenue Code. The following is a summary of some of the tax provisions contained in the legislation.

Tax Rates
The new law permanently extends the current tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% for individuals. The current 10%, 24%, 35%, and 37% rates for estates and trusts are also permanently extended.

Standard Deduction
Effective for tax years beginning in 2025, the standard deduction is increased to the following
amounts.
MFJ, QSS ………………………….. $31,500
Single ………………………………… $15,750
HOH. …………………………………. $23,625
MFS ……………………………………. $15,750
These amounts are adjusted annually for inflation beginning in tax years after 2025.

Personal Exemptions
The new law permanently terminates the personal exemption deduction, with an exception of a temporary deduction for seniors.

For tax years 2025 through 2028, the deduction is $6,000 for each qualified individual. A qualified individual is:

1) The taxpayer, if the taxpayer has attained age 65 before the close of the tax year, and
2) In the case of a joint return, the taxpayer’s spouse, if the spouse has attained age 65 before the close of the tax year.

The $6,000 amount is reduced by 6% of the taxpayer’s modified adjusted gross income (MAGI) that exceeds $75,000 ($150,000 for MFJ).

Child Tax Credit
Effective for 2025, the Child Tax Credit is increased to $2,200 per qualifying child under the age of 17. After 2025, the $2,200 amount is adjusted annually for inflation.

Qualified Business Income Deduction
The qualified business income deduction has been made permanent. The new law also increases the phase-out range for taxpayers that exceed the threshold amount. Effective for 2026, the phase-out range is increased from $50,000 ($100,000 MFJ) to $75,000 ($150,000 MFJ).

The new law also includes a new minimum deduction for active qualified trade or business income. Effective for 2026, the qualified business income deduction for an applicable taxpayer is the greater of $400 or the deduction as calculated under the regular rules. An applicable taxpayer means a taxpayer whose aggregate qualified business income with respect to all active qualified trades or businesses of the taxpayer for the year is at least $1,000. An active qualified trade or business means any qualified trade or business of the taxpayer in which he or she materially participates.

Estate and Gift Tax Exemption Amount
Effective for estates of decedents dying and gifts made after December 31, 2025, the estate and gift tax exemption amount is increased to $15 million, adjusted annually for inflation after 2026.

Home Mortgage Interest Deduction
The new law permanently extends the provision to limit acquisition debt to $750,000 and treat home equity debt as non-deductible personal interest.

The new law also reinstates the provision to treat mortgage insurance premiums as interest, which had expired for tax years after 2021. For tax years beginning after 2025, premiums paid or accrued for qualified mortgage insurance in connection with acquisition debt is treated as qualified residence interest. The deduction begins to phase out when the taxpayer’s adjusted gross income for the tax year exceeds $100,000 ($50,000 MFS).

Gambling Losses
Effective for tax years beginning after 2025, the deduction for gambling losses is limited to 90% of such losses incurred during the year. The deduction is also limited to gains from gambling during the year.

State and Local Tax Deduction
Effective for tax years beginning after 2024, the new law permanently extends the deduction limitation for state and local taxes and increases the applicable deduction limitation amounts as follows.

1) $40,000 for tax years beginning in 2025,
2) $40,400 for tax years beginning in 2026,
3) $40,804 for tax years beginning in 2027,
4) $41,212 for tax years beginning in 2028,
5) $41,624 for tax years beginning in 2029, and
6) $10,000 for tax years beginning after 2029.

For MFS, the limitations are half the amounts listed above.

For tax years beginning after 2024, the deduction limitation amounts are reduced by 30% of the excess of the taxpayer’s modified adjusted gross income over the threshold amount (half the threshold amount for MFS). The threshold amounts are as follows.

1) $500,000 for tax years beginning in 2025,
2) $505,000 for tax years beginning in 2026,
3) $510,050 for tax years beginning in 2027,
4) $515,151 for tax years beginning in 2028,
5) $520,303 for tax years beginning in 2029, and
6) No threshold applies for tax years beginning after 2029.

The 30% reduction for tax years 2025 through 2029 shall not result in the applicable limitation amount to be less than $10,000.

Deduction for Qualified Tips
Effective for tax years beginning after 2024 and before 2029, a deduction is allowed equal to the qualified tips received during the tax year that are included on statements furnished to the taxpayer by the employer (or payee if the recipient is not an employee) or reported by the taxpayer on Form 4137. The amount allowed as a deduction for any tax year is limited to $25,000. Taxpayers do not have to itemize to claim the deduction. The deduction begins to phase-out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 for MFJ).

If the taxpayer is self-employed, the deduction is limited to the net profit from the taxpayer’s trade or business that received the tips.

Qualified tips means cash tips (including credit card transactions) received by an individual in an occupation which customarily and regularly received tips on or before December 31, 2024. Qualified tips do not include amounts received in a specified service trade or business (same definition as used for the qualified business income deduction).

Deduction for Qualified Overtime Pay
Effective for tax years beginning after 2024 and before 2029, a deduction is allowed equal to the qualified overtime compensation received during the year that is included on statements furnished to the taxpayer by the payee. The amount allowed as a deduction for any tax year is limited to $12,500 ($25,000 for MFJ). Taxpayers do not have to itemize to claim the deduction.

The deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 for MFJ).

Qualified overtime compensation means overtime compensation paid to an individual required under section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate at which the individual is employed.

Employers must separately account for the amount of qualified overtime compensation paid to the employee.

Deduction for Qualified Passenger Vehicle Loan Interest
Effective for tax years beginning after 2024 and before 2029, a deduction is allowed for qualified passenger vehicle loan interest. The term qualified passenger vehicle loan interest means any interest which is paid or accrued during the tax year on indebtedness incurred after 2024 for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use. The deduction for any tax year is limited to $10,000. Taxpayers do not have to itemize to claim the deduction. The deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $100,000 ($200,000 for MFJ).

An applicable passenger vehicle means:
1) A vehicle that is originally used by the taxpayer (the purchase of a used vehicle does not qualify),
2) A vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails),
3) A vehicle that has at least 2 wheels,
4) A vehicle that is a car, minivan, van, sport utility vehicle, pickup truck, or motorcycle,
5) A vehicle which is treated as a motor vehicle for purposes of title II of the Clean Air Act, and
6) A vehicle which has a gross vehicle weight rating of less than 14,000 pounds.

An applicable passenger vehicle is a vehicle in which the final assembly occurs within the United States.

Adoption Credit
Effective for tax years beginning after 2024, up to $5,000 of the adoption credit is a refundable credit. The $5,000 amount is adjusted annually for inflation.

Child and Dependent Care Tax Credit
Taxpayers are allowed to claim a tax credit for dependent care expenses. Dependent care expenses are generally daycare expenses that allow the taxpayer to work or look for work. Effective for tax years beginning after 2025, the credit ranges from 50% if AGI is $15,000 or less, to 20% if AGI is over $103,000 ($206,000 for MFJ). The new law does not change the $3,000 ($6,000 for two or more qualifying persons) expense limit that qualifies for the credit.