Tax legislation might not be top of mind during the summer, but the newly passed One Big Beautiful Bill Act (OBBBA) is poised to reshape the tax landscape in major ways, some of which could affect your 2025 tax return and beyond. Whether you’re a retiree, a business owner, or a working family, here’s what you need to know, broken down into the key takeaways that matter most.
What’s in the Bill: Highlights at a Glance
On July 3, 2025, Congress passed OBBBA — the most sweeping update to the U.S. tax code since 2017. It locks in popular cuts from the Tax Cuts and Jobs Act (TCJA) and introduces new deductions, credits, and planning opportunities. But many of the new features are temporary, and some come with income limits and sunsets.
Individual Tax Breaks Extended or Made Permanent
These provisions are now locked in for the long term:
- Tax Brackets and Rates: The lower tax rates introduced in 2017 (10%, 12%, and 22%) are here to stay, with enhanced inflation adjustments.
- Standard Deduction Enhancement: Starting in 2025:
- $750 boost for single filers
- $1,500 boost for married filing jointly. This is in addition to the existing TCJA standard deduction amounts.
- State and Local Tax (SALT) Deduction: State and Local Tax (SALT) deduction cap jumps to $40,000 in 2025 (retroactive to January 1, 2025), then increases slightly each year. The cap is phased out above $500,000 in Modified Annual Gross Income (MAGI) and reverts to $10,000 in 2030.
- Child Tax Credit: Increased to $2,200 per child with future inflation adjustments.
- Alternative Minimum Tax (AMT): Exemption amounts are permanently extended and indexed to inflation, with phaseouts reset to 2018 thresholds. ($500,000 – single filers; $1 million – joint filers).
- Section 199A Deduction: The 20% qualified business income deduction is made permanent, with a new $400 minimum deduction added.
- Estate and Gift Tax: Exemption raised to $15 million – a major win for high-net-worth families, avoiding the scheduled rollback to pre-TCJA levels.
Temporary Deductions (2025-2028): Use Them While You Can
- No Tax on Tips: This provision creates a deduction for tip income up to $25,000 annually and is subject to eligibility requirements (specifically for workers in occupations that traditionally receive tips).
- No Tax on Overtime: Deduction available retroactively to January 1, 2025. Starts to phase out at:
- $150,000 AGI for individuals
- $300,000 AGI for joint filers
- Auto Loan Interest Deduction: Deduct up to $10,000 per year for interest on loans for new U.S.-assembled vehicles used personally. Phases out over $100,000 adjusted gross income (single) or $200,000 (joint).
- Senior Citizen Deduction: New $6,000 per-person deduction stacks on top of the standard deduction and the 65+ add-on. For instance, a 65-year-old single taxpayer who qualifies for the full $6,000 deduction would be able to deduct a total of $23,750 from these three tax breaks on their 2025 tax return. A qualifying 65-year-old couple could deduct up to $46,700.
New and Notable: Additional Tax Features
- Above-the-Line Charitable Contributions: All taxpayers can now deduct $1,000 ($2,000 for married filing jointly), even without itemizing.
- Trump Accounts: Tax-advantaged savings accounts seeded with $1,000 for each newborn:
- Track a stock index
- Allow private contributions up to $5,000 per year
- Remain open until the child turns 18
*Details still pending from the Treasury*
Where’s the Money Coming From? Revenue Offsets
To help pay for the tax cuts, the bill also introduces new limitations:
- Itemized Deduction Limitations: Tax benefit capped at 35% for high earners.
- Charitable Giving Floor: Minimum 0.5% AGI (1% for corporations) to claim deduction.
- Clean Energy Tax Credit Reductions: Major scale-back of green incentives, including sunsetting electric vehicle credits by September 2025.
- Educational Credit Restrictions: Tighter rules for the American Opportunity and Lifetime Learning Credits.
- New Taxes:
- 1% tax on remittances sent abroad
- Tiered tax (up to 8%) on large college endowments
Effective Dates and Deadlines
| Change type | When it starts |
| Standard Deduction & SALT Cap | Tax Year 2025 (immediate) |
| Most New Provisions | January 1, 2026 |
| Temporary Deductions Expire | December 31, 2028 |
| SALT Cap Reverts | January 1, 2030 |
What to Consider Before 2025 Ends
Whether you’re planning for the near term or thinking ahead, here are some ways to prepare:
For Individual Taxpayers:
- SALT Timing: Coordinate state/local tax payments to benefit from the extended cap.
- Charitable Giving: Explore strategies to take advantage of the new above-the-line deduction.
- Business Owners: Review entity structure in light of the expanded Section 199A deduction.
For Retirees:
- Senior Deduction: Confirm eligibility and plan for the added $6,000 per-person deduction.
- Estate Planning: Use the $15 million exemption to review or accelerate your estate strategy.
Where We Go from Here
The One Big Beautiful Bill Act offers significant opportunities, but also leaves questions. With so many moving parts (and some provisions set to expire), it’s wise to start planning early.
Treasury and IRS guidance will further shape how many of these changes are implemented. In the meantime, our team is here to help you understand what it all means for your financial life.
Please note that we strongly recommend consulting with your tax professional and financial advisor before making significant financial decisions based on this legislation.
Presented by Nicolette Davicino, CFP®
