The One Big Beautiful Bill: What It Means for You (Individuals)

By Christopher Pace, President

President Trump signed H.R. 1 — officially titled the One Big Beautiful Bill Act (OBBBA) — into law on July 4. This sweeping legislation permanently extends key provisions of the Tax Cuts and Jobs Act (TCJA) and introduces several new tax rules designed to reduce taxable income, expand access to benefits, and simplify compliance. Below, I break down the provisions that are most likely to impact our individual clients.

Couple Examining their Finances Online

Extension of Reduced Income Tax Rates

The TCJA lowered individual tax rates in 2017, but those changes were set to expire at the end of 2025. This new bill makes those reduced rates permanent. The amendment to Section 1(j)(1) eliminates the sunset clause and locks in the current marginal tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This is good news for most individual taxpayers who were facing a potential tax hike in 2026.

Standard Deduction

The standard deduction will increase significantly beginning in the 2025 tax year. For single filers and married individuals filing separately, the deduction will be $15,750. For married taxpayers filing jointly, it will increase to $31,500. Head of Household filers will see their deduction raised to $23,625. This increase will simplify filing for many and reduce taxable income for those who don’t itemize.

Senior Deduction

You may have heard the President claim that Social Security will be tax-free for seniors. That didn’t make it into the bill. Instead, a new “Senior Deduction” has been introduced, which I view as a tradeoff for that unfulfilled promise. Beginning in tax year 2025 and continuing through 2028, individuals age 65 or older by year-end may claim a new $6,000 deduction. On a joint return, each spouse may qualify, allowing for up to $12,000 in total deductions. This deduction is subject to a 6% phaseout once Modified Adjusted Gross Income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. A Social Security Number is required to claim this deduction.

Child Tax Credit

The Child Tax Credit has been enhanced slightly. It now provides $2,200 per qualifying child, up from $2,000. The refundable portion remains unchanged at $1,400. While modest, this increase will still benefit many families.

Employer-Dependent Care Deduction

If you contribute pre-tax dollars from your wages toward dependent care expenses, there’s good news. Starting in tax year 2026, the maximum amount you can deduct from your wages will increase to $7,500, up from the previous $5,000 limit. For married individuals filing separately, the maximum is $3,750. This helps working families better manage the cost of childcare through payroll deductions.

SALT Deduction

If you’ve spoken with me before, you’ve probably heard me talk about the SALT (State and Local Tax) deduction and how the 2017 Tax Cuts and Jobs Act really hurt those of us living in high-tax states. That law limited the SALT deduction to $10,000, including state/local income and real estate taxes. Under the new bill, the cap increases by $30,000, raising the maximum deduction to $40,000 starting in 2025. Even better, it will increase slightly to $40,400 between 2026 and 2029. The bad news? It drops back to $10,000 in 2030 unless further legislation is passed. If you're a business client and we prepare your PTET returns to circumvent the SALT cap, we can and will continue doing that.

No Tax on Tips

A high-profile element of this bill is the new “No Tax on Tips” provision for those in the service industry. Within 90 days, the government will release a definitive list of who qualifies. So far, we know it includes waitstaff, restaurant workers, hairstylists, and barbers. The rule also applies to self-employed individuals in qualifying service roles. Tips will be tax-free up to $25,000 for the years 2025–2028. However, the deduction phases out for individuals with a MAGI over $150,000 (or $300,000 for joint filers). You must have a valid Social Security Number, and married taxpayers must file jointly to qualify. Tips must be voluntary and can include cash, card tips, and pooled/shared tips. The deduction does not require itemizing.

No Tax on Overtime

From 2025 to 2028, married taxpayers filing jointly who meet the criteria will be able to deduct their overtime wages. To qualify, you must file jointly, have a valid Social Security Number, and your overtime compensation must be reported on a W-2 or equivalent document. The deduction is capped at $12,500 for single filers and $25,000 for joint filers. It phases out gradually for high earners: for every $1,000 your MAGI exceeds $150,000 (or $300,000 for joint filers), the deduction is reduced by $100.

Deductible Car Loan Interest

For tax years 2025 through 2028, you may be able to deduct interest paid on a personal-use auto loan. The loan must be taken out after December 31, 2024, and must be secured by a first lien on the vehicle. To qualify, you’ll need to list the vehicle’s VIN on your return. If you refinance the loan, the deduction still applies — but only on the original principal amount.

The deduction does not apply to:

• Fleet vehicles

• Commercial-use or leased vehicles

• Salvage-title vehicles

• Loans from related parties

The maximum deductible interest is capped at $10,000 per year. The deduction phases out starting at $100,000 MAGI for single filers and $200,000 for joint filers, reducing by $200 for every $1,000 (or fraction thereof) above those limits.

Mortgage Interest and PMI

The $750,000 mortgage cap for deducting interest is now permanent. Prior to 2017, the cap was $1 million, but that was reduced under TCJA and now remains fixed at $750,000. That means if you borrow $1 million to purchase a home, you can only deduct interest on the first $750,000. On the bright side, mortgage insurance premiums (PMI) are once again deductible, something we haven’t seen since 2021.

It’s important to note that the $750,000 cap is a federal limit. Many states are decoupled from the IRS and have their own caps. For example, New York State still allows a $1 million mortgage interest deduction. Be sure to review your state’s rules when planning your deductions.

Charitable Deduction for Non-Itemizers

Beginning in 2026, even if you don’t itemize your deductions, you can still claim a charitable contribution deduction of $1,000 if filing single or $2,000 if filing jointly. This creates an incentive to give, even for taxpayers who stick with the standard deduction.

Trump Accounts

A new savings vehicle called the “Trump Account” has been established for minors. These modified traditional IRAs are designed to promote financial education and savings for children under age 18. A one-time $1,000 government deposit will be made into accounts opened for children born between January 1, 2025, and December 31, 2028. Contributions are allowed up to $5,000 per year (indexed for inflation starting in 2028) and may be made by parents, employers, charitable organizations, or government agencies. Contributions must be specifically designated as Trump Account deposits. Withdrawals are prohibited until the child turns 18. A 12-month waiting period applies before contributions can begin. A total of $410 million has been set aside for this program, available through September 30, 2034.

529 Plans

The bill also enhances the flexibility of 529 plans, particularly for K-12 education. Previously, only $10,000 per student could be used annually for tuition. That cap is now increased to $20,000, allowing families more room to use these tax-advantaged accounts for private or alternative education.

Casualty Losses

The rules for deducting personal casualty losses — previously tied to federally declared disasters — have been expanded. Now, state-declared disasters are also eligible. These include hurricanes, tornadoes, wildfires, earthquakes, floods, snowstorms, and similar events. To qualify, the governor (or the mayor of D.C.) and the Secretary must jointly declare the damage severe and widespread enough to activate this relief.

Green Energy Tax Credits Are Ending

If you plan to buy an electric vehicle or make energy-efficient improvements to your home, act fast. Federal tax credits for EVs expire on September 30, 2025, and credits for home improvements like windows, doors, and boilers expire on December 31, 2025. Not all EVs qualify for the full $7,500 credit, so check with us or your dealership before purchasing.

Gambling Loss Deduction

Previously, gambling losses were deductible up to the amount of winnings. Under the new law, only 90% of gambling winnings can now be offset by losses. It’s a modest change — unless you’re a high-stakes gambler.

New Rule for High Earners on Unemployment

A new provision blocks federal unemployment compensation for individuals whose income during their base period exceeded $1 million. The base period refers to the timeframe used to determine unemployment eligibility and benefit amounts. If you earned over $1 million during that period, you are now ineligible for federal unemployment benefits.

Have Questions? We’re Here to Help.

These changes are sweeping, and not all of them will affect every taxpayer. If you’d like to see how this new law impacts your specific tax situation, we’re offering paid consultations.