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The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces a wide range of tax changes. This article outlines updates that most directly affect individuals and families—including working taxpayers, retirees, and parents—so you can prepare for what lies ahead.
Higher Standard Deduction
Starting with the 2025 tax year, the standard deduction will increase to $15,750 for single filers and $31,500 for Married Filing Jointly. This means more of your income will be excluded from taxation, resulting in a smaller tax bill for many households. If you usually do not itemize deductions, this change may benefit you directly.
Expanded Child Tax Credit
Families with qualifying children will see an increase in the Child Tax Credit. The credit will increase from $2,000 to $2,200 per qualifying child and will continue to offer refundability, meaning that eligible families may receive part of the credit even if they do not owe federal income taxes.
No Federal Tax on Tips and Overtime Premiums
For employees in tipped or hourly jobs, this is a significant update. The law introduces new deductions that make certain earnings tax-free, subject to income limitations:
- Up to $25,000 per year in tips can be deducted from income.
- The overtime portion of pay (the amount above your regular rate) can also be deducted – up to $12,500 per person or $25,000 per couple.
These changes apply from 2025 through 2028 and could increase take-home pay for many service industry and hourly workers.
New Deduction for Seniors
Seniors aged 65 and older will receive a new $6,000 deduction in addition to the existing standard deduction. For a married couple over 65, this means up to $12,000 more of their income may be tax-free.
Eligibility for this deduction is subject to income limits, so not all seniors may qualify in full.
Car Loan Interest Deduction and Green Energy Credit Update
From 2025 through 2028, interest paid on loans for new vehicles assembled in the United States may be deductible—up to $10,000 annually. This new deduction is designed to support domestic manufacturing while offering financial relief for working families who finance their cars. Eligibility is subject to income limits.
At the same time, the Act terminates several consumer green energy tax credits, including those for electric vehicles purchased after September 30, 2025, and residential energy credits for qualifying improvements placed in service after December 31, 2025. While some business-related clean energy incentives remain, individual taxpayers should be aware that many federal credits for personal energy-efficient purchases will phase out in the coming years.
SALT Deduction Cap Raised
The cap on state and local tax (SALT) deductions will increase from $10,000 to $40,000, providing more relief to taxpayers who itemize—particularly those in states with higher income or property taxes. This new limit will apply through 2029, with gradual phase-outs for high-income earners.
Newborn Savings Accounts
abies born from 2025 to 2028 will receive a $1,000 government-funded investment account. These accounts are designed to grow, tax deferred, over time and may be supplemented by contributions from parents and others, up to $5,000 per year. Distributions will be allowed once the child turns 18 years old.
Charitable Contribution Deduction Expanded
Beginning in 2026, taxpayers who do not itemize will be able to claim an “above-the-line” deduction of up to $1,000 ($2,000 for married couples filing jointly) for qualifying charitable contributions. For those who do itemize, the bill places a new 0.5% AGI floor on deductions.
Estate and Gift Tax Exemption Increased
The One Big Beautiful Bill Act permanently increases the federal estate and gift tax exemption to $15 million, indexed annually for inflation. This change prevents the exemption from reverting to around $7 million after 2025, as was previously scheduled. The new exemption applies to gifts made and estates of decedents dying after December 31, 2025.
Final Thoughts
The One Big Beautiful Bill Act presents several new tax-saving opportunities for individuals and families. Some changes take effect with the 2025 tax year and continue through 2028 or later. Planning now can help you take advantage of the benefits available. Stay tuned for our upcoming articles focused on how this law affects business owners and the new 1099 reporting rules.
If you have questions about how these updates affect you or your business, we are here to help. Reach out to our team to schedule a review or to discuss next steps in preparing for the 2025 tax season.
Sources:
https://www.whitehouse.gov/obbb
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