One Big Beautiful Bill Act (OB3) was enacted into law on July 4, 2025.
The Bill made permanent or extended many provisions from the Tax Cuts & Jobs Act (TCJA.
The following are now permanent tax provisions with minor changes for Individuals:
- Individual rate structure (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent
- Increased Standard Deduction for 2025
- Single/MFS: from $15,000 to $15,750
- Head of Household: $22,500 to $23,625
- Joint: $30,000 to $31,500
- Personal exemptions are permanently terminated
- Qualified Business Income Deduction becomes permanent
- Limitation phase-in ranges increased to $75,000 or $150,000 joint
- New minimum $400 deduction if at least $1,000 in QBI from active trade or business activities
- Estate and gift lifetime exclusion
- The exclusion is reset to $15,000,000 starting in 2026. The 2025 amount is $13,990,000
- Qualified Residence Interest Limitation
- Mortgage insurance premiums are treated as qualified interest starting in 2026
- Personal Casualty Loss Deductions
- If attributable to state disasters are deductible starting in 2026
- 2% miscellaneous itemized deduction termination
- Eligible Educator Deductions
- In 2026, expenses exceeding the $300 above-the-line deductions are itemized deductions- no floor.
- Interscholastic sports administrators and coaches are eligible educators
- Child Tax Credit
- Permanently increases Child Tax Credit to $2,200 and refundable to $1,400. Adjusted for inflation.
- Phase-out thresholds of $200,000 Single/MFS and $400,000 MFJ.
- $500 other dependent care is permanent
- SALT (State & Local Taxes)
- Modifies and enhances the SALT limit on itemized deductions for tax years 2025-2029 but will revert back to $10,000 in 2030.
- 2024- $10,000 (what it has been since TCJA)
- 2025- $40,000
- 2026- $40,400
- 2027- $40,804
- 2028- $41,212
- 2029- $41,624
- 2030- $10,000- expires and sets back to $10,000 going forward
- However, there are phase-outs. The SALT deduction is reduced by 30% of the amount that Modified Adjust Gross Income (MAGI) exceeds $500,000 for all filing statuses (adjusted each year).
- Regardless of MAGI, the SALT deduction cannot go below $10,000
- Modifies and enhances the SALT limit on itemized deductions for tax years 2025-2029 but will revert back to $10,000 in 2030.
- Tips
- OB3 provides a deduction for qualified tips of up to $25,000 per year
- This reduces taxable income
- Applicable for tax years 2025- 2028
- Overtime
- Deduction for qualified overtime compensation of up to $12,500 single $25,000 on a joint return
- This reduces taxable income
- Applicable years 2025-2028
- Senior Deduction
- New deduction of up to $6,000 for an individual age 65 years or older by end of tax year ($12,000 if both joint return and both are 65 or older)
- This reduces taxable income
- Applicable years 20225-2028
- Reduced by 6% if MAGI is over $75,000 ($150,000 if MFJ)
- The taxation of Social Security has not changed, instead this is the new benefit
- Car Interest Deduction
- New deduction for qualified passenger vehicle interest of up to $10,000 per year
- This reduces taxable income
- Not an itemized deduction like mortgage
- Applicable years 2025-2028
- Loan must have occurred after 12/31/2024
- Does not include commercial vehicles
- Final assembly must have occurred in the United States
- Need VIN
- Reduced If MAGI exceeds $100,000 or $200,000 MFJ.
- 529 Plan Changes
- OB3 increases amount that can be distributed for elementary or secondary, public, private, or religious school from $10,000 to $20,000 beginning after 12/31/2025
- Can be used for qualified postsecondary credential expenses associated with credential programs
If you have any questions or would like to discuss how this act may affect you, don’t hesitate to reach out to us. I would be happy to help look at your particular situation.
Sarah Dyson, CPA
I am a proud military spouse, mom of three (twin boys and a younger daughter), and CPA*. I am fortunate to have a career that has been able to evolve and shift as our family has grown and relocated over the years.