The One, Big, Beautiful Bill Act (OBBBA) includes, among many other things, numerous provisions that can affect an individual's taxes. The new law makes some changes to existing tax breaks that will be significant to many, but not all, taxpayers. It also creates new breaks that, again, will be significant to certain taxpayers. Finally, it makes permanent the tax rate reductions and most of the changes to deductions and credits made by the Tax Cuts and Jobs Act (TCJA), with occasional tweaks.

State and local tax deduction

The OBBBA increases the limit on the state and local tax (SALT) deduction through 2029. Beginning in 2025, eligible taxpayers can deduct up to $40,000 ($20,000 for married couples filing separately) of SALT, including property tax and either income tax or sales tax, with a 1% annual increase thereafter. However, in 2030, the previous limit of $10,000 ($5,000 for separate filers) will resume.

When modified adjusted gross income (MAGI) exceeds $500,000 ($250,000 for separate filers), the cap is reduced by 30% of the amount by which MAGI exceeds the threshold — but not below $10,000 ($5,000 for separate filers). If you expect to be near or over the threshold, taking steps to reduce your MAGI (for example, increasing retirement plan contributions or making IRA qualified charitable distributions) could help you secure the full SALT deduction.

Child Tax Credit

The $2,000 Child Tax Credit (CTC) for children under age 17 was slated to return to $1,000 per child after 2025, with the income phaseout levels subject to lower thresholds. Also, the $500 Credit for Other Dependents was scheduled to expire at that time. Previously, the Other Dependent Credit was available for each qualifying dependent other than a qualifying child (such as a dependent child over the age limit or a dependent elderly parent). OBBBA clarifies that each dependent must be a resident of the U.S.

The OBBBA makes the doubled CTC permanent, with an increase to $2,200 starting this year and annual inflation adjustments to follow. It also makes permanent the $1,400 refundable portion of the CTC, adjusted for inflation ($1,700 in 2025), and the $500 nonrefundable Other Dependent Credit. OBBBA makes permanent the income phaseout thresholds of $200,000, or $400,000 for joint filers.

Education-related breaks

The OBBBA expands the definition of qualified expenses that can be paid for with tax-free distributions from Section 529 plans. For example, tax-free distributions can now cover qualified post-secondary credentialing expenses. In addition, tax-free elementary and secondary school distributions are no longer limited to paying tuition; they can also pay for books and other instructional materials, online educational materials, tutoring or educational classes outside the home, and certain testing fees.

The OBBBA also increases the annual limit on tax-free distributions for qualified elementary and secondary school expenses from $10,000 to $20,000, beginning in 2026.

In addition, the law creates a tax credit of up to $1,700 for contributions to organizations that provide scholarships to elementary and secondary school students. Among other requirements, students who benefit from the scholarships must be part of a household with an income that doesn't exceed 300% of the area's median gross income and be eligible to enroll in a public elementary or secondary school. The credit can be claimed in lieu of a charitable deduction.

The OBBBA also makes some tax law changes related to student loans:

Employer-paid student loan debt. If your employer pays some of your student loan debt, you may be eligible to exclude up to $5,250 from income. The OBBBA makes this break permanent, and the limit will be annually adjusted for inflation after 2026.

Forgiven student loan debt. Forgiven debt is typically treated as taxable income, but tax-free treatment is available for student loan debt forgiven after December 31, 2020, and before January 1, 2026. Under the OBBBA, beginning in 2026, only student loan debt forgiven due to the death or total and permanent disability of the student will be excluded from income. This exclusion is now made permanent. Warning: Some states may tax forgiven debt that's excluded for federal tax purposes.

Charitable deductions

Generally, donations to qualified charities are fully deductible up to certain adjusted gross income (AGI)-based limits if you itemize deductions. The OBBBA creates a nonitemized charitable deduction of up to $1,000, or $2,000 for joint filers, which goes into effect in 2026.

Also beginning in 2026, a 0.5% floor will apply to itemized charitable deductions. This generally means that only charitable donations in excess of 0.5% of your contribution base will be deductible. Contribution base is AGI without regard to net operating loss carryback or charitable contributions. Therefore, if your AGI is $100,000, your first $500 of charitable donations for the year will be disallowed and carried forward for five years.

Qualified small business stock

Generally, taxpayers selling qualified small business (QSB) stock are allowed to exclude up to 100% of their gain if they've held the stock for more than five years. (The exclusion is less for stock acquired before September 28, 2010.) Under pre-OBBBA law, to be a QSB, a business must be engaged in an active trade or business and must not have assets that exceed $50 million, among other requirements.

The OBBBA expands and accelerates the qualified small business stock exclusion for stock acquired after July 4, 2025. Specifically, it provides a 75% exclusion for QSB stock held for four years and a 50% exclusion for QSB stock held for three years. The law also increases the asset ceiling for QSBS to $75 million and increases the applicable dollar limit for exclusion from gross income to $15,000,000 (adjusted for inflation after 2026).

Affordable Care Act's Premium Tax Credits

The OBBBA imposes new requirements for Premium Tax Credit (PTC) recipients. Beginning in 2028, eligible individuals must annually verify information such as household income, immigration status, and place of residence. Previously, many insureds were allowed to automatically re-enroll annually.

Beginning in 2026, individuals who receive excess advanced PTCs based on estimated annual income must return the entire excess, unless actual income is less than 100% of the federal poverty limit. Currently, individuals with incomes below 400% of the limit are required to make only partial repayments.

Temporary tax deductions

On the campaign trail in 2024, President Trump promised to eliminate taxes on tips, overtime and Social Security benefits, and to make auto loan interest deductible. The OBBBA makes an attempt to fulfill these promises by creating partial deductions set the sunset after 2028. The following above-the-line deductions are available to all taxpayers:

Tips. Employees and independent contractors generally can claim a deduction of up to $25,000 for qualified tips received from an occupation in which they customarily and regularly received tips before 2025. (A list of eligible occupations is expected to be released by the IRS by October 2, 2025.) The tips must be reported on a Form W-2, Form 1099, or other specified statement furnished to the individual, or reported directly by the individual on Form 4137. The deduction begins to phase out when a taxpayer's MAGI exceeds $150,000, or $300,000 for joint filers.

Overtime. Qualified overtime pay generally is deductible up to $12,500, or $25,000 for joint filers. It includes only the excess over the employee's regular pay rate. For example, if a taxpayer is normally paid $20 per hour and is paid "time and a half" for overtime, only the extra $10 per hour for overtime counts as qualified overtime pay. The overtime pay must be reported separately on a taxpayer's W-2 form, Form 1099 or other specified statement furnished to the individual. This deduction also starts phasing out when MAGI exceeds $150,000, or $300,000 for joint filers.

Deductible tips and overtime pay remain subject to federal payroll taxes and any applicable state income and payroll taxes.

Auto loan interest. Interest on qualified passenger vehicle loans originated after December 31, 2024, generally is deductible up to $10,000, though few vehicles come with that much annual interest. Qualified vehicles include cars, minivans, vans, SUVs, pickup trucks and motorcycles with gross vehicle weight ratings of less than 14,000 pounds that undergo final assembly in the United States. The deduction begins to phase out when MAGI exceeds $100,000, or $200,000 for joint filers.

"Senior" deduction. While the OBBBA doesn't eliminate taxes on Social Security benefits, it does include a new deduction of $6,000 for taxpayers age 65 or older by December 31 of the tax year — regardless of whether they are receiving Social Security benefits. The deduction begins phasing out when MAGI exceeds $75,000, or $150,000 for joint filers. Social Security benefits, however, are still taxable to the extent that they were before the OBBBA.

Finally, be aware that additional rules and limits apply to these new tax breaks. In many cases, the IRS will be publishing additional guidance and will provide transition relief for 2025 to eligible taxpayers and those subject to information reporting requirements.

Trump Accounts

Beginning in 2026, Trump Accounts can be set up for anyone under age 18 at the end of the tax year who has a Social Security number. These accounts are governed by the existing IRA provisions, but allow contributions for the benefit of minors with no earned income.

Annual contributions of up to $5,000 can be made until the year the beneficiary turns age 18. In addition, U.S. citizen children born after December 31, 2024, and before January 1, 2029, with at least one U.S. citizen parent, can potentially qualify for an initial $1,000 government-funded deposit.

Contributions are not deductible, but earnings grow tax-deferred as long as they are in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Withdrawals generally can not be taken until the child turns age 18.

Update on TCJA provisions

The OBBBA also makes permanent many TCJA provisions that were scheduled to expire after 2025, including:

  • Reduced individual income tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%,
  • Higher standard deduction (for 2025, the OBBBA also slightly raises the deduction to $15,570 for singles, $23,625 for heads of households and $31,500 for joint filers),
  • The elimination of personal exemptions,
  • Higher alternative minimum tax exemptions,
  • The reduction of the limit on the mortgage debt deduction to the first $750,000 ($375,000 for separate filers) — but the law makes certain mortgage insurance premiums eligible for the deduction after 2025,
  • The elimination of the home equity interest deduction for debt that wouldn't qualify for the home mortgage interest deduction, such as home equity debt used to pay off credit card debt,
  • The limit of the personal casualty deduction to losses resulting from federally declared disasters recognized by the IRS — but the OBBBA expands the limit to include certain state-declared disasters,
  • The elimination of miscellaneous itemized deductions (except for eligible unreimbursed educator expenses), and
  • The elimination of the moving expense deduction (except for members of the military and their families in certain circumstances and, beginning in 2026, certain employees or new appointees of the intelligence community).


The permanency of these provisions should provide some helpful clarity for tax planning. However, keep in mind that "permanent" simply means that the provisions have no expiration date. It's still possible that lawmakers could make changes to them in the future.

Time to reassess

We've covered many of the most significant provisions affecting individual taxpayers, but there are other changes that also might affect you. For example, the OBBBA adds a new limitation on itemized deductions for taxpayers in the 37% tax bracket beginning in 2026. It also imposes a new limit on the deduction for gambling losses beginning next year. And sole proprietors and owners of pass-through businesses will also be directly affected by OBBBA tax law changes affecting businesses.

Given all of these and other tax law changes, now is a good time to review your tax situation and update your tax planning strategies. Turn to us to help you take full advantage of the new — or newly permanent — tax breaks.