9 Key Tax Law Changes for Individuals under the OBBBA

For the first half of 2025, individual taxpayers faced an uncertain tax situation because many provisions of the Tax Cuts and Jobs Act (TCJA) were scheduled to expire at year end. However, on July 4, President Trump signed the One, Big, Beautiful Bill Act (OBBBA) into law. The new law makes many TCJA provisions permanent and includes other favorable changes for individual taxpayers. (However, some tax breaks have been eliminated.) Here's a summary of nine important changes that may affect you and your family. 

1. TCJA Rates and Brackets Are Permanent

The TCJA established seven ordinary income rate brackets for individual taxpayers: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, these brackets were scheduled to expire at the end of 2025. The OBBBA makes the TCJA rates permanent with annual inflation adjustments to the rate bracket thresholds after 2025.

Additionally, there's no change to the current favorable treatment of long-term capital gains and qualified dividends. They'll continue to be taxed at federal rates ranging from 0% to 20%. Certain long-term gains attributable to real estate depreciation deductions can still be taxed at up to 25%, and long-term gains from so-called collectibles can still be taxed at up to 28%.       

2. Expanded Standard Deductions Are Made Permanent

The TCJA dramatically increased standard deduction amounts. The OBBBA makes the enhanced standard deductions permanent, starting with increases for this year. For 2025, the basic standard deductions are as follows:

• $15,750 for single taxpayers (up from $15,000 for 2025 before the OBBBA),
• $23,625 for heads of households (up from $22,500), and
• $31,500 for married couples filing jointly (up from $30,000).

These amounts will be adjusted for inflation for 2026 and beyond.

As before, additional standard amounts are allowed for individuals who are 65 or older or blind. For 2025, the additional amounts are:

• $2,000 for an unmarried individual age 65 or older or blind, or
• $1,600 for a married joint-filing individual age 65 or older or blind.

3. Seniors May Be Eligible for a New Deduction  

For 2025 through 2028, the OBBBA allows individuals age 65 and older to claim a new senior deduction of up to $6,000, subject to income-based phaseouts. This deduction is available whether you itemize or not.

If both spouses of a married joint-filing couple are age 65 or older, each spouse is potentially eligible for a separate deduction of up to $6,000, for a combined total of up to $12,000.  

The senior deduction is phased out when modified adjusted gross income (MAGI) exceeds:

• $75,000 for unmarried individuals, or
• $150,000 for married couples filing jointly.

It's fully phased out when MAGI hits $175,000 or $250,000, respectively.

For 2025, a single individual who's 65 or older could potentially deduct up to $23,750 ($15,750 standard deduction plus $2,000 additional standard deduction plus $6,000 senior deduction). If both spouses of a married joint-filing couple are fully eligible for these write-offs, they could potentially deduct a total of up to $46,700 ($31,500 standard deduction plus two $1,600 additional standard deductions plus two $6,000 senior deductions).  

4. SALT Caps Are Expanded

The TCJA limited the state and local tax (SALT) deduction for itemizers to $10,000 ($5,000 for married individuals who file separately). For 2025 through 2029, the OBBBA increases the SALT deduction limit to $40,000 ($20,000 for married individuals who file separately) with 1% annual inflation adjustments, subject to income-based phaseouts.

For 2026, the cap will be $40,400 ($20,200 for married individuals who file separately). Starting in 2030, the SALT deduction is scheduled to revert to the TCJA limit of $10,000 ($5,000 for married individuals who file separately).

For 2025, the higher SALT deduction limits begin to phase out for taxpayers with modified adjusted gross income (MAGI) over $500,000 ($250,000 for married individuals who file separately). After 2025, the phaseout thresholds will be adjusted annually for inflation. Under the phaseout rule, the SALT deduction limitation is reduced by 30% of MAGI above the applicable threshold, but not below the TCJA limit of $10,000 ($5,000 for married individuals who file separately).

5. Child Tax Credit Is Enhanced

Starting in 2025, the OBBBA permanently increases the child tax credit to $2,200 for each qualifying under-age-17 child (up from $2,000 for 2024), subject to income-based phaseouts. This break will be adjusted annually for inflation after 2025.

The refundable portion of the child credit is made permanent. The refundable amount is $1,700 for 2025, with annual inflation adjustments starting in 2026.

The child credit MAGI phaseout thresholds of $200,000 and $400,000 for married joint-filing couples are also made permanent. These thresholds won't be adjusted annually for inflation.

Important: Starting in 2025, no child tax credit will be allowed unless you report Social Security numbers (SSNs) for the child and the claiming taxpayer on the return. For married couples filing jointly, an SSN for at least one spouse must be reported on the return.   

6. Credit for Other Dependents Is Permanent

The new law also makes permanent the $500 credit for a dependent who isn't a qualifying child. Before the OBBBA, this credit was scheduled to disappear after 2025.

This credit can apply to a dependent child over the age limit or a dependent elderly parent. It's subject to the same income-based phaseouts as the child tax credit.

7. Liberalized QBI Deduction Is Made Permanent

The OBBBA makes permanent the deduction for an individual taxpayer's qualified business income (QBI). The deduction can be up to 20% of QBI. Starting in 2026, the taxable income phaseout threshold that can reduce or eliminate QBI deductions increases to:

• $75,000 (up from $50,000 before the OBBBA), or
• $150,000 for married couples filing jointly (up from $100,000 before the OBBBA).

Starting in 2026, the new law establishes a minimum QBI deduction of $400 for taxpayers with at least $1,000 of QBI from one or more active trades or businesses in which they materially participate. This break is available to taxpayers whose income is too high to qualify for the "regular" QBI deduction.

8. High-Income Taxpayers Are Subject to New Itemized Deduction Limitation

For 2018 through 2025, the TCJA suspended the limitation on itemized deductions for higher-income taxpayers. The OBBBA makes that suspension permanent — except for taxpayers in the top 37% tax bracket.

Starting in 2026, allowable itemized deductions for individuals in the highest tax bracket will be reduced by the lesser of:

• 2/37 of the amount of otherwise allowable itemized deductions, or
• The amount of taxable income above the applicable threshold for the 37% tax bracket.

9. Expanded Lifetime Gift and Estate Tax Exemption Is Permanent

The TCJA significantly expanded the unified federal gift and estate tax exemption. For 2025, the exemption is $13.99 million.

The expanded exemption is now permanent under the OBBBA. For 2026, the exemption increases to $15 million (effectively $30 million for married couples). It will be adjusted annually for inflation after 2026.

Ready, Set, Plan

These are just some highlights of the sweeping tax law changes under the OBBBA. (See "Just the Tip of the Iceberg," below.) The new law contains numerous tax-related provisions and provides greater certainty as you prepare for the 2025 tax year and the future. The IRS is expected to issue guidance in the coming months to clarify the new rules. In the meantime, contact your tax advisor to discuss how the OBBBA will affect your tax situation.