President Trump signed the One Big, Beautiful Bill Act (OBBBA), a reconcilation bill that passed the Senate on July 1 by a vote of 51-50 and passed the House on July 3 by a vote of 218-214. In addition to making permanent most of the TCJA changes that were scheduled to sunset at the end of the year, OBBBA also includes a new $40,000 SALT cap and a wide array of new and enhanced tax breaks while also repealing most of the clean energy tax credits enacted by the Inflation Reduction Act of 2022.
Key Provisions Affecting Individuals:
Increased limitation on State And Local Tax Deductions (SALT) OBBBA increases the SALT cap to $40,000 for 2025. The amount is increased to $40,400 for 2026 and then indexed for inflation annually before reverting to the current $10,000 limit in 2030. The cap is reduced (but not below $10,000) by 30 percent of the excess of the taxpayer’s modified adjusted gross income (MAGI) over $500,000. The phaseout threshold is indexed in the same manner as the cap after 2025.
Individual Tax Rates and Standard Deduction. OBBBA makes the individual tax rates permanent and provides for an extra year of inflation adjustments for the 10-, 12-, and 22-percent brackets. OBBBA also makes the enhanced standard deduction permanent and further enhances it by increasing the amounts for the 2025 tax year to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married filing jointly (so, an across-the-board increase of 5 percent). These amounts will be the new base for inflation indexing for years after 2025.
Estate and Gift Tax Exemption. OBBBA permanently extends the estate and lifetime gift tax exemption and increases the exemption amount to $15 million in 2026.
Enhancements to 529 Plans. For tax years beginning after December 31, 2025, OBBBA increases the annual limit on distributions from 529 savings plans from $10,000 to $20,000. It also allows distributions to be used for additional educational expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school, including: curriculum and curricular materials; books or other instructional materials; online educational materials; tutoring or educational classes outside the home; certain testing fees; fees for dual enrollment in an institution of higher education; and certain educational therapies for students with disabilities.
Charitable Contribution Deduction.. For tax years after December 31, 2025, OBBBA reinstates a charitable contribution deduction for non-itemizers. The provision creates a permanent deduction of up to $1,000 in cash contributions for single filers ($2,000 for married filing jointly) for cash contributions. However, the contribution cannot be made to a donor advised fund or a supporting organization under Code Section 509(a)(3). (Please note this does not apply to in-kind, non-monetary donations).
For individuals who elect to itemize, OBBBA imposes a new 0.5-percent AGI floor on charitable contributions after 2025 . This means a taxpayer’s charitable contribution deductions are reduced by .5% of the taxpayer’s contribution base (generally a taxpayer’s adjusted gross income).
Child Tax Credit. OBBBA permanently increases the child tax credit to $2,200 per child beginning in 2025 and indexes it for inflation.
Other Dependent Credit. OBBBA makes the $500 credit for each qualifying dependent permanent with no adjustment for inflation beginning with the 2026 tax year.
Adoption Credit. OBBBA makes the adoption tax credit partially refundable up to $5,000 (indexed for inflation) beginning in 2025.
Student Loan Discharges. OBBBA includes both bad news and good news for student loan discharges. The bad news is that it allows a Biden era provision allowing all student loan discharges (regardless of the reason) to be excluded from income to expire at the end of 2025. The good news is that it permanently extends a provision allowing exclusion from income of student loan discharges resulting from the individual’s death or permanent disability.
Deduction for Tip Income (No Tax on Tips). OBBBA creates a new above-the-line deduction of up to $25,000 for qualified tips received by an individual in an occupation which customarily and regularly receives tips during a given tax year. The deduction is allowed for both employees and independent contractors. The deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). The deduction is allowed for the 2025-2028 tax years.
Deduction for Overtime Pay (No Tax on Overtime). OBBBA creates a new above-the-line deduction for up to $12,500($25,000 in the case of a joint return) for “qualified overtime compensation” (defined as overtime compensation paid to an individual under Section 7 of the Fair Labor Standards Act). The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return). The deduction is allowed for the 2025-2028 tax years.
Temporary Senior Deduction (No Tax on Social Security). OBBBA adds a deduction for all individuals who have attained age 65 before the end of the tax year. The deduction amount is $6,000 per individual. The senior deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $75,000 ($150,000 in the case of a joint return). The deduction is allowed for the 2025-2028 tax years.
Deduction for Car Loan Interest. OBBBA creates a new deduction of up to $10,000 of “qualified passenger vehicle loan interest,” defined as interest paid on debt incurred after December 31, 2024 for the purchase of a new “applicable passenger vehicle” assembled in the U.S. The deduction is allowed for tax years 2025 through 2028 and begins to phaseout when the taxpayer’s modified adjusted gross income exceeds $100,000 ($200,000 in the case of a joint return).
Deduction for Mortgage Insurance Premiums. Beginning in 2026, OBBBA permanently restores the deduction for mortgage insurance premiums (previously available from 2018 through 2021) by treating such premiums as interest on acquisition indebtedness. As before, the deduction is phased out for taxpayers with adjusted gross income above $100,000 ($50,000 for married filing separately).
Home Mortgage Interest Deduction. OBBBA makes the $750,000 cap for acquisition indebtedness incurred after December 15, 2017 permanent. In addition, the home equity interest deduction for interest on up to $100,000 of debt secured by your residence that is not used to buy, build or substantially improve the residence continues to be nondeductible.
Health Savings Account Enhancements. For plan years beginning after December 31, 2024, OBBBA permanently extends the safe harbor providing that a health plan will not fail to be treated as a high deductible health plan (HDHP) because of not having a deductible for telehealth services. Beginning in 2026, OBBBA allows – (1) individuals with HDHPs to also enroll in direct primary care arrangements and allows HSA funds to be used to pay for DPC services (up to $150 per month for individuals or $300 per month for family arrangements); and (2) for all bronze and catastrophic health insurance plans on the Exchange to be eligible plans for the purpose of making HSA contributions.
Trump Accounts. OBBBA creates Trump accounts, a new type of tax-exempt savings account administered by banks and other financial institutions. Starting January 1, 2026, parents of any child under age 8 may open a Trump account for their child. Aggregate contributions are limited to $5,000 annually, but the limit does not apply to contributions from tax-exempt entities such as private foundations. Beginning at age 18, account holders may access up to 50 percent of funds for a limited set of purposes, including higher education. At age 25, the 50 percent limitation is lifted. At age 30, account holders have access to their full balance for any purpose. Under a pilot program, for U.S. citizens born between January 1, 2024, and December 31, 2028, the federal government will contribute $1,000 per child into every eligible account.
Repeal of Energy Efficient Home Improvement Credit after 2025. OBBBA repeals the Energy Efficient Home Improvement Credit for improvements placed in service after 2025. Therefore, 2025 is the last year for insulation and energy efficient windows, doors, heat pumps, central air conditioners, water heaters, furnaces, or boilers to qualify for this credit.
Repeal of Clean Energy Credit after 2025. OBBBA repeals the residential Clean Energy Credit for expenditures made after 2025. Therefore, expenditures for solar property, fuel cell property, small wind energy property, geothermal heat pump property, and battery storage technology will not qualify for this 30% credit if expenditures are made after 2025. It also terminates the new clean vehicle credit and the previously-owned clean vehicle credit for vehicles acquired after September 30, 2025.
Repeal of Alternative Fuel Vehicle Refueling Property Credit. OBBBA repeals the alternative fuel vehicle refueling property credit for property placed in service after June 30, 2026. Note! This credit applies to the installation of electric vehicle charging equipment (including chargers installed at an individual’s principal residence)
New Limit on Gambling Losses. Beginning in 2026, OBBBA further limits the term “losses from wagering transactions” to 90 percent of the amount of such losses. Any deduction for gambling losses remains limited to the amount of gambling winnings.