How the One Big Beautiful Bill Act Will Affect Your Individual Taxes

Tax Changes for Individuals

Signed into law on July 4^th, 2025, H.R.1, also known as the One Big Beautiful Bill Act (OBBBA) extends several major provisions from the 2017 Tax Cuts and Jobs Act and introduces a host of new tax measures. The following are some impactful changes for individuals.

Permanent Extension of 2017 TCJA Individual Tax Rates:

The lower individual income tax brackets established by the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent, providing long-term certainty for tax planning.

Permanent Increase in the Standard Deduction:

Beginning in 2025, the standard deduction will receive a permanent boost. The deduction amounts will be $31,500 for joint filers, $23,625 for head of household filers, and $15,750 for single or other filers. These amounts will be indexed for inflation in future years.

Permanent Child Tax Credit:

The child tax credit has been made permanent with an increased credit value of $2,200 in 2026 and will be adjusted for inflation in future years.

Temporary Increase in the State and Local Tax (SALT) Deduction Cap (2025–2029):

For tax years 2025-2029, the state and local tax deduction cap will temporarily increase from $10,000 to $40,000. For taxpayers with an adjusted gross income (AGI) greater than $500,000, the deduction will phase out by 30% of excess income not to be reduced below the original $10,000 cap.

Increased Estate and Gift Tax Exemption:

Effective in 2026, the lifetime exemption amount for estates and gifts will increase to $15 million per individual ($30 million for married couples), indexed for inflation. This higher exemption has been made permanent, creating long-term planning opportunities.

Enhanced Qualified Small Business Stock (QSBS) Exclusion:

The bill significantly enhances the QSBS exclusion for stock acquired after July 4, 2025, introducing a tiered exclusion system based on holding period and increasing limitations. The exclusion cap has been increased from $10 to $15 million, and the gross asset value threshold has been increased from $50 to $75 million. Both figures will be adjusted for inflation annually beginning in 2027.

Qualified Business Income (QBI) Deduction:

The QBI deduction, initially set to expire in 2026, is now permanent and the rate remains 20%. The income phase-in threshold has been increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers. Additionally, the bill adds a new minimum deduction of $400 (adjusted for inflation starting in 2026) for taxpayers with at least $1,000 in active QBI during the year.

Car Loan Interest Deduction:

Starting in 2025, individuals can deduct the interest they pay on a car loan if they buy a new vehicle for personal use. This new deduction—available through 2028—allows you to deduct up to $10,000 in interest per year, even if you do not itemize your deductions. To qualify, the loan must be for a new car, the car must be for personal use, and the loan must be secured by the car itself. The deduction begins to phase out if your income is over $100,000 (or $200,000 for joint filers). The auto’s gross vehicle weight must be under 14,000 pounds, and final assembly must have been completed in the U.S.

$6,000 Senior Deduction:

Effective for 2025 through 2028, individuals who are 65 or older can claim a new $6,000 tax deduction. This is on top of the standard deduction already available to seniors. If both spouses in a married couple are 65 or older, they can claim a total of $12,000. The deduction begins to phase out for those with income over $75,000 (or $150,000 for joint filers).

529 Account Expansions:

The list of eligible education expenses for 529 distributions has been expanded to include a broader range of K-12 expenses as well as costs associated with recognized postsecondary credential programs. The annual distribution limit for K-12 expenses has also been increased from $10,000 to $20,000.

Creation of “Trump Accounts:”

The act introduces “Trump Accounts,” a new type of savings vehicle for minors, which will receive a $1,000 government contribution for eligible children born between 2025 and 2028, and allow up to $5,000 in additional annual contributions.

Be on the lookout for more OBBBA articles coming soon.