Individual Tax Highlights of the One Big Beautiful Bill
This article is the first in a series on the One Big Beautiful Bill Act (OBBB) that was signed into law in July 2025. The bill represents the most significant tax legislation since the Tax Cuts and Jobs Act (TCJA) that became law in 2017. As we work to digest all of the details contained in the massive 1,100-page bill, we will post additional articles here.
The OBBB was written with these priorities:
To extend or make permanent many of the provisions from the TCJA
To reduce green energy credits from the Inflation Reduction Act
To encourage American business by restoring favorable business tax provisions
To “put America first” by enacting permanent reforms to international provisions of the federal tax code
This article will highlight on some of the tax provisions contained in the OBBB which will affect many individual taxpayers. Future articles will dive deeper into these provisions, as well as discuss tax changes affecting businesses and nonprofit organizations.
Tax Rates and Brackets – makes permanent the existing seven tax brackets created by the TCJA ranging from 10%-37%
Standard Deduction – makes permanent and slightly increases the higher standard deductions originally laid out in the TCJA
Personal Exemptions – eliminated temporarily by the TCJA, now permanently eliminated by the OBBB
Extra Senior Deduction – provides a temporary senior deduction for tax years 2025-2028 for individuals 65 or older. The deduction phases out for seniors with modified AGI over $75,000 for singles and $150,000 for joint filers. It can be taken whether the senior claims the standard or itemized deductions.
Miscellaneous Itemized Deductions – for example, tax preparation fees, investment fees, and professional fees incurred with IRS audits and assessments were temporary eliminated by the TCJA. The OBBB eliminates these deductions permanently. Expenses for K-12 educators are the only remaining miscellaneous itemized deduction.
State and Local Tax Deduction Limit – OBBB temporarily increases the cap on itemized deductions for state and local taxes to $40,000. The current law has this cap returning to the $10,000 TCJA limit after tax year 2029 if it is not extended. The deduction is also subject to a phaseout for individuals with modified AGI greater than $500,000 in 2025.
Of particular relevance for business owners, OBBB contains no SALT limitation for passthrough entities.
Charitable Deductions
Non-itemizing singles can deduct charitable contributions up to $1,000 ($2,000 for joint filers) starting in 2026.
Taxpayers who do itemize will only be able to deduct charitable contributions that exceed 0.5% of their AGI, with a limited carryforward provision for any disallowed deduction.
Home Mortgage Interest – OBBB made permanent the TCJA limitations on home mortgage interest deductions (capped at $750,000 of mortgage indebtedness, and home equity indebtedness is not deductible unless it qualifies as “acquisition indebtedness”
Auto Loan Interest – OBBB creates a new temporary deduction allowed for those who itemize or take the standard deduction for tax years 2025-2028 for “qualified passenger vehicle loan interest” on debt incurred after December 31, 2024. There are several restrictions on this deduction, among them that the vehicle must be new, weigh less than 14,000 pounds, and have been assembled in its final form in the U.S. The deduction is also limited to $10,000 and that cap decreases for taxpayers with modified AGI greater than $100,000 ($200,000 for joint returns).
Deductions for Tips Earned – OBBB creates a temporary above-the-line deduction for “qualified tips” received by an individual in an occupation that “customarily and regularly” receives tips. It is limited to $25,000 and begins to phase out when modified AGI exceeds $150,000 ($300,000 for joint filers).
Deductions for Overtime Pay – OBBB creates a temporary and limited above-the-line deduction for “qualified overtime compensation” received during tax years 2025-2028. At this time, it appears the deduction will only apply to the overtime premium, and not the full amount earned for overtime hours. This deduction is limited to $12,500 ($25,000 for joint returns) and begins to phaseout when AGI exceeds $150,000 ($300,000 for joint filers).
Child Tax Credit – OBBB provides for a permanent increase in the child tax credit to $2,200 and indexes the credit to inflation for future tax years. The $400,000 phaseout for joint filers and $200,000 for all others was also made permanent.
Schreiber Accounting and Advisory is constantly monitoring tax legislation changes, and stands ready to help clients take advantage of opportunities for tax savings when they present. Check out the firm’s Tax Preparation and Planning services, and contact the firm for more information.
Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.