On July 4, President Donald Trump signed the One Big Beautiful Bill Act (“OBBB”) into law after the Senate and House passed the bill on July 1 and July 3, respectfully.
The OBBB includes numerous tax changes, including permanent and limited modification of many tax provisions under the Tax Cuts and Jobs Act of 2017 (“TCJA”) that were set to expire after 2025, new provisions promised by President Trump during his 2024 campaign, elimination or modification of most green energy provisions, and dozens of other changes affecting individuals and businesses.
This is the first in a three-part blog series on how the bill will affect individual and business tax provisions.
Individual tax provisions
The OBBB essentially preserves the TCJA’s tax structure relating to individual taxpayers on a permanent basis.
Extended or Modified Provisions (Individuals)
- Tax brackets: The bill permanently extends the individual tax rates introduced by the TCJA and adds an extra year of inflation adjustment to the 10 percent, 12 percent, and 22 percent tax brackets.
- Standard deduction and personal exemptions: The OBBB permanently terminates the deduction for personal exemptions that was suspended from 2018 through 2025 under TCJA while slightly increasing the standard deduction.
- Beginning in 2025, the standard deduction for a single filer will increase to $15,750 ($15,000 under current law), head of household will increase to $23,625 ($22,500 under current law), and married taxpayers filing jointly will see an increase to $31,500 ($30,000 under current law). These increases will be permanent and will continue to increase annually with inflation.
- State and local (SALT) tax cap: The SALT cap, which was limited to $10,000 under TCJA, will be increased to $40,000 ($20,000 in the case of a married taxpayer filing separately) beginning in 2025. Such amount will increase to $40,400 in 2026 ($20,200 if filing separately) and will then increase 1 percent per year through 2029. However, the $10,000 SALT cap will be restored for 2030 and beyond.
- Income-based phase out: For 2025, the increased cap phases out to the extent modified AGI exceeds $500,000 ($250,000 if married filing separately) but cannot reduce the SALT deduction below $10,000. Accordingly, the deduction will be fully phased down to the minimum for taxpayers with $600,000 or more of modified AGI ($350,000 if married filing separately). The income-based thresholds increase to $505,000 (or $252,500 if filing separately) in 2026 and then by 1 percent increments thereafter.
- Limitation on itemized deductions: The OBBB limits taxpayers in the 37 percent bracket to $0.35 of tax benefit per $1 of itemized deductions. The limitation is effective for tax years beginning after Dec. 31, 2025.
- Miscellaneous itemized deductions: The repeal of miscellaneous itemized deductions, other than for certain educator expenses, has been made permanent by OBBB.
- Excess business losses: Initially, under TCJA, business losses could offset up to $250,000 of nonbusiness income ($500,000 for joint filers), which, after being adjusted for inflation, currently equals $313,000 in 2025 ($626,000 for joint filers). This rule was scheduled to expire after 2028. The OBBB permanently extends this rule and resets the inflation-adjusted limitation to $250,000 ($500,000 for joint filers) for the 2026 tax year. The 2026 limitation amount will be adjusted for inflation in subsequent years.
- Child tax credit: The TCJA temporarily increased the child tax credit to $2,000. The OBBB makes the child tax credit permanent, increases the credit to $2,200 beginning in 2025, and it will increase for inflation starting in 2026. In addition, the $500 non-child dependent credit and increased phase-out thresholds were made permanent.
- Alternative minimum tax (“AMT”): Increased AMT exemptions and related phase-out thresholds under TCJA significantly reduced the number of taxpayers subject to AMT, but were set to sunset after 2025. The OBBB permanently extends them with some changes to the exemption phase-out, which may pull more upper-income taxpayers into AMT than under TCJA starting with the 2026 tax year.
- Casualty loss deductions: The OBBB expands casualty loss deductions to include disasters declared by state governors beginning in 2026. This is an expansion of the TCJA, which limited casualty loss deductions to only those incurred in a presidentially declared disaster area.
- Mortgage insurance premium deduction: Beginning in 2026, the OBBB will permanently permit the deduction of mortgage insurance premiums on eligible acquisition debt.
- Mortgage interest deduction: TCJA temporarily limited the deduction of mortgage interest to the first $750,000 of acquisition indebtedness through 2025. OBBB made this limitation permanent.
- Home equity loans: The TCJA temporarily limited the deduction of interest on home equity loans (unless used to buy, build, or substantially improve a taxpayer’s home) through 2025. OBBB made this limitation permanent.
- Gambling losses: Under TCJA, gambling losses are generally deductible as an itemized deduction only to the extent of gambling winnings through 2025. The OBBB permanently restricts the deduction to 90 percent of gambling losses, not to exceed gambling winnings. The 90 percent restriction will begin in 2026.
- Student loan discharge: Under TCJA, student loan discharges occurring due to death or disability were excluded from taxable income through 2025. The OBBB permanently extends this provision. Separately, the American Rescue Plan Act expanded the exclusion under TCJA to cover essentially all student loan forgiveness through the end of 2025, but the OBBB is letting this expansion expire.
- Employer-provided student loan payments: The OBBB makes permanent an exclusion from income of up to $5,250 for employer-provided student loan payments. In addition, this exclusion amount is adjusted for inflation beginning after 2026.
- Moving expenses: Under TCJA, moving expenses were not deductible, other than for certain members of the military, through 2025. The OBBB makes this provision permanent, but does expand the exception for certain members of the military to include members of the intelligence community.
- Energy credits: The OBBB repeals several Inflation Reduction Act green energy tax credits primarily aimed at individuals, such as electric vehicle and residential energy efficiency credits. The earliest credits to be terminated are the Previously-Owned Clean Vehicle Credit and the Clean Vehicle Credit, which both expire after Sept. 30, 2025.
- Estate Tax Exemption: Under TCJA, the estate and gift tax exemption was increased to $15 million for the 2018 tax year and adjusted for inflation through 2025. For 2025, the exemption is currently $13.99 million per person. The OBBB permanently resets the exemption to $15 million for the 2026 tax year, which will be increased for inflation going forward. The GST exemption has also been increased to $15 million per person, matching the estate and gift tax exemption. The rules around GST tax rates and portability remain unchanged.
Please check out our other OBBB blogs to learn more about business taxes and new provisions for individual taxes.
If you have any questions about how the OBBB may affect your individual or business taxes, please reach out to your Zinner & Co. Tax Team representative.
