How the One Big Beautiful Bill Affects Individual Taxpayers

On July 4, President Trump signed the One Big Beautiful Bill (OBBB) into law, introducing a wide range of changes to the tax code and various government spending initiatives. To help make sense of what this means for you, we’ll be breaking down the key provisions and their implications in a series of blog posts.

In this post, we’ll take a closer look at how the OBBB affects individual taxpayers — from the extension of the 2017 tax cuts and adjustments to income tax brackets, to new deductions, credits, and savings opportunities. Whether you’re a salaried employee, retiree, or self-employed, these changes could have a direct impact on your financial planning and tax filing strategy.

• Standard Deduction Increased: The Bill locks in the 2017 individual rate schedule and increases the standard deduction to $15,750 for single filers and $31,500 for joint filers, effective in 2025, with ordinary inflation indexing thereafter.
• Individual Tax Rates and Brackets Locked In: The Bill cements the individual tax rates passed under the 2017 TCJA, such that the top marginal rate remains at 37%. Brackets for lower rates (10%, 12%, and 22%) remain tied to inflation indexes, meaning incremental shifts each year to keep pace with the cost of living. If you’ve grown accustomed to the TCJA’s structure, this section of the Bill preserves that familiarity and provides certainty for planning multi-year tax strategies.
• Child Tax Credit Increased and Made Permanent: The Bill permanently increases the Child Tax Credit (CTC) to $2,200 per qualifying child under the age of 17, effective for tax year 2025. The maximum refundable portion rises to $1,700 the same year.
• SALT Deduction Cap Temporarily Raised: The bill temporarily increases the ceiling on the itemized deduction for state and local taxes from $10,000 to $40,000 for joint filers ($20,000 for single filers) beginning with 2025 returns. The cap rises by 1 percent per year through 2029 and then reverts to $10,000 in 2030.
• Temporary Senior Bonus Deduction (2025-2028): Individuals aged 65 and older can claim an additional $6,000 deduction ($12,000 for joint filers) on top of the standard age-related add-on. The full amount is available for those with modified AGI up to $75,000 (single) or $150,000 (joint), and phases out completely at $175,000 and $250,000, respectively. This temporary provision is designed to ease the tax burden on retirees and applies only to returns filed from 2025 through 2028.
• New Deductions for Tips and Overtime Pay (2025-2028): Individuals in tip-based industries (like hospitality or food service) can deduct up to $25,000 in tip income, while those in overtime-heavy fields (like healthcare, retail, or manufacturing) can deduct up to $12,500 (single) or $25,000 (joint) in overtime pay — all without itemizing. Both deductions phase out at $150,000 MAGI for single filers and $300,000 for joint filers. To support these changes, W-2 forms will include new boxes for reporting qualified tip and overtime income, helping taxpayers and preparers track eligibility for these deductions. Employers in beauty and food/beverage sectors may also benefit from an expanded FICA tip credit. Read more here.
• Estate and Gift Tax Exemption Made Permanent: The doubled lifetime exemption that was due to sunset after 2025 is made permanent and bigger: $15 million per person ($30 million married), indexed for inflation beginning in 2026.
• Alternative Minimum Tax (AMT) Exemption Thresholds Adjusted: The larger post-2017 exemption amounts remain in place, but the income levels at which the exemption phases out revert to their pre-TCJA starting points – approximately $500,000 (single) and $1 million (joint) in 2025, indexed thereafter. Result: most middle-income filers remain untouched, while very high-income taxpayers may lose more of the exemption than under current rules.
• Pease Limitation Reinstated for High Earners: The Bill reintroduces the Pease limitation for high-income taxpayers starting after 2025. Under this provision, taxpayers in the highest income tax bracket (37%) will face a phased reduction of certain itemized deductions, limiting deductions as income increases.
• Green Energy Credits Phased Out After 2025: Several consumer-focused green energy credits established by the Inflation Reduction Act of 2022 will terminate generally after 2025. Credits ending include the Clean Vehicle Credit, Previously Owned Clean Vehicle Credit, Qualified Commercial Clean Vehicle Credit, Alternative Fuel Refueling Property Credit, Energy-Efficient Home Improvement Credit, Residential Clean Energy Credit, and the New Energy-Efficient Home Credit. These changes significantly reduce incentives for consumer adoption of certain clean energy technologies.
• Temporary Car Loan Interest Deduction (2025-2028): Individuals can deduct up to $10,000 in interest on auto loans for vehicles assembled in the U.S., offering temporary tax relief and support for domestic manufacturing. This deduction is set to expire after a few years, making it especially valuable for those planning to purchase a new or used car soon.
• Mortgage Insurance Premiums Now Deductible: The mortgage debt limit for interest deductions is now permanently capped at $750,000 ($375,000 for married filing separately), but mortgage insurance premiums can now be treated as deductible interest, offering added relief for homeowners, especially those with less than 20% equity.
• 529 Plan Uses Expanded to K-12 and Homeschooling: The Bill expands permitted uses of funds in 529 plans. Previously restricted to higher education expenses, these accounts can now cover expenses related to elementary, secondary, and homeschooling, providing families with broader financial flexibility in managing educational costs.

As you can see, the One Big Beautiful Bill introduces a wide range of changes that could significantly impact your tax situation — from expanded deductions and credits to the return of certain limitations. While some provisions offer immediate benefits, others require thoughtful planning to take full advantage.

HTB’s tax professionals are here to help you make the most of these opportunities while staying compliant with IRS and state rules. We’ll continue to share insights on the newly enacted OBBB in the coming weeks, so stay tuned. In the meantime, please don’t hesitate to reach out with any specific questions — we’re here to help you navigate these changes with confidence.