The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, bringing with it significant changes to tax provisions that will ultimately impact most Americans. Some of these changes have already gone into effect, while others will be rolled out over the next few years. But—whether now or later—this legislation will touch individuals, families, businesses, foreign entities, the healthcare community, and more. With over 900 pages of provisions, tax professionals have only begun to scratch the surface of how this Bill will impact Americans during the 2025 tax season and beyond.
Community CPA is dedicated to keeping you informed about tax changes that could impact you, your family, or your business. With 900 pages of provisions to unpack, we can’t do it all in one article. This article will focus on the impact of the OBBBA on individual tax provisions.
Individual Income Tax Rates & Standard Deductions
The OBBBA made several changes to individual income tax rates and standard deductions:
- Tax rates made permanent: The OBBBA makes the individual tax rate reductions and bracket changes introduced by the Tax Cuts and Jobs Act (TCJA) of 2017 permanent. This also permanently addresses the “marriage penalty” by continuing the TCJA’s fix for married filing jointly rates.
- Increased standard deductions:
a. Standard deduction for joint filers and surviving spouses increased to $31,500
b. Standard deduction for heads of household will increase to $23,625
c. Standard deduction for single filers or married filing separately will increase to $15,750
d. Inflation adjustment for the standard deduction will now be based on 2024 data, rather than data from 2017
An increased standard deduction has a significant impact on taxpayers, primarily by simplifying tax filing and often leading to lower tax bills for some segments of the population.
The OBBBA generally extended or made permanent many individual income tax rate reductions and the increased standard deductions originally put in place by the TCJA back in 2017.
Charitable Contributions
Changes introduced by the OBBBA will affect both itemizers and non-itemizers:
- Itemized deductions: The OBBBA introduced a 0.5% Adjusted Gross Income (AGI) floor. In layman’s terms, this means if you choose to itemize your deductions—and you also donate cash to charity—you won’t get a tax break on the very first small chunk of money you give away. That small chunk is calculated as 0.5% of your total AGI. It’s a way for the government to slightly limit the tax benefit you get from smaller charitable cash donations if you’re an itemizer.
- Non-itemized deductions: Starting in 2026, non-itemizers will be able to deduct a limited amount of charitable contributions on their tax return, outside of Schedule A. This “above-the-line” deduction is capped at $2,000 for married couples filing jointly and $1,000 for single filers and is aimed at broadening charitable giving.
- The 60% AGI limitation has been permanently extended. This provides more flexibility for larger donations.
To qualify, charitable contributions must be in cash and made to a public charity, for example, a 501(c)(3) organization.
Itemized Deductions (Schedule A)
For taxpayers who file a Schedule A, the OBBBA introduced several changes to miscellaneous itemized deductions and the State and Local Tax (SALT) cap.
- Miscellaneous itemized deductions: The OBBBA permanently suspends most miscellaneous itemized deductions—like unreimbursed employee expenses or investment fees—that were subject to the 2% AGI floor before the TCJA. Before, you could only deduct these if they added up to more than 2% of your income, but now, for most people, you just can’t deduct them at all
- Educator expenses: Starting in 2026, a new line item will appear on Schedule A for unreimbursed employee expenses for eligible educators. This includes K-12 teachers, instructors, counselors, interscholastic sports administrators, coaches, principals, and aides who work at least 900 hours.
- State and Local Tax (SALT) cap: The $10,000 cap on state and local tax deductions (including property taxes) is increased to $40,000 for married filing jointly and $20,000 for married filing separately for tax years 2025 to 2029. This significant increase means more taxpayers will likely find it beneficial to itemize their deductions.
- Home mortgage interest: The limitation on home mortgage interest deduction, which is currently capped at the interest on $750,000 of mortgage debt for primary and secondary homes, is now permanent.
- Wagering losses: As of 2026, the OBBBA will limit the deductibility of gambling losses to 90% of your gambling winnings. For example, if you win $10,000 and lose $10,000, you can now only deduct $9,000 of your losses (90% of $10,000). This leaves you with $1,000 in taxable gambling income, even though you effectively broke even.
- Moving expenses: the OBBBA has put an end to moving expense deductions for individual taxpayers. If you move for a job, your employer can reimburse you and you can deduct your costs as a business expense.
- Casualty losses: Casualty losses from federally or state-declared disasters are no longer deductible on Schedule A. If your home or personal property is damaged in a natural disaster, federal aid or insurance payouts may cover these losses.
New Taxes & Deductions
The OBBBA introduced four new taxes and/or deductions:
- Remittance transfer tax: A 1% tax will be imposed on financial institutions for wiring money internationally. We expect this cost will be passed on to the consumer.
- No tax on car loan interest: For personal use vehicles purchased in 2025 through 2028, taxpayers can deduct up to $10,000 per year in car loan interest. This applies to cars, minivans, vans, SUVs, pickup trucks, and motorcycles with a gross vehicle weight under 14,000 pounds. The vehicle identification number (VIN) must be reported, and lenders will file information returns with the IRS.
- Tips income deduction: Restaurant workers and others who receive tips can claim an “above-the-line” deduction of up to $25,000 for qualified tips income, provided their household income is under $300,000 (joint filers). Payroll taxes still apply. It’s important to note that this is a temporary provision for 2025–2028.
- Overtime pay deduction: Another new “above-the-line” deduction of up to $25,000 is available for overtime pay, also only for tax years 2025–2028. This could benefit employees by reducing their amount of taxable income.
Child & Dependent-Related Credits
Families will see enhancements to existing credits and a new account for children:
- Child Tax Credit (CTC): The TCJA temporarily modified the CTC, increasing the deduction to $2,000 per qualifying child, with a refundable portion of $1,400. It also decreased the earned income threshold to $2,500 and phased out at $400,000 for joint filers. The OBBBA makes these changes permanent, with a few adjustments:
- The non-refundable CTC amount has been increased to $2,200 per qualifying child
- The refundable portion has been increased to $1,700
- It is crucial that you or your tax preparer file this deduction properly—the omission of a correct social security number for your child will be considered a mathematical error, and your credit will be denied without investigation or audit.
- Extended credit for other dependents (the Mother-in-Law credit): The TCJA had provided a temporary $500 non-refundable credit for dependents who don’t qualify for the CTC, for example, children over 17 or children without a social security number. Like with the CTC, omission of a correct social security number will be considered a mathematical error, and your claim will be denied.
- Enhanced child dependent care credit: Before the TCJA, taxpayers could claim a credit for expenses paid to daycare or individuals, calculated by multiplying qualifying expenses (a maximum of $3,000 for one child, or $6,000 for more than one) by roughly 35%. The OBBBA increases the maximum credit calculation to 50%. This applies to tax years beginning in 2026, and is permanent.
- Trump accounts: This is a new concept, designed for the benefit of children. It allows new tax-favored accounts to be established on behalf of children, allowing contributions from parents, relatives, employers, other taxable entities, non-profits, and government entities. To be eligible, the child must be a U.S. citizen and have a social security number. Trump accounts are structured like an IRA, with funds distributable after the child turns 18. The annual contribution is capped at $5,000 per year. This is a temporary provision, available from 2025–2028. There is also a pilot program for a government-funded initial $1,000 contribution for newborns starting in 2025. Parents can receive a tax credit of up to $1,000 on individual contributions.
Enhanced Deductions for Seniors
The OBBBA states that taxpayers aged 65+ and their spouse (if filing jointly) can claim a $6,000 deduction per qualified individual for tax years beginning 2025–2028. This senior deduction is reduced by 6% for AGI that exceeds $75,000. Like with some of the child and dependent-related credits, you must include the qualifying individual’s social security number on the return—and you need to get it right! Mistakes will cause your claim to be denied without audit or investigation.
Estate & Gift Tax Exclusion
The TCJA increased the estate and gift tax exclusion amount from $5 million to $10 million, which, adjusted for inflation is closer to $14 million. The OBBBA further increases the exclusion to $15 million, which will be adjusted for inflation. Individuals and families with a net worth greater than $15 million will need to have a well-thought-out estate plan in place—and even those with significantly less net worth should also consider putting an estate plan in place to protect themselves, their loved ones, and the assets they’ve worked a lifetime to accrue.
There’s Never Been a Better Time to Have a Qualified Tax Professional in Your Corner
For better or worse, the OBBBA has implications for taxpayers in every bracket. If you file your own taxes using TurboTax or similar, your software should reflect the latest tax deductions and credits from the OBBBA. However, as helpful as those DIY tax filing systems can be, they are no replacement for working with a tax professional who can interpret tax law and tax code in the way that works best for your individual circumstances.
Whether you choose to DIY it or hire a qualified professional, Community CPA is here to provide you with the knowledge you need to make informed decisions that protect your wealth and preserve your financial health.
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