One Big Beautiful Bill’s Individual Tax Changes

President Trump officially signed into law the One Big Beautiful Bill Act on July 4, a major tax package that impacts nearly all U.S. taxpayers. The new law extends key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new tax breaks for workers, families, and retirees.

As this is a nearly 1,000-page bill, the below is just a snapshot of the new tax laws affecting individuals. If you have questions about any of these sections, contact your tax advisor.

Permanent individual tax rates

The new law makes permanent the TCJA’s individual tax brackets. Without this change, tax rates would have reverted to higher pre-2017 levels after 2025. Moving forward, the inflation adjustment will only apply to the 10% and 12% brackets.

For tax year 2025, the tax rates are:

37% for incomes over $626,350 ($751,600 for married couples filing jointly)
35% for incomes over $250,525 ($501,050 for married couples filing jointly)
32% for incomes over $197,300 ($394,600 for married couples filing jointly)
24% for incomes over $103,350 ($206,700 for married couples filing jointly)
22% for incomes over $48,475 ($96,950 for married couples filing jointly)
12% for incomes over $11,925 ($23,850 for married couples filing jointly)
10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

No tax on tips and overtime

For tax years 2025 to 2028, workers in qualifying service industries — such as food service, salons, and personal care — can exclude tip income and overtime pay from taxable income. The deduction for no tax on tips is capped at $25,000 and decreases for those making $150,000 a year ($300,000 for couples). For no tax on overtime, the deduction is capped at $12,500 for those making more than $150,000 per year. For couples, the deduction is limited to $25,000 with an income cap of $300,000. Payroll taxes still apply to both tips and overtime pay.

Expanded Child Tax Credit

The Child Tax Credit (CTC) permanently increases to $2,200 per child starting in 2025, indexed annually for inflation. The credit continues to phase out at higher income levels. (For 2024, annual income could not be more than $200,000 or $400,000 if filing a joint return.)

Additionally, the new bill made permanent that $1,400 of the credit is refundable.

Boosted standard deduction with senior bonus

Starting in 2025, the standard deduction will permanently increase to $15,750 for single filers and $31,500 for married filing jointly, adjusted annually for inflation. Personal exemptions have been permanently eliminated.

In addition, from 2025 to 2028, seniors aged 65 and older may qualify for an extra $6,000 deduction with AGI phaseouts starting at $75,000 for single filers, $150,000 married filing jointly. These amounts build on the enhanced deductions introduced under the TCJA and offer new relief for middle-income families and retirees.

Charitable deductions

This provision permanently allows non-itemizers to deduct charitable contributions up to $1,000 for individuals and $2,000 for married filers, subject to limits based on income and contribution size.

For itemizers, charitable donations can only be deducted on a tax return if the total amount exceeds 0.5% of the taxpayer’s AGI.

Itemized deductions

The new bill removes the Sec. 68 overall limitation on itemized deductions, replacing it with a new overall limitation on the tax benefit of itemized deductions. This means your itemized deductions may be reduced by 2/37 of the smaller of your total itemized deductions or the amount of taxable income that exceeds the threshold for the 37% tax bracket.

Higher SALT deduction cap

The State and Local Tax (SALT) deduction cap — originally set at $10,000 under the TCJA — has been increased to $40,000 per household. This is phased down for taxpayers with modified adjusted gross incomes over $500,000. The $40,000 is reduced by 30% of the excess modified adjusted gross income over the threshold amount with a floor of $10,000. Also, the $40,000 cap will increase 1% each year through 2029, then starting in 2030, the cap is again reduced to $10,000.

This change provides more flexibility for taxpayers in high-tax states like California, New York, and New Jersey.

Qualified business income deduction

Originally set to expire at the end of this year, the pass-through business deduction under Section 199A has been made permanent at 20%. This means owners of a pass-through entity will pay tax at individual rates on effectively 80% of the qualified income reported from the entity.

Additionally, the bill expands the limitation phase-in window from $50,000 for single filers ($100,000 for married filing jointly) to $75,000 for single filers ($150,000 for married filing jointly). The new itemized deduction threshold does not impact determination of deduction for QBI purposes.

Under OBBBA, the pass-through entity tax (PTET) deduction remains largely unchanged.

Estate and gift tax changes

The increased federal estate tax exemption has been made permanent, increasing to $15 million and effective for the 2026 tax year and indexed annually for inflation. This exclusion represents the value of property an individual can gift or bequeath without incurring federal gift or estate tax.

Trump Accounts

The law introduces a tax-free trust account for children under age 18 — called Individual Trust Accounts, or “Trump Accounts." Starting in 2026, parents can contribute up to $5,000 annually, including up to $2,500 tax-free from a parent’s employer. Contributions aren’t tax deductible, gains are tax-deferred, and all distributions are taxed. Partial withdrawals from Trump Accounts can be made after the beneficiary turns 18, full withdrawals for “qualified expenses” after age 25, and full withdrawals for any purpose at age 30.

There will be a $1,000 government contribution at birth for children born between 2025 and 2028. Contributions may also be made by tax-exempt organizations.

July 10, 2025

What the One Big Beautiful Bill Act Means for Individuals