Key Tax Provisions for Individuals of the One Big Beautiful Bill Act

Last edition, we covered the impact on businesses of the new tax legislation. This month, it’s all about the provisions that impact individual taxpayers. Here are some key provisions to know about.

Individual income tax rates. Makes Tax Cuts and Jobs Act (TCJA) rates permanent. All brackets continue to be indexed for inflation after 2025. Also adds an additional year of inflation adjustment to the end of the 10% and 12% brackets (where the 22% bracket begins).

Standard deduction. Permanently increases the standard deduction. Effective as of Jan. 1, 2025: Single & MFS: $15,750 (indexed); HoH: $23,625 (indexed); MFJ: $31,500 (indexed).

Personal exemptions. Permanently terminates deduction for personal exemptions.

Child Tax Credit (CTC). Permanent increase of $2,200 per child, with $1,700 refundable with inflation adjustments.

Other Dependent Credit. $500 credit is made permanent, and the requirement that the dependent be a resident of the US continues; no inflation adjustment.

Estate and gift tax exemption. Increases exemption to $15 million (indexed from 2026); makes higher exemption permanent.

Alternative Minimum Tax (AMT) exemption. The bill preserves TCJA’s AMT exemption amounts but increases the phase-out rate to 50% (vs. 25% under current law), steepening the claw-back for upper-income filers.

Mortgage interest deduction. Makes the $750,000 limit permanent, also includes mortgage insurance premiums.

Home equity debt. The disallowance of home equity debt interest expense is made permanent.

Miscellaneous itemized deductions. Permanently terminates deduction but removes unreimbursed employee expenses for eligible educators from the list of miscellaneous itemized deductions.

Moving expenses deduction. Permanently terminates deduction (except for Armed Forces).

Charitable deduction for non-itemizers (Cash deductions only). The bill creates a charitable contribution deduction of $1,000 for single filers or $2,000 for MFJ for certain charitable contributions. The deduction is permanent; however, it starts after 2025.

Charitable deduction for individuals who itemize (Cash deductions only). The bill would limit the charitable deduction for taxpayers who itemize by providing a deduction only for charitable contributions to the extent that they exceed 0.5% of the taxpayer’s contribution base.

No tax on tips. Allows deduction for qualified tips (excludes highly compensated employees, which is $160,000 for 2025 under Sec. 414 and Notice 2024-80) received in certain occupations (as defined by Treasury); SSN required. Limits the benefit to $25,000 per taxpayer. The bill would also begin to phase out the deduction when the taxpayer’s modified adjusted gross income exceeds $150,000 ($300,000 for MFJ) and would expire in 2028.

No tax on overtime. Allows deduction for qualified overtime compensation (excludes highly compensated employees and tips); deduction ends after 2028; SSN required. The bill limits the benefit to $12,500 per taxpayer, subject to an income limitation.

Enhanced deduction for seniors. Adds $6,000 bonus deduction for seniors (2025– 2028); phased out at higher incomes.

No tax on car loan interest. Allows deduction for up to $10,000 of interest on new car loans (2025–2028); must be US-assembled passenger vehicles with the vehicle serving as security for the loan.

529 plan qualified expenses. Expands to include more K-12 and homeschool expenses, and postsecondary credentialing expenses. In particular, CPA credentialling would also be allowed (including exam expenses).

State and local tax (SALT) cap. The SALT provision retroactively increases the individual limit from $10,000 to $40,000 for 2025 and $40,400 for 2026, followed by 1% increases for 2027, 2028, and 2029. Beginning in 2030, the cap would revert to $10,000. Such deduction would also be subject to a phaseout for MAGI greater than $500,000 in 2025, $505,000 in 2026, and similar 1% increases thereafter, but the deduction would not be reduced below $10,000. Additionally, there would be no SALT limitation for pass-through entities.

Wondering how the new tax legislation affects you and your family? 

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