The recently enacted One Big Beautiful Bill Act (OBBBA) represents one of the most sweeping updates to the U.S. tax code in years. Since 2025, individuals and businesses have faced a wide range of changes affecting income tax rates, deductions, credits, cost-recovery rules, and more. Many provisions from the Tax Cuts and Jobs Act (TCJA) are now permanent, while several new opportunities and limitations have been added.
Below is a structured summary of the most significant updates every taxpayer should understand.
Key changes for individual taxpayers
Income Tax Rates, Brackets, and Deductions
The OBBBA permanently extends the TCJA’s lower income tax rates and expanded brackets. The top marginal rate remains at 37%, avoiding the previously scheduled increase to 39.6%.
The standard deduction was made permanent and increased in 2025 to:
● $31,500 for married filing jointly
● $15,750 for single filers
● $23,625 for heads of household
These amounts will continue to adjust annually for inflation.
While the personal exemption remains suspended, the Act introduces a temporary deduction for seniors age 65 and older. From 2025 through 2028, qualifying taxpayers may deduct up to $6,000, subject to income phase-outs.
Family and individual credits and deductions
Child Tax Credit (CTC)
● Permanently increased to $2,200 per qualifying child beginning in 2025
● Refundable portion capped at $1,400, indexed for inflation
● Stricter Social Security Number requirements for both the taxpayer and child
State and Local Tax (SALT) Deduction
● Cap increased to $40,000 ($20,000 for MFS) from 2025
● Phases out at higher income levels
● Scheduled to revert to $10,000 after 2029
Mortgage Interest Deduction
● The $750,000 mortgage indebtedness cap is made permanent
● Mortgage insurance premiums are officially treated as mortgage interest
● Loans obtained prior to December 15th, 2017 are still subject to the old $1 million mortgage indebtedness cap.
Vehicle Loan Interest Deduction
● Up to $10,000 per year of interest on loans for new, U.S.-assembled personal vehicles is deductible
● Loans must’ve begun after December 31, 2024
● Income phase-outs apply at higher MAGI levels
New deductions for earned income
The OBBBA introduces two new deductions available to non-itemizers and itemizers alike:
Qualified Tips Deduction
● Deduct up to $25,000 of qualified tip income
● Not available to specified service trades or businesses
● Phases out for higher-income taxpayers
Premium Overtime Pay Deduction
● Deduct up to $12,500 (single) or $25,000 (joint filers)
● Applies to the premium portion of overtime pay
● Same phase-out thresholds as the tip deduction
Charitable contributions
The above-the-line deduction for cash charitable contributions is made permanent and increased to:
● $1,000 for single filers
● $2,000 for joint filers
For those who itemize, a new 0.5% of AGI floor applies to all charitable contributions. Only contributions exceeding that threshold are deductible.
Provisions affecting businesses
Expensing and Cost Recovery
● 100% Bonus Depreciation
Made permanent for qualified property acquired after January 19, 2025.
● Section 179 Expensing
Limit increased to $2.5 million, with a phase-out beginning at $4 million.
● R&D Expensing
Immediate expensing of domestic research and experimental expenditures becomes permanent.
Foreign R&D must still be amortized over 15 years.
● Special Expensing for Structures
Certain nonresidential real property used in qualified production activities may qualify for 100% expensing if placed in service between July 4, 2025, and January 1, 2031.
Business deductions and credits
Business Interest Limitation
● Permanently set at 30% of EBITDA, restoring the more favorable pre-2022 standard.
Section 199A Pass-Through Deduction
● The 20% QBI deduction is made permanent
● Higher phase-in thresholds apply
● A new minimum deduction of $400 for active business income is added
Other Notable Provisions
● The paid family and medical leave credit is made permanent and expanded
● Business meal deductions expanded for certain fishing operations
● The advanced manufacturing investment credit increased to 35%
● The excess business loss limitation for non-corporate taxpayers is made permanent
Corporate charitable deductions
Starting in 2026, a 1% taxable income floor applies to corporate charitable deductions. Only contributions exceeding this threshold are deductible, still subject to the 10% overall limit.
Energy and savings provisions
Clean Energy Credits
The OBBBA rolls back or eliminates many clean energy incentives enacted under the Inflation Reduction Act. Key changes include:
● Repeal or early termination of credits for electric vehicles, residential energy property, and commercial clean vehicles
● Extension of the clean fuel production credit (Section 45Z) through 2029
● Termination of clean electricity credits (Sections 45Y and 48E) for wind and solar placed in service after 2027
● Elimination of the Energy Efficient Home Improvement Credit after 2025
New children’s savings accounts
The Act creates a new tax-advantaged savings vehicle for children under 18, featuring:
● $5,000 annual contribution limit
● Employer contributions up to $2,500, excluded from income
● A $1,000 government contribution for newborns from 2025–2028
● Required investment in broad U.S. equity index funds
● Scheduled to launch in mid-2026
Final thoughts
The OBBBA brings extensive and far-reaching changes to the U.S. tax system. With many TCJA provisions now permanent and a variety of new deductions, credits and rules introduced, taxpayers need to plan carefully. Individuals and businesses alike should consult with their tax advisors to understand how these changes apply to their specific financial situations. Proactive planning is essential to navigate the new tax landscape effectively.
Want to strategize to your individual needs? Contact us at info@ascendadvisors.com.
