Introduction
President Trump has enacted the One Big Beautiful Bill Act (OBBBA), which is also recognized by other official titles. This legislation introduces numerous provisions affecting both individuals and businesses, many of which are advantageous; however, it is essential to review all details carefully. Numerous provisions from the 2017 tax law have been made permanent, albeit often with minor modifications. Certain elements will phase out over time or expire within several years. Definitions provided in the new law require close attention. Importantly, contrary to some expectations, the Act does not contain a provision eliminating tax on Social Security benefits. Additionally, individual states maintain their own tax regulations: some begin with federal adjusted gross income (AGI) and adjust as necessary, while others calculate income independently. Adoption of federal changes may be automatic or may require state legislative approval. Taxpayers utilizing tax preparation software must ensure that it reflects these recent updates. The subsequent sections will focus on provisions most relevant to taxpayers.
Individual Provisions
Basics of the Tax Cuts and Jobs Act Made Permanent
A significant number of foundational rules from the 2017 tax act are now permanent, including:
- The 10%, 12%, 22%, 24%, 32%, 35%, and 37% rate brackets
- Elimination of personal exemptions
- Reduced cap ($750,000) on mortgage interest deduction
- Limitation of the casualty loss deduction
- Termination of miscellaneous itemized deductions
- Increased alternative minimum tax exemption and threshold amounts
- Allowance for rollovers from qualified tuition programs to ABLE accounts
Personal Exemption
The personal exemption, eliminated in the 2017 Act, is now permanently removed. Seniors aged 65 and older will receive a $6,000 deduction for tax years beginning after 2024 and before 2029, replacing the proposed repeal of tax on Social Security benefits. This deduction phases out at a MAGI of $75,000 for individuals and $150,000 for joint filers.
Standard Deduction
The increased standard deduction is permanent. For 2025, the standard deduction will be:
- $15,750 for individuals
- $23,625 for heads of household
- $31,500 for married couples filing jointly
These figures will be indexed for inflation in subsequent years.
State and Local Taxes (SALT)
The Act temporarily increases the SALT deduction cap from $10,000 to $40,000, indexed for inflation by 1% annually until 2030, when it reverts to $10,000. Higher-income taxpayers (MAGI over $500,000) will experience a phased reduction in this additional deduction. Taxpayers may still elect to deduct sales taxes instead of income taxes. The pass-through entity tax (PTET) remains deductible at the federal level; initial proposals to eliminate this deduction were not adopted in the final bill.
# Advisory—PTET Election
Whether to opt for the PTET election depends on individual tax circumstances, particularly relative to the SALT deduction cap, and should be evaluated with a qualified tax advisor or reliable tax preparation software.
Child Tax Credit
The child tax credit consists of a nonrefundable portion, raised to $2,200 per qualifying child (indexed for inflation), and a permanent refundable amount of $1,400 (also indexed). The $500 credit for dependents other than children phases out at $200,000 ($400,000 for joint returns).