What the One Big Beautiful Bill Act Means for Individuals

The One Big Beautiful Bill Act (OBBBA) introduces sweeping tax updates for individuals — from making key provisions of the Tax Cuts and Jobs Act (TCJA) permanent to launching entirely new savings opportunities. While some changes modernize existing breaks, others offer new benefits designed to ease financial burdens.

State and Local Tax Deduction

The OBBBA increases the state and local tax (SALT) deduction limit through 2029. This allows eligible taxpayers to deduct up to $40,000 for individuals and $20,000 for married separate filers starting in 2025. The deduction covers property taxes and either income or sales tax, with a one percent increase annually.

For taxpayers with modified adjusted gross income (MAGI) over $500,000 or $250,000 for separate filers, the SALT deduction cap is reduced by 30 percent of the excess income, but not below $10,000 for married couples or $5,000 for separate filers. Taxpayers near these thresholds may benefit from strategies to lower MAGI, such as boosting retirement contributions or making qualified charitable IRA distributions.

Child Tax Credit

The OBBBA not only preserves the Child Tax Credit and Credit for Other Dependents. It also enhances them. Key updates include making these provisions permanent and increasing the CTC to $2,200 this year with annual inflation adjustments. It also locks in the $1,400 refundable portion, adjusted to $1,700 in 2025, the $500 nonrefundable COD, and the current income phase-out thresholds of $200,000 for single filers and $400,000 for joint filers.

Education Breaks

The OBBBA expands qualified expenses for tax-free Section 529 plan distributions. This includes post-secondary tuition and expands allowable K–12 expenses beyond tuition and fees. Starting in 2026, the annual tax-free distribution limit for K-12 expenses doubles from $10,000 to $20,000. It also offers a tax credit of up to $1,700 for donations to scholarship organizations supporting students from households earning up to 300 percent of the area’s median income.

It also permanently excludes up to $5,250 in employer-paid student loan assistance, with inflation adjustments to take effect starting in 2027, and limits tax-free loan forgiveness to cases of death or total disability. Some states may still tax forgiven debt excluded for federal tax purposes.

Charitable Deductions

Generally, donations to qualified charities are fully deductible up to certain adjusted gross income (AGI)-based limits if you itemize deductions. The OBBBA introduces a nonitemized charitable deduction of up to $1,000 for individuals, or $2,000 for joint filers, starting in 2026.

It also implements a 0.5 percent AGI floor on itemized charitable deductions, meaning only donations exceeding 0.5 percent of your AGI will be deductible. For example, with a $100,000 AGI, the first $500 of donations will not qualify for a deduction.

Qualified Small Business Stock

Generally, taxpayers selling qualified small business (QSB) stock can exclude up to 100 percent of their gain if they have held the stock for more than five years. This exclusion applies when the business is actively operating and has assets of $50 million or less in value.

The OBBBA introduces smaller exclusions for shorter holding periods. Specifically, it provides a 75 percent exclusion for QSB stock held for four years and a 50 percent exclusion for QSB stock held for three years. These exclusions go into effect for QSB stock acquired after July 4, 2025.  It also increases the QSB asset limit to $75 million, adjusted for inflation after 2026, for stock issued after that date.

Affordable Care Act’s Premium Tax Credits

The OBBBA introduces stricter rules for Premium Tax Credit (PTC) recipients. Beginning in 2026, individuals who receive excess advanced PTCs must repay the full amount unless their actual income falls below 100 percent of the federal poverty level. Currently, individuals with income below 400 percent of the federal poverty level are only required to repay part of the excess. Starting in 2028, eligible individuals will be required to verify their information annually, including household income, immigration status, and place of residence. Previously, many insureds were allowed to automatically re-enroll.

Temporary Tax Deductions

Between 2025 and 2028, the OBBBA introduces temporary deductions aimed at workers, vehicle owners, and older taxpayers. Highlights include:

• Tips: Generally, employees and independent contractors can claim a deduction of up to $25,000 for qualified tips received if they are in an occupation that customarily and regularly received tips before 2025. The tips must be reported on a Form W-2, Form 1099, or Form 4137. The deduction begins to phase out when MAGI exceeds $150,000 for individuals or $300,000 for joint filers.

• Overtime: Qualified overtime pay is deductible up to $12,500 for individuals or $25,000 for joint filers. It includes only the excess over the regular pay rate. The overtime pay must be reported separately on a taxpayer’s W-2 form, Form 1099, or other specified statement furnished to the individual. This deduction also starts phasing out when MAGI exceeds $150,000 for individuals or $300,000 for joint filers.

• Auto Loan Interest: The OBBBA allows individuals to deduct up to $10,000 in interest on vehicle loans originated after December 31, 2024. The vehicle must weigh under 14,000 pounds, be assembled in the United States, and may include cars, SUVs, trucks, or motorcycles. The deduction phases out when MAGI is over $100,000 for individuals and $200,000 for joint filers.

• Senior Deduction: The OBBBA does not eliminate taxes on Social Security benefits. However, it does include a new deduction of $6,000 for taxpayers 65 years old or older by December 31 of the tax year, regardless of whether they are receiving Social Security benefits. The deduction begins phasing out when MAGI exceeds $75,000 for individuals or $150,000 for joint filers. Social Security taxation rules remain unchanged.

These deductions are temporary. Planning ahead is key.

Trump Accounts

Beginning in 2026, families can open Trump Accounts, which are tax-advantaged savings accounts for children under 18 with a valid Social Security number. Annual contributions of up to $5,000 are allowed until the child reaches adulthood. U.S. citizen children born between January 1, 2025, and December 31, 2028, with at least one U.S. citizen parent, may qualify for a $1,000 government-funded deposit. Contributions are not deductible, but earnings grow tax-deferred if they are in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet other requirements.

TCJA Provisions

The OBBBA permanently extends many TCJA provisions set to expire after 2025, including reduced individual tax rates, higher standard deductions, elimination of personal exemptions, increased AMT exemptions, a lower $750,000 mortgage debt deduction limit, eligibility for certain mortgage insurance premiums to be deducted as residential interest, elimination of home equity interest deductions for non-qualified debt, limits the personal casualty loss deduction to federally and certain state-declared disasters, and removal of miscellaneous itemized and moving expense deductions. The permanency of these provisions should provide some helpful clarity for tax planning. However, keep in mind that permanent means the provisions have no expiration date. It is still possible that lawmakers could make changes to them in the future.

Here to Help You Navigate the One Big Beautiful Bill Act

With so many changes under the OBBBA, now is the time to revisit your tax strategy. If you have any questions, we are here to help. We build value-added relationships with each client to understand their business structure and provide solid solutions. Our approach offers direct access to the firm's decision-makers. Our innovative cross-functional services help businesses address the challenges ahead.