12/18/2025
HIGHLIGHTS OF THE ONE, BIG, BEAUTIFUL BILL ACT (OBBB)
Congress has enacted a major new piece of tax legislation, the largest update since the Tax Cuts and Jobs Act. This new law affects individual taxpayers, families, and business owners, and introduces planning opportunities that may impact your 2025–2029 tax years.
Below is a summary of the most important provisions that may apply to you.
1. Standard Deduction Increases (Beginning 2025)
Single: $16,000 (prior $14,600)
Married Filing Jointly: $32,000 (prior $29,200)
Head of Household: $24,000 (prior $21,900)
These amounts will be inflation-adjusted annually.
2. Updated Individual Tax Brackets (Beginning 2025)
Single Filers:
10%: $0 – $12,000
12%: $12,001 – $60,000
22%: $60,001 – $120,000
24%: $120,001 – $250,000
32%: $250,001 – $400,000
35%: $400,001 – $600,000
37%: Over $600,000
Married Filing Jointly:
10%: $0 – $24,000
12%: $24,001 – $120,000
22%: $120,001 – $240,000
24%: $240,001 – $500,000
32%: $500,001 – $800,000
35%: $800,001 – $1,000,000
37%: Over $1,000,000
3. State and Local Tax (SALT) Deduction Changes
For tax years 2025 through 2029, the SALT deduction cap is temporarily increased to $40,000 per return ($20,000 for Married Filing Separately). The expanded deduction begins to phase out at $500,000 of modified adjusted gross income and is reduced by 30% of the excess over that threshold. The deduction cannot be reduced below the original $10,000 cap ($5,000 MFS).
4. Changes to Itemized Deductions (Other Than SALT)
The medical expense deduction threshold remains at 7.5% of AGI. Mortgage interest remains deductible subject to statutory limits and grandfathering rules. Miscellaneous itemized deductions subject to the 2% AGI floor remain largely suspended.
5. Child & Family Credit Enhancements
The Child Tax Credit has increased to $2,400 per qualifying child. A new Family Care Credit of up to $1,000 is available for non-child dependents such as elderly parents, subject to income limits.
6. Business Tax Provisions
The Qualified Business Income deduction has been extended and increased to 25%. Bonus depreciation is restored to 100% through 2027, and the Section 179 expense limit has increased to $2,000,000 with phase-out beginning at $3,500,000.
7. Social Security Benefit Changes
The new law includes important relief for taxpayers receiving Social Security benefits. First, eligible taxpayers may claim an additional $6,000 deduction related to Social Security income, subject to income limitations and phase-out rules. This deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
8. Changes Affecting Tips and Overtime Income
The new tax law includes targeted relief for taxpayers who earn income from tips and overtime compensation, particularly in service-based and hourly professions.
Tip Income
Under the new rules, a portion of qualified tip income may be eligible for a special deduction or exclusion from taxable income, subject to income limitations and reporting requirements. This provision is intended to reduce the tax burden on workers in tipped occupations while maintaining existing employer reporting and withholding obligations. Tips must continue to be properly reported to employers and included in tax filings to qualify for any available tax benefit.
Overtime Compensation
The legislation also provides tax relief related to overtime pay, allowing eligible taxpayers to deduct or exclude a portion of overtime compensation from taxable income, subject to income thresholds and phase-out rules. Overtime wages must continue to be reported as required, and the benefit may be limited based on modified adjusted gross income.
These provisions do not eliminate payroll taxes (Social Security and Medicare), and wages, tips, and overtime pay remain subject to standard reporting and withholding rules.
9. Vehicle Loan Interest Considerations
The new tax law includes changes affecting the deductibility of interest paid on vehicle loans for autos purchased for personal use. For individual taxpayers, effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets the following eligibility criteria. Lease payments do not qualify.
Interest must be paid on a loan that:
Originated after December 31, 2024
• Was used to purchase a vehicle originally used by the taxpayer
• Was secured by a lien on the vehicle
• Was for a personal-use (nonbusiness) vehicle
If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.
What counts as a qualified vehicle
A qualified vehicle is a car, minivan, van, SUV, pickup truck or motorcycle that:
• Has a gross vehicle weight rating of less than 14,000 pounds
• Underwent final assembly in the United States.
• This deduction is available to both itemizing and non-itemizing taxpayers.
• You must include the VIN on your return for any year you claim the deduction
Maximum annual deduction is $10,000.
Phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
