01/08/2025
Detailed Overview of Key Tax Provisions related to the One Big Beautiful Bill Act - If you have any questions, please don't hesitate to contact me!
📊 Tax Rates
Permanently extends the TCJA’s tax rate reductions.
Lower brackets indexed to inflation annually, adjusting tax brackets to keep pace with rising costs.
💰 Standard Deduction
Permanently maintains TCJA's increased deduction.
Starting in 2025:
Individual Filers: $15,750
Joint Filers: $31,500
Future adjustments beyond 2025 will continue to be indexed annually for inflation.
👨👩👧 Personal Exemption
Permanently eliminates personal exemptions.
Introduces "Senior Deduction" of $6,000 (2025-2028) for taxpayers aged 65+.
Deduction phases out:
Single: reduced by 6 cents per dollar above $75,000 AGI.
Joint: reduced by 6 cents per dollar above $150,000 AGI.
🏠 SALT Cap
Temporarily increases SALT deduction cap to $40,000 for tax year 2025.
Phaseout begins at $500,000 AGI and completely phases out at $600,000 AGI.
In 2026, the threshold will increase by 1% or to $40,400 for households with income under $505,000. The thresholds will continue to increase by 1% each year through 2029.
Permanently reverts to $10,000 starting in 2030.
🎁 Charitable Contributions
Permanent deduction for non-itemizers effective after 2025:
Single: $1,000
Joint: $2,000
Qualifying contributions must be cash donations made directly to charitable organizations; donations via donor-advised funds (DAFs) are excluded.
Itemizers limited to amounts exceeding 0.5% of AGI (excluding NOLs).
Permanently extends 60% limit for cash donations to qualified charities.
Unused deductions may be carried forward up to five years.
🎲 Gambling Loss Deduction
Limits deductions to 90% of wagering losses after 2025.
Losses must be itemized and cannot exceed total gambling winnings.
Example: If annual gambling losses are $1,000, only $900 is deductible against winnings.
💵 Tip Income
Above-the-line deduction up to $25,000 annually (2025-2028).
Eligible for employees and independent contractors in specified industries (pending Treasury guidance for eligible industries).
Documentation and record-keeping requirements to be provided by the Treasury.
Phaseouts begin:
Single: $150,000 AGI
Joint: $300,000 AGI
⏰ Overtime Pay
Deduction specifically applies to qualified overtime wages (based on Fair Labor Standards Act), not bonuses or other additional compensation.
Single: up to $12,500
Joint: up to $25,000 (2025-2028).
Phaseouts begin:
Single: $150,000 AGI
Joint: $300,000 AGI
🏦 Mortgage Interest Deduction
Permanently maintains TCJA limits:
Single: $750,000 loan limit
Married Filing Separately: $375,000 loan limit
Interest on home equity indebtedness remains non-deductible.
Certain mortgage insurance premiums qualify as deductible interest.
🚗 Car Loan Interest Deduction
Deduction of up to $10,000 interest annually (2025-2028).
Applies exclusively to loans for new passenger vehicles assembled in the U.S. after Dec. 31, 2024; leases are excluded.
Phaseouts begin at:
Single: $100,000 AGI
Joint: $200,000 AGI
💼 Bonus Depreciation
Restores 100% bonus depreciation for qualifying property placed in service after Jan. 19, 2025.
Eligible property includes equipment, machinery, and certain business assets.
Bonus depreciation phases down gradually after 2027, absent further legislative extensions.
📄 Information Reporting (Forms 1099)
Reporting threshold increased to $2,000 starting in 2027 (for payments made in calendar year 2026), adjusted for inflation in increments of $100 thereafter.
Form 1099-K threshold for third-party settlement organizations raised to $20,000 and must involve over 200 transactions (effective for payments starting in 2026).
💳 Tax-Advantaged Savings (Trump Accounts)
Annual contributions up to $5,000 (indexed for inflation) for beneficiaries under age 18.
Tax-deferred growth; preferential tax treatment for distributions used on qualifying expenses such as education, home purchase, or retirement.
Withdrawals for non-qualifying expenses may be subject to penalties.
One-time federal complementary contribution of $1,000 for children born between 2025-2028 (no income limits).
Beneficiary must utilize funds by age 31.
🎓 Changes to 529 Plans
Expands tax-free distributions for elementary and secondary school expenses, and qualified postsecondary credentialing expenses such as vocational certifications, professional licenses, and continuing education programs.
Effective immediately upon enactment of the law.
🔍 Legislative References
For further research, consult the One Big Beautiful Bill Act, signed into law on July 4, 2025, as Public Law 119-21, that goes into effect for 2025.
The reader is advised to contact a tax professional prior to taking any action based upon this information. Jennifer Palladino, EA, assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.
