President Trump signed the One, Big, Beautiful Bill Act (OBBBA) into law on July 4, 2025. This comprehensive legislation extends Tax Cuts and Jobs Act (TCJA) provisions and introduces significant new benefits while making others permanent.
If you're wondering how these OBBBA individual tax changes will affect your family's financial situation, you're not alone. The new law touches everything from child tax credits to estate planning, with some provisions offering immediate relief and others providing long-term tax planning opportunities.
Let's break down the eight key areas where these changes could impact your tax bill and overall financial strategy.
Enhanced Child Tax Benefits
Higher Child Tax Credit
The child tax credit receives a welcome boost under the new law. For 2025, families can claim $2,200 per qualifying child under 17, up from the previous $2,000. The refundable portion starts at $1,700 in 2025 and will adjust for inflation moving forward.
Income limits remain generous for most families. The credit begins phasing out at $200,000 for single taxpayers and $400,000 for married couples filing jointly. However, there's an important requirement: both the child and at least one parent must have a valid Social Security number to claim the credit.
Permanent Credit for Other Dependents
The $500 credit for non-child dependents is now permanent. This applies to children who've aged out of the child tax credit or elderly parents you're supporting. The credit follows the same phaseout rules as the child tax credit, ensuring consistency across dependent-related benefits.
Tax Rates and Standard Deductions Locked In
Permanent Tax Brackets
The seven-bracket structure from the TCJA — with rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% — is now permanent. Starting in 2026, these bracket thresholds will adjust annually for inflation, providing predictability for long-term tax planning.
Capital gains rates remain unchanged at 0%, 15%, or 20% for long-term gains and qualified dividends. Real estate depreciation gains continue at up to 25%, while collectibles face a 28% rate.
Higher Standard Deductions
The OBBBA increases standard deduction amounts for 2025:
- Single filers: $15,750 (up from $15,000)
- Head of household: $23,625 (up from $22,500)
- Married filing jointly: $31,500 (up from $30,000)
These amounts will adjust for inflation starting in 2026. Additional deductions remain available for taxpayers age 65 or older or those who are blind — $2,000 for single individuals and $1,600 per spouse for married couples.
New Senior Benefits
Senior Deduction for 2025-2028
A brand-new deduction targets taxpayers age 65 and older. This senior deduction allows up to $6,000 for individuals, or $12,000 for married couples where both spouses qualify. The deduction is available regardless of whether you itemize other deductions.
Income limits apply, with phaseouts beginning at $75,000 modified adjusted gross income (MAGI) for singles and $150,000 for joint filers. The deduction disappears completely at $175,000 and $250,000 MAGI, respectively.
Temporary SALT Relief
Increased State and Local Tax Deductions
The controversial $10,000 cap on state and local tax (SALT) deductions gets temporary relief. For 2025, the limit jumps to $40,000 ($20,000 for married filing separately). The cap rises to $40,400 in 2026 and increases by one percent annually through 2029 before reverting to $10,000 in 2030.
Higher-income taxpayers face additional restrictions. The enhanced SALT deduction phases out starting at $500,000 MAGI for married couples filing jointly and $250,000 for singles and married individuals filing separately.
Estate Planning Advantages
Permanent Higher Exemptions
The lifetime estate and gift tax exemption jumps from $13.99 million in 2025 to $15 million in 2026, with annual inflation adjustments thereafter. For married couples, this creates an effective $30 million exemption starting in 2026.
This change provides significant estate planning opportunities, especially for families who were concerned about the previous scheduled reduction of these exemptions.
New Vehicle Interest Deduction
Qualified Passenger Vehicle Loan Interest
For tax years 2025-2028, taxpayers can deduct up to $10,000 in interest paid on loans for qualified passenger vehicles purchased for personal use. The vehicle must have final assembly in the United States to qualify.
The deduction phases out when MAGI exceeds $100,000 for singles or $200,000 for married couples filing jointly. This benefit is available even if you don't itemize other deductions.
Planning Strategies for the New Landscape
Consider Timing Strategies
With some provisions temporary and others permanent, timing becomes crucial. The senior deduction and vehicle interest deduction expire after 2028, while the enhanced SALT deduction phases down starting in 2030. If you're eligible for these benefits, maximizing them during their availability periods makes sense.
Estate Planning Opportunities
The permanent higher estate tax exemptions create opportunities for wealth transfer strategies. Consider whether gifting strategies or trust structures might benefit from these enhanced exemptions.
Income Management
Several deductions now include income-based phaseouts. Managing your MAGI through retirement plan contributions, health savings accounts, or other strategies could help you qualify for or maximize these benefits.
What This Means for Your Tax Planning
The OBBBA individual tax provisions create a more predictable tax environment while introducing targeted benefits for specific groups. Families with children, seniors, and higher-income taxpayers in high-tax states all see potential advantages.
However, the temporary nature of some provisions means your tax strategy may need regular adjustments. The enhanced SALT deduction provides significant near-term relief, but planning for its eventual reduction will be important.
Understanding how these changes interact with your specific situation requires careful analysis. Income levels, family composition, and state of residence all influence which benefits you can claim and how to optimize your overall tax strategy.
Given the complexity of these changes and their interaction with existing tax law, working with a qualified tax professional can help ensure you're maximizing available benefits while preparing for future adjustments. The new law creates opportunities, but capturing them requires thoughtful planning and execution.
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DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
