The enactment of the One Big Beautiful Bill Act (OBBBA) has resulted in several income tax changes for individual taxpayers. The legislation includes permanent and limited modification of many soon-to-expire tax provisions, new provisions, and the elimination or modification of most green energy provisions, among other changes.

Individual Extenders

Many provisions of the Tax Cuts and Jobs Act (TCJA) applicable to individuals were scheduled to expire at the end of 2025; however, these have been made permanent with the OBBBA. These include:

• 10, 12, 22, 24, 32, 35, and 37 percent brackets applicable since 2018;
•  elimination of personal exemptions;
•  increased alternative minimum tax exemption and threshold amounts;
•  lower limitation on the deduction of mortgage interest;
•  limitation on the casualty loss deduction;
•  termination of the miscellaneous itemized deduction;

Also, while the Act permanently eliminates the personal exemption amount, it provides a $6,000 deduction amount for seniors age 65 and older after 2024 and before 2029. This deduction phases out for individuals whose modified adjusted gross income (AGI) exceeds $75,000 ($150,000 for joint filers).

Estate Taxes

The estate tax basic exclusion amount is increased to a base amount of $15 million for decedents dying in 2026, adjusted for inflation thereafter.

SALT Deduction

The Act increases the state and local tax deduction (SALT deduction) cap to $40,000 for 2025, with a one percent increase in the cap each year through 2029 before returning to the $10,000 limit in 2030. The cap is reduced when the taxpayer’s modified AGI exceeds $500,000 for 2025, with a one percent increase each year through 2029.

Standard Deduction

The Act increases the amount of the standard deduction for tax years beginning in 2025 and subject to inflation thereafter. Under the Act, the standard deduction amounts for 2025 are $31,500 for joint filers, $23,625 for heads of households, and $15,750 for single taxpayers and married taxpayers filing separately.

New Individual Provisions

The Act also enacts several new individual provisions, including:

• a deduction from income for amounts received as tips, capped at $25,000 and subject to phaseout for taxpayers with modified AGI exceeding $150,000 or $300,000 for joint filers; and
• a deduction from income for overtime pay, capped at $12,500 ($25,000 for joint filers) and subject to phaseout for taxpayers with modified AGI exceeding $150,000 or $300,000 for joint filers.

Taxpayers do not have to itemize in order to claim the deductions but are required to provide a Social Security number. Neither deduction is allowed for tax years beginning after2028.

Itemized deduction limitation. The Act limits itemized deductions for taxpayers in the highest (37 percent) income bracket, to saving taxes as if the taxpayer was in the 35% bracket.

Automobile loan interest deduction. The Act includes a deduction of up to $10,000 for interest paid on an automobile loan in 2025 through 2028 for a car purchased after 2024. This deduction is available to both itemizers and non-itemizers.

Additional provisions. The Act also includes:

• dependent care FSA contributions are increased from $5,000 to $7,500 annually;
• gambling losses and related expenses are limited to 90% of winnings;
• a tax credit for contributions to scholarship-granting organizations;
• an expansion of 529 programs to include elementary, secondary, and home schooling expenses; and
• the resurrection of the COVID-era allowance of a charitable contribution deduction for non-itemizers, that will allow an above the line deduction for charitable contributions up to $1,000 for single filers and $2,000 for married filing joint taxpayers for tax years beginning after 2025.

Green Energy Credit Terminations

The Act terminates various green energy credits applicable to consumers. Under the Act, affected credits include the following (termination generally after 2025, though for the clean vehicle credits they end September 30^th, 2025):

• previously-owned clean vehicle credit;
• clean vehicle credit;
• alternative fuel refueling property credit;
• energy efficient home improvement credit; and
• residential clean energy credit.

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Please call our office and we can discuss how these changes might affect your tax situation. We are here to help you.