---
title: "How will the One Big Beautiful Bill Act affect individual taxpayers?"
date: 2025-07-21
author: "Gina Khawam"
featured_image: "https://beachfleischman.com/wp-content/uploads/2025/07/2025-0715-obbba-passed_blog.avif"
categories:
  - name: "Tax Bites"
    url: "/category/tax-bites.md"
tags:
  - name: "ACA"
    url: "/tag/aca.md"
  - name: "OBBBA"
    url: "/tag/obbba.md"
  - name: "tax credits"
    url: "/tag/tax-credits.md"
  - name: "TCJA"
    url: "/tag/tcja.md"
---

# How will the One Big Beautiful Bill Act affect individual taxpayers?

The One Big Beautiful Bill Act (OBBBA) introduces wide-ranging tax changes for individuals, from new deductions to the extension of popular tax breaks under the Tax Cuts and Jobs Act (TCJA). Here’s a streamlined look at what matters most for individual taxpayers:

## SALT Deduction

Starting in 2025, the state and local tax deduction limit increases to $40,000 ($20,000 for separate filers) through 2029, then reverts to $10,000. High earners may see reduced benefits, so consider strategies to lower your modified adjusted gross income (MAGI).

## Child Tax Credit

The Child Tax Credit increases to $2,200 (with annual inflation adjustments) and makes the $1,400 refundable portion and $500 Credit for Other Dependents permanent. Income phaseout thresholds remain at $200,000 ($400,000 for joint filers).

## Education Tax Breaks

OBBBA expands 529 plan uses and doubles the K–12 distribution limit to $20,000. A new credit of up to $1,700 is also available for donations to scholarship-granting organizations. Employer-paid student loan contributions up to $5,250 remain tax-free, and forgiven student loans due to death or disability are permanently excluded from income.

## Charitable Giving

A new above-the-line deduction allows up to $2,000 in charitable contributions without itemizing (starting in 2026). Itemized charitable deductions must now exceed 0.5% of AGI.

## Qualified Small Business Stock (QSBS)

Partial exclusions (50% or 75%) are introduced for QSB stock held for three or four years, respectively, with the 100% exclusion retained for five-year holdings. The QSB asset ceiling rises to $75 million.

## Premium Tax Credits

Beginning in 2026, excess Premium Tax Credit repayments must be fully returned unless income is below 100% of the federal poverty level. In 2028, recipients must verify income and eligibility annually.

## New Temporary Deductions (2025–2028)

- **Tips:** Deduct up to $25,000 in reported tips (phaseout begins at $150,000 MAGI).
- **Overtime:** Deduct extra pay beyond the regular rate (up to $25,000 for joint filers).
- **Auto Loan Interest:** Deduct interest on loans for U.S.-made vehicles (up to $10,000; income limits apply).
- **Senior Deduction:** Taxpayers age 65+ can claim a $6,000 deduction.

## Trump Accounts

Launching in 2026, these accounts let families contribute up to $5,000 annually for children under 18. Contributions aren’t deductible, but earnings grow tax-deferred.

## TCJA Made Permanent

OBBBA cements key TCJA provisions:

- Lower tax brackets
- Increased standard deduction
- AMT exemption hikes
- Limits on mortgage interest, casualty losses, and unreimbursed expenses

## Time to Reevaluate

With many changes now permanent or newly enacted, individuals should revisit their tax strategies. Some high-income taxpayers may face new deduction limits starting in 2026, making proactive planning even more critical.

©2026