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