The One Big Beautiful Bill Act (OBBBA) is a major federal tax law that significantly reshaped the U.S. tax code.
- Signed into law: July 4, 2025
- Public Law: 119‑21
Purpose:
OBBBA builds on the 2017 Tax Cuts and Jobs Act (TCJA) by making many temporary provisions permanent and introducing new deductions, limits, and phase‑outs to incentivize work, savings, and domestic investment, and to simplify tax filing for individuals and businesses.
Key Individual Tax Provisions
Standard Deduction
2026 Standard Deduction Amounts
- Single / Married Filing Separately: $16,100
- Head of Household: $24,150
- Married Filing Jointly / Qualifying Surviving Spouse: $32,200
Before OBBBA:
These amounts were scheduled to revert to lower pre‑TCJA levels in 2026.
OBBBA Change:
- Makes the TCJA standard deduction permanent
- Continues annual inflation adjustments
State and Local Tax (SALT) Deduction Cap
2026 SALT Cap
- $40,400 – Single / MFJ
- $20,200 – Married Filing Separately
Before OBBBA:
- $10,000 cap under the TCJA
OBBBA Change
- Raises the SALT cap and indexes it through 2029
- Phase‑out begins at MAGI of:
- $505,000 (Single/MFJ)
- $252,500 (MFS)
- Cap is reduced by 30% of excess MAGI
- Deduction cannot fall below $10,000 ($5,000 if MFS)
- Cap reverts to $10,000 in 2030
No Tax on Tips & No Tax on Overtime
New Deductions (Effective 2025)
- Tip Income Deduction:
Up to $25,000 - Overtime Deduction:
Up to $12,500 per individual
(Up to $25,000 MFJ)
Income Phase‑Out Begins At
- $150,000 MAGI – Single / HOH
- $300,000 MAGI – MFJ
Available whether or not the taxpayer itemizes
Before OBBBA:
- These deductions did not exist
Car Loan Interest Deduction
- Deduction limit: Up to $10,000
- Applies to interest on new vehicles assembled in the U.S.
- Income phase‑out begins at:
- $100,000 MAGI – Single
- $200,000 MAGI – MFJ
Before OBBBA:
- Personal car loan interest was not deductible
Senior Deduction
- Amount:
- $6,000 – Single
- $12,000 – MFJ
- Eligibility:
- Age 65 or older
- Valid SSN
- Not Married Filing Separately
- MAGI phase‑out begins at:
- $75,000 – Single
- $150,000 – MFJ
OBBBA Change:
- New deduction available 2025–2028
Charitable Contributions
Itemizers
- Contributions deductible only to the extent they exceed 0.5% of AGI
Non‑Itemizers
- New “above‑the‑line” deduction (starting 2026):
- $1,000 – Single
- $2,000 – MFJ
Before OBBBA
- No AGI floor for itemizers
- No deduction allowed for non‑itemizers
Energy Credit Sunsets
OBBBA Accelerated Expiration
- Residential Clean Energy Credit:
Ended December 31, 2025 - New & Used Clean Vehicle Credits:
Ended September 30, 2025
Before OBBBA:
- Credits were set to continue through 2032
Qualified Business Income (QBI) Deduction
- Deduction: Up to 20% of Qualified Business Income
- Applies to pass‑through entities
Before OBBBA:
- Scheduled to expire after 2025
OBBBA Change:
- Makes the QBI deduction permanent
Eligible seniors should evaluate the temporary senior deduction and how it interacts with other benefits.