How Tax Changes in the Big Beautiful Bill May Impact Your Personal Taxes

While the bill was passed in July, many of these changes, like income tax rates and the increased standard deduction, will be retroactive for 2025 — meaning the changes will apply to your 2025 tax filing.

Individual Income Tax Rates

The OBBBA made permanent the individual income tax rates that were set as part of the Tax Cuts and Jobs Act (TCJA) of 2017.

The 2025 federal income rates for single filers are as follows:

• $11,925 or less: 10%
• $11,925 to $48,475: 12%
• $48,475 to $103,350: 22%
• $103,350 to $197,300: 24%
• $197,300 to $250,525: 32%
• $250,525 to $626,350: 35%
• $626,350 or more: 37%

The 2025 federal income rates for married joint filers are as follows:

• $0 to $23,850: 10%
• $23,851 to $96,950: 12%
• $96,951 to $206,700: 22%
• $206,701 to $394,600: 24%
• $394,601 to $501,050: 32%
• $751,600 or more: 37%

Note that the federal income rates are indexed each year for inflation, so these rates may vary year to year.

Increased Standard Deduction

Another good news for individual taxpayers: the standard deduction has been permanently increased. For tax year 2025, the standard deduction is $15,750 for single filers and $31,500 for married joint filers. Like federal income tax rates, the standard deduction is indexed each year for inflation.

Expanded State and Local Tax (SALT) Deduction Cap

For tax years 2025 to 2029, the cap on the state and local tax (SALT) deduction increases from $10,000 to $40,000, with annual 1% increases. A phase-out back down to the original $10,000 cap takes place for single filers with modified adjusted gross income (MAGI) over $500,000. In 2030, unless further legislation is passed, the SALT cap will revert back to $10,000.

But what exactly is the SALT deduction?

The SALT deduction allows taxpayers who itemize their deductions to subtract certain state and local taxes they paid from their federal taxable income. This deduction prevents taxpayers from being taxed twice on the same portion of their income—once by the state and again by the federal government.

Extra Senior Deduction

Taxpayers aged 65 or older may claim an additional $6,000 deduction (maximum $12,000 per couple) from 2025 to 2028.

According to the IRS, this is in addition to the current standard deduction for seniors under existing law, which allows taxpayers over 65 years old to add $2,000 to the $15,000 standard deduction (for tax year 2025).

With both the new and standard senior deduction, some seniors could take a total of $23,000 ($15,000 + $2,000 + $6,000) in deductions for the tax year, if filing as a single taxpayer.

However, this enhanced senior deduction does phase out based on your Modified Adjusted Gross Income (MAGI). For single individuals, that phase-out begins at $75,000. For married couples filing jointly, that phase out begins at $150,000. We recommend working with a CPA to ensure you claim all eligible deductions.

To qualify for this new senior deduction, a taxpayer must turn 65 years old on or before the last day of the taxable year.

Tip Income Deductions

For workers who earn tips, up to $25,000 of that tip income can be deducted, which ultimately lowers your tax bill.

This tip income deduction phases out for higher-earners, starting at $150,000 MAGI for single filers and $300,000 for joint filers.

Overtime Income Deductions

Find yourself working overtime? Some of that overtime income can be treated as a deduction. Single filers can deduct up to $12,500 of overtime income, while up to $25,000 for joint filers can be deducted. Like the tip income deduction, this begins to phase out at $150,000 MAGI for single filers and $300,000 for joint filers.

Child Tax Credit Increase

The Child Tax Credit rises to $2,200 per dependent for tax year 2025, with future inflation adjustments.

To be able to claim the Child Tax Credit, the dependent must:

• Be under 17 at the end of the tax year
• Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew)
• Not provide more than half of his or her own support for the tax year
• Have lived with you for more than half the tax year (time at college counts as living with you if they meet the other listed factors)
• Be claimed as a dependent on your return
• Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes)
• Be a U.S. citizen, U.S. National or a U.S. resident alien
• Must have a Social Security Number that is valid for employment and is issued before the due date of your tax return (including extensions)

Increased Estate and Gift Tax Exemption

The exemption is increased to $15 million (for single filers) and $30 million (for joint filers) beginning in 2026, indexed for inflation.

With an estate tax rate range from 18% – 40%, it was previously triggered at $5 million prior to the passing of TCJA. Now, more of your estate can stay within your family before triggering the estate tax.

The annual gift tax exclusion increases in 2025 to $19,000.  Any gifts made to an individual that are lower than this $19,000 exclusion do not require separate reporting with the IRS.  You will need to consider all gifts (birthdays, holidays, etc.) when calculating the total amount of annual gifts given to any one person.  If married, you can also use “gift splitting” so that you and your spouse can each give up to $19,000 ($38,000 in total) to any individual.  We recommend working with a CPA to ensure you follow all the requirements related to gifts.

Auto Loan Interest Deduction

Bought a new car this year? Up to $10,000 per year in interest may be deducted. However, this deduction only applies to vehicles with final assembly in the United States.

How do you determine this?

According to the IRS, the location of final assembly will be listed on the vehicle information label attached to each vehicle on a dealer’s premises. Alternatively, you can find the vehicle’s plant of manufacture as reported in the vehicle identification number (VIN). The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) provides plant of manufacture information.

This loan interest deduction applies only to new vehicles purchased for personal use, not business use. (Note: Businesses are already allowed to deduct interest expense related to the purchase of a business automobile — this has not changed.)

Loans used to purchase previously-owned vehicles also do not apply for this deduction.

New Trump Accounts for Children

Included within OBBBA is a provision for new long-term savings accounts for minor children called Trump Accounts. These function similarly to a traditional IRA, with some differences until the child turns 18 years old.

Learn how OBBBA may impact your personal taxes with Landmark CPAs

Work with Landmark CPAs to understand how the tax changes in OBBBA may impact your personal taxes.