One Big Beautiful Bill—Individual Tax Changes

By: Brandon Allfrey, CPA & Squire Tax Partner

New tax rules will affect individuals and businesses after the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. The Senate had made several significant changes to the original legislation proposed by the House of Representatives to extend and enhance some of the tax benefits from the Tax Cuts and Jobs Act (TCJA) enacted in 2017 that were scheduled to expire at the end of 2025. The House vote approved the changes, and President Trump signed the bill into law.

Several important updates and changes to tax law will impact individuals and businesses. Join us on July 29, 2025, for our in-person and virtual event to discuss the impact of this new law on you. Here are some of the key provisions of the new act we will be discussing:

Key Provisions – Individual Taxpayers

• Permanent Extension of the Increased Standard Deduction and Changes to Tax Rates: The bill makes the TCJA’s increased standard deduction amounts permanent. In 2025, the standard deduction increases to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married filing jointly. The standard deduction will be adjusted for inflation after that. These changes have been made retroactive to include 2025. Also, the bill generally makes the tax rates enacted in 2017 in the TCJA permanent.
• State and Local Tax cap: The bill temporarily increases the limit on the federal deduction for state and local taxes (the SALT cap) to $40,000 (from the current $10,000) and adjusts it for inflation. In 2026, the cap will be $40,400, and then will increase by 1% annually, through 2029. Starting in 2030, it will revert to the current $10,000.
  The amount of the deduction available to a taxpayer phases down for taxpayers with modified adjusted gross income (MAGI) over $500,000 (in 2025). The MAGI threshold will be adjusted for inflation through 2029. The phasedown will reduce the taxpayer’s SALT deduction, but the limit on a taxpayer’s SALT deduction could never go below $10,000.
  The bill also preserves the use of business entities utilizing state passthrough entity taxes (PTET) to avoid the SALT limitation as applicable state laws allow.
• Senior Bonus Deduction: Under current law, up to 85% of Social Security benefits could be taxable, depending on the recipient’s other sources and amounts of income. The legislation aims to reduce the taxation of Social Security benefits for years 2025 through 2028 by providing those age 65 and older an additional $6,000 standard deduction amount, reduced when modified adjusted gross income exceeds $150,000 for married couples ($75,000 for others).
• Adjustment to the Qualified Business Income Deduction (QBI): The bill makes the Sec. 199A qualified business income (QBI) deduction permanent and keeps the deduction rate at 20%. The phase-in limitation mechanics are increased and revised for simplification.
• Estate and Gift Tax Exemption Enhancements: The unified estate and gift tax exemption will see a permanent increase to an inflation-indexed $15 million for single filers ($30M married filing jointly) beginning in 2026. The amount will be indexed for inflation annually.
• Child Tax Credit Modifications: The bill increases the amount of the nonrefundable child tax credit to $2,200 per child beginning in 2025 and indexes the credit amount for inflation. The bill also makes permanent the $1,400 refundable child tax credit, adjusted for inflation. It in addition makes permanent the increased income phaseout threshold amounts of $200,000 ($400,000 in the case of a joint return), as well as the $500 nonrefundable credit for each dependent of the taxpayer other than a qualifying child. Personal exemptions deductions are now permanently zero in favor of the child tax credit rules.
• “No” Tax on Overtime: The bill provides a temporary above-the-line deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual during a given tax year. Overtime deductions would only be allowed for qualified overtime compensation, the excess of the regular rate as defined by the Fair Labor Standards Act, if the total amount of qualified overtime compensation is reported separately on Form W-2 (or Form 1099, if the worker is not an employee). This temporary deduction will be available for tax years 2025 through 2028. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return).
• “No” Tax on Tips: The tax bill introduces a new above-the-line tax deduction for qualified tips received by individuals working in occupations where tipping is customary. The tips must be voluntarily given, not negotiated, and determined solely by the customer. The temporary deduction of up to $25,000 of qualified tips received by an individual. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return).
• Mortgage interest deduction: The bill permanently extends the TCJA’s provision limiting qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt. It also makes permanent the exclusion of interest on home-equity indebtedness from the definition of qualified residence interest. The bill also treats certain mortgage insurance premiums on acquisition indebtedness as qualified residence interest.
• No Tax on Car Loan Interest: The bill allows taxpayers to deduct up to $10,000 in interest paid on auto loans for vehicles assembled in the U.S. for years 2025 through 2028. The deduction would phase out for taxpayers with an AGI of $100,000 ($200,000 for married individuals filing jointly).
• Termination of Clean Vehicle Credits: The legislation terminates the tax credit for purchasing both new and previously owned clean vehicles after September 30, 2025.
• Termination of Residential Solar Credit: The legislation terminates the tax credit for solar electric, solar water heating, fuel cell, small wind energy, geothermal heat pump, and battery storage property generally after 2025.
• Termination of Energy Efficient Home Improvement Credit: The legislation terminates the 30% tax credit for household energy efficient improvements after 2025.

There are more, but these are the key issues affecting most taxpayers.

It is imperative for taxpayers to approach these changes with caution. There are specific details in these provisions that need administrative guidance from the IRS. Additionally, some provisions have extended qualifications for certain taxpayers. To discuss your specific tax situation and the application of the new law, please contact us.