OBBBA Tax Law 2025: Key Permanent Changes for Individuals

Will you be able to benefit from the One Big, Beautiful Bill Act (OBBBA), signed into law earlier this year? The law makes many tax provisions, which were scheduled to expire at year end, permanent and includes other favorable changes for individual taxpayers. (However, some tax breaks have been eliminated.) Here’s a summary of six important changes that may affect you and your family.

1. Tax rates and brackets are permanent

The Tax Cuts and Jobs Act (TCJA) established seven ordinary income rate brackets for individual taxpayers: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, these brackets were scheduled to expire at the end of 2025. The OBBBA makes the TCJA rates permanent with annual inflation adjustments to the rate bracket thresholds after 2025.

2. Expanded standard deductions are also permanent

The TCJA dramatically increased standard deduction amounts. The OBBBA makes these standard deductions permanent. For 2025, the basic standard deductions are as follows:

$15,750 for single taxpayers,
$23,625 for heads of households, and
$31,500 for married couples filing jointly.

These amounts will be adjusted for inflation for 2026 and future years. As before, additional standard amounts are allowed for individuals who are 65 or older or blind.

3. Eligible seniors get a new deduction

For 2025 through 2028, the OBBBA allows individuals age 65 and older to claim a new senior deduction of up to $6,000, subject to income-based phaseouts. This deduction is available whether you itemize or not. If both spouses of a married joint-filing couple are age 65 or older, each spouse is potentially eligible for a separate deduction of up to $6,000, for a combined total of up to $12,000.

The senior deduction begins to phase out when modified adjusted gross income (MAGI) exceeds:

$75,000 for unmarried individuals, or
$150,000 for married couples filing jointly.

4. The SALT deduction is increased

The TCJA limited the state and local tax (SALT) deduction for itemizers to $10,000 ($5,000 for married individuals who file separately). For 2025 through 2029, the OBBBA increases the SALT deduction limit to $40,000 ($20,000 for married individuals who file separately), subject to income-based phaseouts.

For 2026, the cap will be $40,400 ($20,200 for married individuals who file separately) and there will be 1% annual inflation adjustments for 2027-2029. Starting in 2030, the SALT deduction is scheduled to revert to the TCJA limit of $10,000 ($5,000 for married individuals who file separately).

For 2025, the higher SALT deduction limits begin to phase out for taxpayers with MAGI over $500,000 ($250,000 for married individuals who file separately). After 2025, the phaseout thresholds will be adjusted annually for inflation. Under the phaseout rule, the SALT deduction limitation is reduced by 30% of MAGI above the applicable threshold, but not below the TCJA limit of $10,000 ($5,000 for married individuals who file separately).

5. Child Tax Credit is enhanced

Starting in 2025, the OBBBA permanently increases the child tax credit to $2,200 for each qualifying under-age-17 child (up from $2,000 for 2024), subject to income-based phaseouts. This break will be adjusted annually for inflation after 2025.

The refundable portion of the child credit is made permanent. The refundable amount is $1,700 for 2025, with annual inflation adjustments starting in 2026.

The child credit MAGI phaseout thresholds of $200,000 and $400,000 for married joint-filing couples are also made permanent. These thresholds won’t be adjusted annually for inflation.

Important: Starting in 2025, no child tax credit will be allowed unless you report Social Security numbers (SSNs) for the child and the claiming taxpayer on the return. For married couples filing jointly, an SSN for at least one spouse must be reported on the return.

6. Credit for other dependents is permanent

The new law also makes permanent the $500 credit for a dependent who isn’t a qualifying child. Before the OBBBA, this credit was scheduled to disappear after 2025.

This credit can apply to a dependent child over the age limit or a dependent elderly parent. It’s subject to the same income-based phaseouts as the child tax credit.

More certainty

These are just some highlights of the sweeping tax law changes under the OBBBA. The new law contains numerous tax-related provisions and provides greater certainty for this year and the future. The IRS is expected to issue guidance in the coming months to clarify the new rules. In the meantime, contact us to discuss how the OBBBA will affect your tax situation.

Large gift and estate tax exemption is permanent

The Tax Cuts and Jobs Act (TCJA) significantly increased the unified federal gift and estate tax exemption. For 2025, the exemption is $13.99 million. However, under the TCJA, the exemption was scheduled to revert to its pre-TCJA level after 2025, unless Congress extended it. This caused uncertainty for wealthy individuals whose estates may be exposed to gift and estate taxes if the higher exemption amount were to expire.

Good news: The expanded exemption is now permanent under the One, Big, Beautiful Bill Act. For 2026, the exemption increases to $15 million (effectively $30 million for married couples). It’ll be adjusted annually for inflation after 2026. This permanence will make it much easier for affluent families to plan their estates.