The One Big Beautiful Bill Act (OBBBA) brings permanent tax relief for individuals, with key provisions such as the continuation of TCJA tax rates (10%-37%), an increased Standard Deduction indexed for inflation, and a higher Child Tax Credit of $2,200 per child ($1,700 refundable). The Estate Tax Exemption is raised to $15M, and the Mortgage Interest Deduction cap remains at $750K.
Other notable changes include expanded 529 Education Plans for broader educational expenses, an Above-the-Line Charitable Deduction, and a permanent Tip Income Deduction. Overtime Pay Deductions and a Senior Deduction offer additional support to working-class taxpayers and retirees.
The SALT Deduction Cap increases to $40K, while the QBI Deduction for small businesses is made permanent. The QSBS Exclusion is improved to encourage startup investment. Additionally, student loan repayments and educator expense deductions are enhanced, and the Pease Limitation is repealed for high earners.
These provisions simplify tax filing, lower tax burdens, and support families, small businesses, and retirees with long-term benefits.
Provision | Definition | Pre-OBBBA | Post-OBBBA | Outcomes / Benefits |
1. Income Tax Rates | Tax brackets applied to taxable income | TCJA rates expire in 2026 | TCJA rates (10%-37%) made permanent | Prevents automatic tax hikes; preserves lower brackets |
2. Standard Deduction | Fixed amount reducing taxable income | $14,600 (Single), $29,200 (Married) | $15,750 (Single), $31,500 (Married); indexed | Higher deduction lowers tax liability; inflation protection |
3. Child Tax Credit | Credit per qualifying child under age 17 | $2,000 per child | $2,200 per child; $1,700 refundable made permanent | More support for families; helps low-income households |
4. Estate Tax Exemption | Amount excluded from estate tax | ~$13.99M per individual | $15M per individual; indexed | Protects more wealth; simplifies estate planning |
5. Mortgage Interest Deduction | Deduction for interest on home mortgage | $750K debt cap; expires 2025 | $750K cap made permanent | Maintains homeownership incentive |
6. 529 Education Plans | Tax-advantaged savings for education | Tuition only; $10K/year cap | Includes books, tutoring; cap raised to $20K/year | Supports broader educational expenses |
7. Charitable Deduction (Itemized) | Deduction for charitable contributions | No minimum threshold | Must exceed 0.5% of AGI from 2026 | Encourages larger donations |
8. Above-the-Line Charitable Deduction | Deduction allowed without itemizing | NA | $2,000 (MFJ), $1,000 (Single) from 2026 | Incentivizes giving for standard deduction filers |
9. Tip Income Deduction | Deduction for reported tip income | NA | Up to $25K tax-free; income limits apply | Benefits service workers |
10. Overtime Pay Deduction | Deduction for extra hours worked | NA | Up to $12.5K (Single) / $25K (Joint); income limits apply | Supports working-class taxpayers |
11. Auto Loan Interest Deduction | Deduction for interest on qualifying vehicle loans | NA | Up to $10K for U.S.-assembled vehicles | Promotes domestic auto industry |
12. Trump Accounts | Tax-free savings accounts for minors | NA | $1K gov’t deposit + $5K annual savings | Encourages early savings; government match |
13. Senior Deduction | Extra deduction for low-income seniors | NA | Up to $6K if income < $75K (Single filer) | Reduces tax burden for retirees |
14. SALT Deduction Cap | Deduction for state and local taxes | $10K cap | Raised to $40K; phased down for high earners | Relief for high-tax states; limited for high-income households |
15. QBI Deduction | 20% deduction for pass-through business income | Expires after 2025 | Made permanent | Supports small business owners |
16. Miscellaneous Itemized Deductions | Deductions for unreimbursed expenses (e.g., tax prep) | Suspended under TCJA | Permanently disallowed | Simplifies tax filing |
17. Pease Limitation Repeal | Limits on itemized deductions for high earners | Applies to high-income taxpayers | Permanently repealed | High earners retain full deductions |
18. QSBS Exclusion | Exclusion of gains from sale of qualified small business stock | 100% after 5 years | 50% (3 yrs), 75% (4 yrs), 100% (5 yrs); higher asset limits | Encourages startup investment; faster gain exclusion |
19. Student Loan Repayment Exclusion | Employer-paid student loan amounts excluded from income | Up to $5,250 excluded | Made permanent; indexed for inflation | Reduces taxable income; supports education |
20. Educator Expense Deduction | Allows teachers to deduct classroom expenses. | Capped at $250 | Fully deductible as itemized expense | Teachers can deduct full out-of-pocket classroom expenses |
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SAI CPA Services offers expert tax, accounting, and financial solutions with 25+ years of experience. We ensure accuracy, compliance, and growth.
Copyright © 2025 – Powered by SAI CPA SERVICES