Your Guide to the Individual Tax Changes in the “One Big Beautiful Bill Act” (OBBBA) 273

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Signed into law in July 2025, the One Big Beautiful Bill Act (OBBBA) introduces the largest set of federal tax changes since the 2017 Tax Cuts and Jobs Act (TCJA). The law does two main things: it makes key TCJA tax cuts permanent, and it adds several new, targeted deductions.

The overall goal? To put more money in your pocket, though it comes with the drawback of increasing tax code complexity.

Making TCJA Tax Cuts Permanent (And Better)

The most significant impact of the OBBBA is its permanent extension of individual tax provisions from the 2017 TCJA that were set to expire at the end of 2025. Without this new law, the majority of taxpayers would have faced a tax increase in 2026.

Here’s what’s staying and, in some cases, expanding:

  • Tax Rates and Brackets: The current, lower ordinary income tax rates and bracket widths are now permanent. This includes keeping the top tax rate at 37% instead of letting it climb back up to 39.6%.
  • Larger Standard Deduction: The significantly expanded standard deduction is now a permanent feature. For tax year 2025, the amounts are even more generous:
    • Single Filers: Increased from $15,000 to $15,750.
    • Joint Filers: Increased from $30,000 to $31,500.
    • Why this matters: The increased standard deduction simplifies filing for millions of Americans, as it means more people can avoid itemizing their deductions.
  • Child Tax Credit (CTC): The maximum credit per qualifying child increases from $2,000 to $2,200 in 2026 and will be adjusted for inflation in future years.
  • Other Key Permanence: The law also makes permanent a higher Alternative Minimum Tax (AMT) exemption and maintains tighter limits on certain itemized deductions, like the Home Mortgage Interest Deduction (HMID).

New, Temporary Individual Deductions

The OBBBA also introduces a number of new, but mostly temporary (2025–2028), individual tax deductions that target specific groups of workers and seniors. These are available to both itemizers and non-itemizers, which is a significant benefit.

New Deduction Maximum Annual Deduction (2025-2028) Who Qualifies Key Details
Tipped Income Up to $25,000 Taxpayers who work in tipped occupations. Applies to reported qualified tip income.
Overtime Pay Up to $12,500 (Single) / $25,000 (Joint) Employees receiving qualified overtime pay. Applies only to the premium portion of overtime pay (e.g., the “half” in time-and-a-half).
Car Loan Interest Up to $10,000 Taxpayers with a new loan for a personal vehicle. Only for loans originated after Dec. 31, 2024, to buy a new car that had its final assembly in the US.
Seniors’ Deduction Additional $6,000 ($12,000 for qualifying joint filers) Individuals age 65 and older. This is in addition to the existing senior standard deduction and phases out based on income.

These new deductions are designed to provide direct relief and can significantly lower the taxable income for eligible workers and seniors. However, many are subject to income phase-outs, and their narrow focus will inevitably add more complexity to the tax code.

Bottom Line for Taxpayers

The OBBBA delivers a net positive for most individuals. By permanently extending the majority of the 2017 tax reductions, it ensures that most taxpayers avoid a scheduled tax hike. On average, the law is projected to increase after-tax incomes, meaning you should see more money in your pocket than you would have if Congress had done nothing.

Do any of the new, temporary deductions for tips, overtime, or seniors apply to your situation?

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