Taxpayers filing a 2025 return will encounter changes introduced by President Trump’s One Big Beautiful Bill Act. The broad legislation affects everything from deductions for seniors to the Child Tax Credit. Here’s a clear breakdown of what to expect.
What Is the One Big Beautiful Bill?
President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025. The package overhauls major tax and spending policies and cements most of the tax provisions brought by 2017’s Tax Cuts and Jobs Act (TCJA). If those provisions had been allowed to expire, the tax breaks many have relied on for the past nine years would have vanished. The standard deduction would have been cut nearly in half, and tax rates would have jumped back to their old, higher levels. Instead, the Big Beautiful Bill makes those lower rates permanent and adds several new, targeted tax breaks that are in effect for the 2025 tax year.
Bigger Standard Deduction
If you’re taking the standard deduction, OBBA likely lowered your tax bill. The standard deduction amounts for 2025 are:
- Single filers: $15,750
- Married filing jointly: $31,500
- Head of household: approximately $23,625
Looking ahead to 2026, these will rise again to $16,100 for individuals and $32,200 for joint filers. The increases mean fewer taxpayers will benefit from itemizing deductions, since the standard deduction may now be the better option.
TCJA Tax Brackets
The tax brackets set by the 2017 Tax Cuts and Jobs Act are now permanent. Depending on your income, you’ll fall into one of seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, or 37%. The income thresholds for each bracket will continue to adjust slightly each year for inflation.
Huge Wins for Seniors (Age 65+)
If you or your spouse is 65 or older, the OBBBA introduces a massive new benefit. On top of the previously existing “extra” standard deduction for seniors, there is now a new senior deduction of $6,000 per person.
- Individual: $6,000 deduction.
- Married Couple (both 65+): $12,000 deduction.
This deduction begins to phase out if your income (MAGI) is over $75,000 for individuals or $150,000 for joint filers. Unlike some other breaks, you can claim this even if you choose to itemize your deductions rather than take the standard deduction.
Expanded Child Tax Credit and Trump Child IRAs
The Child Tax Credit, which was scheduled to drop back down to $1,000, has been permanently saved and increased. For the 2025 tax year, the credit is $2,200 per child. In future years, the amount will also be indexed to inflation, so it will grow as prices rise.
Children are also helped by the Big Beautiful Bill’s Trump Account, a new tax-deferred savings tool for parents. Starting in 2026, families can contribute up to $5,000 per year, and employers can add up to $2,500. However, the first deposit may come from the government. The federal government is making a one-time $1,000 contribution for babies born between 2025 and 2028.
No Tax on Tips and Overtime
One of the most talked-about updates in the Big Beautiful Bill is how tips are treated. Service workers who earn tips, such as restaurant servers and hairstylists, can deduct their tip income from their federal taxes. This applies to tips reported on a W-2 or 1099 for jobs that customarily receive tips. The deduction phases out for individuals earning more than $150,000 ($300,000 for joint filers).
If you worked overtime and earned time-and-a-half, the “half” portion of that pay is now deductible for up to $12,500 per year ($25,000 for joint filers). The same income phase-out thresholds apply as with the tip deduction.
SALT Deduction Cap Raised
Are you planning to itemize your deductions? The cap on the State and Local Tax (SALT) deduction has been raised to $40,000 for taxpayers with incomes under $500,000. This could be a big help for people in high-tax states like California, New York, and New Jersey.
New Deduction for American-Made Cars
Supporting domestic auto manufacturing now comes with a tax perk. If you buy a new vehicle whose final assembly was in the U.S., you may be able to deduct up to $10,000 in interest paid on the loan during the year. This deduction is available to single filers making up to $100,000 ($200,000 for joint filers).
Get Help
Ready to review your tax plan? Contact Kondler & Associates, CPAs, today to schedule a consultation. We’ll help you understand what the One Big Beautiful Bill means for your taxes.