Big Beautiful Bill Individual Tax Effects Impact Many
The Big Beautiful Bill individual tax effects touch on a number of areas. Congress established some new tax provisions, eliminated some taxes, expanded some deductions and got rid of some others. Officially titled the One Big Beautiful Bill Act, the OBBBA represents a massive change to the tax code. This time out, we’ll touch on provisions that primarily effect personal tax returns. To read about business tax effects, you can click here.
Standard Deduction and Tax Rates
The OBBBA makes permanent the higher standard deduction, and the elimination of exemptions. The standard deduction for 2025 will be $15,750 for single filers, and $31,500 for married. In addition, each tax payers over 65 temporarily gets an additional $6,000.
As for tax rates, Congress temporarily lowered them in 2017; the OBBBA makes those rate changes permanent.
No Taxes on Tips and Overtime
The OBBBA eliminates income tax on tip income (up to $25,000), as well as overtime (up to $12,500). Both are still subject to Social Security and Medicare taxes, however.
Big Beautiful Bill Individual Tax Effects – New Deductions
Congress raised the limit on state and local taxes (SALT) that you can deduct if you itemize. You can now deduct $40,000, up from $10,000.
You can also deduct interest on a car loan now. You can deduct up to $10,000 in interest on a vehicle assembled in the United States, even if you don’t itemize.
Similarly, non-itemizers can now take a straight deduction on charitable donations. Single filers can deduct up to $1,000, while married filers can deduct up to $2,000. However, taxpayers who do itemize their charitable contributions now have a floor on their deductions. Donations must total more than .5 percent of a taxpayer’s adjusted gross income in order to be deductible.
Kids and Taxes
The OBBBA raises the Child Tax Credit from $2,000 to $2,200 through 2028. In addition, children will be eligible for a “Trump Acount,” that lets parents/relatives contribute up to $5,000 per year. The interest will accrue tax free, but can’t be withdrawn until the child reaches 18. What’s more, children born between 2025 and 2028 will be eligible for $1,000 in “seed money” from the US government (with some additional restrictions).
Energy Credits Phasing Out and Going Away
The Inflation Reduction Act created a number of tax credits for filers who bought electric vehicles, or made energy-efficient improvements to their homes. Those credits are being phased out quickly (some before the end of this year) and set to disappear.
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Find out more about what cars are eligible for deducting loan interest.
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