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Ext. PublicationIndividual Tax Provisions: Federal Tax Law Updates
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The One Big Beautiful Bill Act (OBBBA) brings considerable changes to individual tax planning. It makes many Tax Cuts and Jobs Act (TCJA) provisions permanent, increases the standard deduction and state and local tax (SALT) deduction cap and introduces new deductions aimed at workers and seniors. These changes have created both opportunities and new compliance challenges for 2025 and beyond.
Rates, Standard Deduction and SALT Cap
- TCJA’s seven income tax brackets, ranging from 10% to 37%, are now permanent.
- The standard deduction rises to $31,500 for joint filers, $15,750 for single filers and $23,625 for head of household filers in 2025.
- The SALT deduction cap increases to $40,000 in 2025 but phases down to $10,000 for taxpayers with modified adjusted gross income over $500,000.
Credits and Exemption
- The child tax credit increases to $2,200, with $1,700 refundable. Thresholds of $200,000 (single) and $400,000 (joint) are permanent.
- The credit for other dependents ($500) is made permanent.
- The estate and gift tax exemption rises to $15 million per person in 2026. Married couples may shield up to $30 million.
Planning point: With a higher estate tax exemption, some taxpayers may choose to bring assets back into their estates for a step-up in basis.
New Deductions for Workers and Seniors
- Tip income deduction: Temporary deduction during 2025-2028 of up to $25,000 for qualified tips. The deduction is reduced when modified adjusted gross income exceeds $150,000 for single filers and $300,000 for joint filers.
- Overtime deduction: Temporary deduction during 2025-2028 of up to $12,500 for single filers and $25,000 for joint filers for qualified overtime compensation. The deduction is reduced when modified adjusted gross income exceeds $150,000 for single filers and $300,000 for joint filers.
- Senior deduction: Taxpayers age 65+ may claim a $6,000 deduction for years 2025-2028. The deduction is reduced when modified adjusted gross income exceeds $75,000 for single filers and $150,000 for joint filers.
Other Provisions
- Auto loan interest deduction: Taxpayers may deduct up to $10,000 per year during 2025-2028 for interest incurred on a qualified automobile loan. The deduction is reduced when modified adjusted gross income exceeds $100,000 for single filers and $200,000 for joint filers.
- QBI (qualified business income) deduction: The 20% deduction for qualified business income is now permanent.
Planning Considerations for Taxpayers
- High-income taxpayers should plan for the SALT cap phaseout.
- Families should revisit estate planning strategies in light of the $15 million exemption.
- Workers in tipped or hourly occupations should confirm proper reporting to qualify for deductions.
Key Takeaways
- Standard deduction is permanently increased, with SALT deduction cap temporarily higher.
- Child tax credit is expanded and gift tax and estate tax exemption raised.
- New deductions for tips, overtime and seniors offer temporary relief.
- Auto loan interest deduction creates opportunities for vehicle purchases.
The numerous tax law changes made by OBBBA can create confusion for taxpayers. Weaver’s tax professionals can help individuals and families optimize deductions, align estate strategies and plan for temporary provisions before they expire. Contact us to get started.
©2025
Federal Tax Law Updates Series
Weaver’s Federal Tax Law Updates series explores key provisions of recent federal tax legislation and the implications for businesses and individuals. From depreciation and R&D expensing to energy incentives and state conformity, the series highlights what taxpayers should know to plan effectively in the evolving tax landscape.
- Business Tax Provisions: Federal Tax Law Updates
- R&D, Depreciation and Interest Deductions: Federal Tax Law Updates
- Energy Tax Credits and Incentives: Federal Tax Law Updates
Additional Resources
The Tax Navigator is a comprehensive insight hub for updates on tax policy, planning and legislation. The following videos hosted by Sean Muller, Weaver’s partner-in-charge, specialty tax services, feature updates related to the federal tax legislation and trending topics mentioned in this blog.
