The 2025 Tax Reform, officially titled the “One Big, Beautiful Bill Act of 2025” (OBBBA), was signed into law on July 3rd, 2025. To help navigate the key changes, we’ve organized the information into three main areas of interest. In this section, we focus on the revised tax provisions affecting Individuals and Estates, highlighting the most impactful updates introduced by the new legislation.
Individual Tax Rates and Brackets
OBBBA makes the TCJA’s rates and brackets permanent, albeit with cost-of-living adjustments on the amounts. The inflation adjustments are increased by an extra year for the 10%, 12%, and 22% brackets.
Standard Deductions Increased
The new law increases the standard deduction. Starting in 2025, the new standard deductions are as follows:
- Single filers and married filing separately: $15,750 (up from $15,000).
- Joint filers: $31,500 (up from $30,000)
- Heads of households: $23,625
The “Senior Bump”
OBBBA also establishes a new senior $6,000 standard deduction for taxpayers age 65 and older ($12,000 for couples if both are age 65 and older.) The senior bump is an “above the line” deduction. It’s available to seniors whether they itemize or not.
It begins to phase out when a taxpayer’s MAGI exceeds $75,000 ($150,000 for couples.)It will be in effect from 2025 through 2028, unless Congress extends it.
The Child Tax Credit
OBBBA saves the Child Tax Credit. It was set to expire this year. But OBBBA makes it permanent, and increases the maximum credit to $2,400 for 2025, and $2,200 for 2026. It will be adjusted for taxation thereafter.
Home Mortgage Interest Deductions
The $750,000 maximum home mortgage deduction limit from the TCJA is made permanent.
SALT (State and Local Tax) Deductions
In a major concession to states with high income taxes, OBBBA lifts the cap on SALT deductions from $10,000 to $40,000 for 2025. The cap will increase by 1% per year through 2029.
There’s a phaseout that applies to taxpayers with modified adjusted gross incomes above $500,000. But the SALT deduction won’t phase out to zero, no matter how high the taxpayer’s income. The minimum SALT deduction will remain at 10%, even for the highest earners.
After 2029, the maximum SALT deduction will revert to $10,000. Fortunately, the pass-through entity tax workaround is still in effect. That means some business owners can pay a business tax and get a credit back on their individual return.
Introducing “Trump Accounts”
The new law establishes a special tax-advantaged savings account for all babies born in the next four years. The government will fund a $1,000 “baby bonus” for children born between January 1st, 2025 through 2028.
Taxpayers can contribute up to $5,000 per year that can grow tax-free until the beneficiary withdraws the money at age 18 or older. You cannot make contributions after the child reaches age 18. At that time, withdrawals are subject to capital gains taxes, rather than higher ordinary income rates, provided the money is used for qualified expenses.
Non-qualified withdrawals are taxed at ordinary income rates plus a 10% penalty, similar to early withdrawals on traditional IRAs. You can invest your Trump Account in mutual funds with expense ratios of less than 0.10 percent, which essentially limits you to low-cost index funds.
ABLE Accounts
ABLE Accounts are special tax-advantaged savings accounts created under IRC Section 529 for disabled individuals. They make it possible to contribute money for the benefit of disabled individuals without jeopardizing their eligibility for Medicaid and other critical need-based benefits.
OBBBA makes permanent the TJCA’s increased limitation on contributions to ABLE accounts. As of 2025, the contribution limit is $19,000 – the same as the gift tax exclusion. After 2026, only ABLE contributions will qualify for saver’s credit contributions
The bill also makes permanent the inclusion of ABLE account contributions as eligible Sec. 25B Saver’s Credit contributions. Starting in 2027, the annual amount eligible for the Saver’s Credit increases to $2,100, while the maximum Saver’s Tax Credit is $1,050.
After 2026 only ABLE account contributions will be eligible for Saver’s Credit contributions.
“No Tax on Tips”
No more taxes on up to $25,000 tip income, beginning this year and extending through 2028. That is, there’s an above-the-line deduction worth up to $25,000
This applies to workers in traditionally and customarily tipped industries. The tips also must be reported on your W-2. All the tip income will still be subject to payroll taxes, just not to federal income tax.
This deduction begins to phase out when AGI exceeds $150,000 for singles, or $300,000 for couples. Because it’s an above the line deduction, tip income won’t count as part of your AGI. That means it won’t count against you when it comes to qualifying for means-tested benefits and other programs.
“No Tax on Overtime”
No more taxes on up to $12,500 of overtime pay for single filers, or up to $25,000 for joint filers. That amount of income is an above-the-line deduction for 2025 through 2028.
Like the tip income deduction, the overtime income deduction starts phasing out for AGIs above $150,000 for individuals and $300,000 for joint filers.
Again, this income will still be subject to payroll taxes, just not to federal income taxes.
Personal Auto Loan Interest Deduction
You will be able to deduct up to $10,000 in interest on certain personal auto loans.
To qualify, the car must have been assembled in the United States for tax years 2025 through 2028. The car must be a residential vehicle under 14,000 pounds, and must be listed as collateral on the loan. This deduction phases out starting at an AGI of $100,000 for single filers and $200,000 for married couples.
529 Plan Withdrawals for K-12
The annual limit for using 529 plan assets for K-12 expenses doubles, going from $10,000 to $20,000 beginning in 2026.
Green Energy Tax Credits
The bill repeals some tax credits such as electric vehicle and residential energy efficiency tax credits over the next year and a half.
Peace Limitations Repealed and Replaced
OBBBA removes the Pease limitations that reduced the value of your itemized deductions if you had a high income. Instead of the old rule, it creates a new way to reduce your itemized deductions.
Here’s how the new rule works:
If your taxable income puts you in the 37%, the total amount itemized deductions will be reduced.
The reduction will be the smaller of 2/37ths of the total expenditure, or by the portion of your taxable income that exceeds the 37% threshold – whichever is less.
1% Remittance Tax
OBBBA imposes a 1% federal tax on remittances to foreign countries, with some exemptions. This is much less than the 3.5% tax specified in earlier versions of the Bill.
It applies to transfers made using cash, money orders, cashier’s checks, or other similar physical instruments.
Transfers made through U.S.-issued debit or credit cards, or from accounts held at financial institutions, are exempt from this tax.
That means that you can send money abroad from your bank account tax free, but you’ll get hit with a tax if you send a money order or cashier’s check.
Moving Expenses No Longer Deductible for Most.
Moving expenses under Section 217 are no longer deductible, except for military families and certain national intelligence community members.
SALT Cap Increase
Finally, the deduction limit for payment of state and local taxes (the SALT cap) is temporarily increased from the current $10,000 to $40,000. That amount will then be adjusted for inflation, starting with $40,400 in 2026 and increased by 1% annually through 2029. In 2030, the deduction limit reverts to $10,000. However, the amount of the available deduction does phase down for taxpayers with a modified AGI of over $500,000, adjusted annually for inflation with a floor of $10,000.
Estate and Gift Taxes
The current Estate Tax exemptions were set to expire at the end of the year, that was ~$15 million estate tax exclusions or ~$30 million for married couples; reverting to an expected $6 to $7 million for singles and $12 to $14 million for couples.
OBBBA makes the higher estate tax exemption levels permanent, and adjusts them for inflation beginning in January 2026 – for US citizens. Which should come as a relief to families with highly illiquid assets, such as family farms, closely held businesses, and real estate that cannot be readily liquidated to pay a 40% estate tax on the excess.
There’s a commensurate increase in gift tax exclusions, as well, which allows families to transfer more money to other family members or into trusts without incurring a tax liability.
This amendment prevents the sunset of the “bonus exemption” established by the Tax Cuts and Jobs Act (TCJA) that was slated to occur at the end of this year.
The unified credit allows individuals to transfer wealth without incurring federal estate and gift taxes up to a specified limit. Similarly, the GSTT exemption allows transfers to certain future generations without incurring additional tax. By raising the exemption amount to $15 million, individuals will be able to pass on greater wealth to their heirs without the burden of transfer taxation, thereby encouraging wealth accumulation as well as larger lifetime gifts and transfers within families.
