Key Individual Tax Provisions of OB3 (One Big Beautiful Bill)

On July 4, 2025, after several months of debate in the House of Representatives and Senate, President Trump signed the One Big Beautiful Bill (OB3) into law. This bill makes permanent many of the provisions of the Tax Cuts and Jobs Act (TCJA); changes some individual, business, and international tax laws; and ends several clean energy credits.

Standard Deduction and Rates

The 2017 TCJA tax rates are made permanent. For 2025, the standard deduction is:

• $15,750 (Single)
• $23,625 (Head of Household)
• $31,500 (Married Filing Jointly)

The standard deduction will be indexed for inflation annually.

State and Local Tax (SALT) Deduction

• State and Local Tax (SALT) Cap is increased to $40,000 from $10,000 and is indexed for inflation.
  Note: This provision expires after December 31, 2029, and will revert to $10,000.

Personal Exemptions & Senior Deduction

• Personal exemptions are permanently set at $0.
• A new $6,000 deduction for individuals age 65 and older is available for tax years 2025–2028, phased out for MAGI above $75,000 (Single)/$150,000 (MFJ).

Child and Dependent Credits

• The Child Tax Credit is increased to $2,200 per child beginning in 2025 and is indexed for inflation.
• The $1,400 refundable portion is made permanent and indexed for inflation.
• The $500 credit also remains for other dependents.

Qualified Business Income (QBI) Deduction

• Qualified Business Income (QBI) Deduction remains at 20% and is made permanent.
• SSTB deduction phase-in ranges are expanded from the TJCA.

Gift & Estate Tax

• The lifetime gift and estate tax exemption is made permanent and the amounts are set for $15 million per individual for 2026 and is subject to inflation indexing. Portability between spouses remains.

Alternative Minimum Tax (AMT)

• Alternative Minimum Tax (AMT) exemption amounts of $500,000 (Single) and $1,000,000 (MFJ) are made permanent, subject to inflation adjustments.

Mortgage Interest and Other Deductions

• Mortgage interest deduction is permanently limited to the interest on the first $750,000 of home mortgage acquisition debt.
• Interest on home equity debt is permanently excluded.

• Casualty loss deductions can only be taken in federal and specific state declared disaster areas.
• Miscellaneous itemized deductions are permanently eliminated.
• High-income taxpayers: Itemized deductions are reduced by 2/37 of the lesser of (a) the amount of itemized deductions or (b) the amount of taxable income in the 37% bracket.

Other Individual Provisions

• Moving expenses are permanently eliminated other than for members of armed forces and intelligence community.
• Wagering losses are limited to 90% of total losses, and losses will only be deductible up the wagering gains for the year.
• There is a new temporary deduction up to $25,000 for tips received by an individual for years 2025-2028. The deduction phases out at income levels of $150,000 (Single) and $300,000 (MFJ).
• There is also a new temporary deduction on overtime compensation up to $12,500 (Single) and $25,000 (MFJ). The phase out begins at the same amount as the tips deduction.
• Interest on car loans up to $10,000 is deductible beginning in 2025 on cars where final assembly takes places in the US. It will be phased out at AGI levels of $100,000 (Single) and $200,000 (MFJ).
• Up to $5,000 of the adoption credit is made a refundable credit.
• The Child and Dependent Care Credit is permanently increased to 50% of qualifying expenses.
• New tax free savings accounts called “Trump Accounts” may be set up minors under 18 with up to $5,000 allowed to be contributed to these accounts each year.
• Section 529 plans are allowed to fund expenses for elementary or secondary schools. The bill also expands the definition of qualified higher education expenses.
• A charitable deduction of $1,000 (single) or $2,000 (MFJ) may be taken by taxpayers who do not itemize. For itemizers, a 0.5% of AGI floor is imposed on the charitable contribution deduction.

We anticipate additional guidance and clarification on some of these provisions in the coming months. As more information becomes available, we will keep you updated. In the meantime, if you have questions about these new laws or any other tax matters, please contact us. We are here to help.