There are a number of big things happening inside the One Big Beautiful Bill - and we want to give you some basics of those details:
For Families:
Child Tax Credit
Starting in 2025, the child tax credit is increasing to $2,200 from $2,000. The credit also has a COLA (cost-of-living adjustment) attached.
Dependent Care
The bill, which will take effect in 2026, increases the dependent care flexible spending account limit to $7,500 from $5,000. Note that the bill also raises the maximum percentage of qualified expenses for dependent care from 35 percent to 50 percent.
American Family Account
The government will make a one-time $1,000 payment into an account for babies born between 2025 and 2028. Note: Parents can add up to $5,000/year. No withdrawals are allowed before age 18.
529 Expansion
The bill extends the 529 umbrella to cover non-tuition expenses related to elementary or secondary school attendance. In addition, starting in 2026, the cap for tuition-related expenses increases from $10,000 to $20,000.
For Seniors:
Extension of Tax Rates
The bill extends the current tax rates of 12 percent, 22 percent, 24 percent, 32 percent and 37 percent, respectively. If the TCJA expired, the rates were scheduled to revert back to 15, 25, 28, 33 and 39.6 percent.
Standard Deduction
It also increased the standard deduction to $15,750 for single filers and $31,500 for those filing jointly for 2025. Both are a slight increase from the current rate. Note: The standard deduction will be adjusted for inflation starting next year.
State and Local Tax Deduction (SALT)
Big change here. The SALT is increasing to $40,000 in 2025, and will increase 1 percent annually until 2030. But in 2030, the SALT will revert to $10,000. Note: SALT has a $500,000 threshold for both single and married filers.
For Employees:
No Tax on Tips
A new $25,000 deduction was created for tips starting in 2025 and ending in 2028. The deduction is reduced if your gross income exceeds $150,000 or $300,000 if married. Note: The tax on tips provision is allowed even if you take the standard deduction.
No Tax on Overtime
A new $12,500 deduction (single filers) and $25,000 (married filing jointly) was created for overtime starting in 2025 and ending in 2028. Note: Like no tax on tips, the deduction is reduced if your gross income exceeds $150,000 or $300,000 if married. The new bill has added complexity to the tax code, so we anticipate the IRS will issue guidelines on how to interpret the updated rules later this year.
For Businesses and Business Owners:
Small Business Deduction
The new law permanently establishes the deduction of up to 20 percent of qualified business income for sole proprietorships, partnerships, and SCorps.
100 Percent Expensing of Capital and Factory Investments
The bill restores the provision that allows businesses to expense 100 percent of capital investments made on or after January 19, 2025. However, some limits may apply.
1099-K
The new law sets the reporting limits at $20,000 and 200 transactions for transactions on cash apps. Note: The rule starts in 2025. It rolls back the $600 threshold set under the American Rescue Plan.
Looking to Purchase a Vehicle?:
New Car Loans
Between 2025 and 2028, a $10,000 deduction on new car loan interest will be available, but some limitations apply (such as the car needing to be brand-new). First, the deduction will be reduced by $200 if your gross income exceeds $100,000 or $200,000 if you are married. Plus, the car’s final assembly must occur in the U.S. to qualify for the deduction.
Termination of EV Subsidies
EV credits for new and used cars will end after September 30, 2025. Note: Some EV home improvements (such as windows) and residential energy credits (adding solar) end after December 31, 2025.
Charitable Giving:
Charitable Contribution Recordkeeping
Charitable contributions of $1,000 for individual filers and $2,000 for married couples filing jointly can now be deducted even if you don’t itemize your deductions.
Estate and Gift Tax Exemption
The bill increases the estate and gift tax exemption starting in 2026. This year, the exemption is capped at $13.99 million for single filers and $27.98 million for married filing jointly. In 2026, it increased to $15 million for single filers and $30 million for married filing jointly. Note: The exemption will increase with inflation.
Ever since the Tax Cuts and Jobs Act was passed in 2017, there’s been an ongoing concern that the estate and gift tax exemption would revert back to the 2017 level in 2025. And although the new bill extends the rule, it’s possible that it may change again sometime in the future.
For Tax Payers:
Extension of Tax Rates
The bill extends the current tax rates of 12 percent, 22 percent, 24 percent, 32 percent and 37 percent, respectively. If the TCJA expired, the rates were scheduled to revert back to 15, 25, 28, 33 and 39.6 percent.
Standard Deduction
It also increased the standard deduction to $15,750 for single filers and $31,500 for those filing jointly for 2025. Both are a slight increase from the current rate. Note: The standard deduction will be adjusted for inflation starting next year.
State and Local Tax Deduction (SALT)
Big change here. The SALT is increasing to $40,000 in 2025, and will increase 1 percent annually until 2030. But in 2030, the SALT will revert to $10,000. Note: SALT has a $500,000 threshold for both single and married filers.