2025 U.S. Tax Changes: Key Highlights From the One Big, Beautiful Bill Act (OBBBA) 

What individuals and families should know heading into 2025 and beyond.

The One Big, Beautiful Bill Act (OBBBA) — enacted on July 4, 2025 — marks the most sweeping rewrite of the U.S. individual tax landscape since the Tax Cuts and Jobs Act (TCJA). While the legislation is broad, several provisions directly impact everyday taxpayers, families, and retirees, with a second set of items structured as temporary incentives ending between 2028–2030.

This overview summarizes what is currently in force, where sunset rules apply, and areas where the IRS and Treasury are still finalizing implementation guidance.

The Act makes the TCJA’s seven-bracket system permanent starting in 2026:

• 10%, 12%, 22%, 24%, 32%, 35%, and 37%
  
  

No new higher bracket (such as 39.6%) was introduced. This provides much-needed rate certainty when planning Roth conversions, capital gains harvesting, and multi-year income planning.

Capital gains continue to follow the existing structure:

• Short-term gains taxed at ordinary rates
  
  

• Long-term gains taxed at 0%, 15%, or 20%, depending on income
  
  

• Bracket thresholds will continue to be adjusted for inflation
  
  

This has strategic implications for clients looking to exit appreciated positions, rebalance portfolios, or perform gain-harvesting in low-income years.

The TCJA standard deduction increase is now locked in:

• Single: $15,750
  
  

• Married Filing Jointly: $31,500
  
  

• Head of Household: $23,625
  
  

An additional $6,000 age-65 deduction begins in 2025 and runs through 2028, subject to income phaseouts.

IRS guidance is expected on the documentation/affirmation requirements tied to the additional age-based deduction.

The $10,000 SALT cap increases temporarily:

• 2025–2030:
  
  

  • $40,000 for joint filers
    
    

  • $20,000 for married filing separately
    
    

• Income thresholds apply (phase-outs begin at $500,000 MAGI for joint filers)
  
  

• After 2030, the cap returns to $10,000 under the statute
  
  

Important: IRS guidance is still pending on how multi-state withholding and PTET (pass-through entity tax) regimes interact with the new cap.

Several TCJA changes are now locked in, while new limitations apply:

Permanent Items

• Miscellaneous itemized deductions remain eliminated
  
  

• Pease limitation permanently repealed
  
  

New Limitations

• 35-cent-per-dollar cap on itemized deductions for very high-income filers
  
  

• Charitable contributions now have a 0.5% AGI floor before deductibility
  
  

These restrictions particularly affect taxpayers with high charitable intent or significant mortgage interest.

Beginning 2025:

• Credit increases to $2,200 per child
  
  

• Refundable portion increases to $1,400
  
  

• Valid SSN required for the child
  
  

• At least one parent must have a valid SSN
  
  

This change remains in force and is already reflected in 2025 advance planning tools.

The estate tax exemption rises to:

• $15,000,000 per individual in 2026, indexed annually
  
  

Portability remains intact. High-net-worth families will want to revisit older plan assumptions that relied on the TCJA sunset.

The statute creates a new §530A “Money Accounts for Growth and Advancement”:

• Up to $5,000 annual contributions for children under age 8
  
  

• Withdrawals permitted at age 18 for:
  
  

  • Education
    
    

  • First-time home purchase
    
    

  • Starting a business
    
    

• Investment restricted to U.S. equity index–tracked mutual funds
  
  

• Employer contributions up to $2,500 permitted
  
  

Pending IRS/Treasury guidance:

• Custodial requirements
  
  

• Plan document structure
  
  

• Nondiscrimination testing for employer contributions
  
  

Most financial institutions are in a pre-launch phase awaiting these regs.

These provisions are currently active but sunset automatically:

a. No Tax on Tips (2025–2028)

Above-the-line deduction up to $25,000 for workers in typical tipped industries.
Excludes highly compensated employees above statutory income limits.

b. No Tax on Overtime (2025–2028)

• Deduction up to $12,500 (single) or $25,000 (joint)
  
  

• Phases out above $150,000 AGI
  
  

• Eliminated entirely by $275,000 single / $300,000 joint
  
  

c. Car Loan Interest Deduction (2025–2028)

• Up to $10,000, only for U.S.-assembled vehicles
  
  

• Phaseouts begin at $100,000 single / $200,000 joint
  
  

Note: IRS guidance is pending on compliant VIN coding for “U.S.-assembled” criteria.

529 plans: Expanded to include K–12 private, home-school, and credentialing programs

Employer Dependent Care Assistance: Increased to $7,500

Student loan system: Parent PLUS and Grad PLUS borrowing caps tightened; income-driven repayment limits modified for post-2026 loans

Section 127 educational assistance: $5,250 exclusion made permanent.

Effective January 1, 2026:

• Applies only to cash-based remittances sent abroad
  
  

• Transfers funded by U.S. bank accounts, debit cards, or credit cards remain exempt
  
  

• Digital platforms (e.g., Wise, Remitly) are generally exempt if the funding source is exempt
  
  

Pending:
Treasury is finalizing reporting and due-diligence obligations for remittance providers and threshold de minimis exceptions.

• No increase in the top 37% rate
  
  

• No millionaire surtax
  
  

• No carried-interest reform
  
  

• No corporate rate reduction
  
  

• No repeal of estate tax
  
  

• No federal elimination of tax on Social Security benefits
  
  

This is important for taxpayers who were anticipating more aggressive structural change.

The 2025 tax landscape brings stability in several key areas, especially personal income tax rates, standard deductions, and the estate tax exemption — while introducing targeted temporary incentives aimed at workers and families. Some provisions remain dependent on administrative guidance, which will shape how easily taxpayers can take advantage of new benefits.