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Understanding What the One Big Beautiful Bill Act (OBBBA) Means for You: Part 1

The Tax Cuts and Jobs Act (TCJA) brought major changes to tax policy during President Trump’s first term. Many of those provisions were set to expire after 2025, but with the recent passage of the One Big Beautiful Bill Act (OBBBA), much of that tax relief is extended and refined.

If you’re an individual taxpayer or small business owner, understanding how OBBBA affects your taxes is essential for effective planning in 2025 and beyond. I’ll break down key provisions in this two-part series, starting with the most impactful changes for personal tax rates, deductions, and credits.

Individual Tax Rates

OBBBA prolongs the reduced individual income tax rates originally established by the TCJA, extending them beyond January 1, 2026. This means many taxpayers will continue to benefit from lower rates on their income. One notable aspect is the permanent elimination of the 39.6% top bracket, which favors higher earners. Additionally, tax brackets will now adjust annually for inflation starting in 2026, helping taxpayers avoid “bracket creep” as wages rise.

Standard Deductions

The Act also makes the higher standard deductions introduced under TCJA permanent and increases them for inflation. For 2025, the original TCJA amounts were $15,000 for single or married filing separately, $22,500 for heads of household, and $30,000 for married filing jointly. OBBBA uses a new inflation calculation method that is expected to increase these figures significantly, although final IRS numbers are pending.

Senior Tax Deduction

For seniors aged 65 and older, OBBBA introduces a temporary additional deduction of $6,000 per qualifying individual. This provision is phased out for taxpayers with modified adjusted gross income (MAGI) above $75,000 for singles and $150,000 for married couples filing jointly. This deduction offers targeted relief to older taxpayers and partially replaces the campaign promise to eliminate taxes on Social Security benefits.

Child Tax Credit

The child tax credit increases from $2,000 to $2,200 per qualifying child starting in 2025, with future inflation adjustments. The credit phases out at higher income levels—$400,000 MAGI for married filing jointly and $200,000 for other filers. New documentation requirements related to Social Security numbers also apply.

Qualified Business Income Deduction

Small business owners benefit from increased phase-in thresholds for the QBI deduction: from $50,000 to $75,000 for individuals, and from $100,000 to $150,000 for joint filers after 2025. Additionally, a new minimum deduction of $400 (inflation-adjusted) ensures that taxpayers with modest qualified business income receive some benefit.

Estate and Gift Tax Exemptions

OBBBA permanently extends the estate and lifetime gift tax exemption and raises it to $15 million for individuals ($30 million for married couples) starting in 2026. These amounts will be indexed annually for inflation, allowing families to transfer more wealth tax-free.

To explore these provisions in more detail and see examples of how they may affect your tax situation, visit my blog at cpaconsultingservices.com/blog

Next month, we’ll continue this series with additional updates on mortgage interest deductions, new rules on tips and overtime pay, car loan interest deductions, and more. Stay tuned!

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