The One, Big, Beautiful Bill Act significantly affects federal taxes, credits and deductions. It was signed into law on July 4, 2025, as Public Law 119-21, and takes effect in 2025.

Official References

- IRS Summary of the OBBBA

- Official Text of the Act

Key Provisions for 2025

INDIVIDUALS

1. Increased Standard Deduction (Permanent and Enhanced)

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• Single: $15,750
• Married Filing Jointly: $31,500
• Head of Household: $23,625
• Additional Details:
• These amounts are made permanent and will be adjusted for inflation after 2025.
• The standard deduction is available to all filers who do not itemize deductions.
• Additional standard deduction amounts for age/blindness remain available under existing law [6].
• Phase-out: None for the standard deduction itself.

2. Senior Deduction (Temporary, 2025–2028)

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• $6,000 per eligible individual age 65 or older
• $12,000 for a married couple if both spouses qualify
• Eligibility:
• Taxpayer (and spouse, if applicable) must be age 65 or older by the end of the tax year.
• Available to both itemizers and non-itemizers.
• Must include Social Security Number(s) on the return and file jointly if married.
• Phase-out:
• Deduction phases out for modified adjusted gross income (MAGI) over $75,000 (single) or $150,000 (joint) at a rate of 6% of the excess.

3. Expanded Child Tax Credit

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• $2,200 per qualifying child (increased from $2,000)
• $1,400 refundable portion (indexed for inflation)
• $500 nonrefundable credit for other dependents
• Eligibility:
• Child must have a valid Social Security Number.
• At least one parent on a joint return must have a valid SSN to claim the refundable portion.
• Phase-out:
• Credit phases out at $200,000 MAGI (single) or $400,000 (joint).

4. Increased State and Local Tax (SALT) Deduction Cap

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• Cap increased to $40,000 ($20,000 for married filing separately) for 2025, indexed for inflation through 2029.
• Phase-out:
• For 2025, deduction phases down for MAGI over $500,000 (single) or $1,000,000 (joint), reduced by 30% of the excess over the threshold, but cannot go below $10,000.

5. Deduction for Qualified Tips (Temporary, 2025–2028)

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• Up to $25,000 per year in qualified tips may be deducted.
• For self-employed, deduction cannot exceed net income from the business in which tips were earned.
• Eligibility:
• Applies to employees and self-employed individuals in IRS-listed tipped occupations as of December 31, 2024.
• Not available to those in a Specified Service Trade or Business (SSTB) under section 199A, or employees of an SSTB.
• Must include SSN on the return and file jointly if married.
• Available to both itemizers and non-itemizers.
• Phase-out:
• Deduction phases out for MAGI over $150,000 (single) or $300,000 (joint).

6. Deduction for Qualified Overtime Pay (Temporary, 2025–2028)

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• Up to $12,500 per year ($25,000 for joint filers) in qualified overtime pay may be deducted.
• Deduction applies to the “half” portion of “time-and-a-half” overtime required by the Fair Labor Standards Act.
• Eligibility:
• Must have SSN and file jointly if married.
• Available to both itemizers and non-itemizers.
• Phase-out:
• Deduction phases out for MAGI over $150,000 (single) or $300,000 (joint).

7. Deduction for Car Loan Interest (Temporary, 2025–2028)

• Effective Date: Indebtedness incurred after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• Up to $10,000 per year in interest paid on a qualified car loan may be deducted.
• Eligibility:
• Loan must be for a new (not used) personal-use vehicle, with final assembly in the United States, and secured by a lien on the vehicle.
• Deduction is available to both itemizers and non-itemizers.
• Must include the Vehicle Identification Number (VIN) on the return.
• Phase-out:
• Deduction phases out for MAGI over $100,000 (single) or $200,000 (joint).

8. Enhanced Adoption Credit (Partially Refundable)

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status and Amounts:
• Maximum adoption credit for 2025 is $17,280; for 2026, $17,670 (indexed for inflation).
• Up to $5,000 (indexed) of the credit may be refundable.
• Eligibility:
• Available to all filing statuses.
• Refundable portion does not apply to carryforwards from prior years [6]; [5].
• Phase-out: Standard phase-out rules for the adoption credit apply (not changed by OBBBA).

9. Recognition of Indian Tribal Governments for Adoption Credit

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status: All
• Benefit: Indian tribal government determinations of “special needs” status for a child are now recognized for the adoption credit.

10. Permanent Exclusion for Employer Payments of Student Loans

• Effective Date: Payments made after December 31, 2025 (but applies to 2025 for payments made in 2026)
• Filing Status: All
• Benefit: Employer-paid student loan amounts are excluded from income, with inflation adjustments.

11. Permanent Expansion of 529 Account Uses

• Effective Date: Distributions made after July 4, 2025 (i.e., July 5, 2025, onward)
• Filing Status: All
• Benefit: 529 accounts can be used for a broader range of K-12 expenses (curriculum, tutoring, testing, therapies), and the annual limit for K-12 distributions is increased to $20,000 per beneficiary per year.

12. Permanent Expansion of 529 Account Uses for Postsecondary Credentialing

• Effective Date: Distributions made after July 4, 2025 (i.e., July 5, 2025, onward)
• Filing Status: All
• Benefit: 529 accounts can be used for recognized postsecondary credential programs, including fees, testing, and continuing education.

13. Permanent Exclusion for Student Loan Discharge Due to Death or Disability

• Effective Date: Discharges after December 31, 2025 (but applies to 2025 for discharges in 2026)
• Filing Status: All
• Benefit: Exclusion from gross income for student loan discharges due to death or disability, expanded to private loans, with SSN required on the return.

14. Permanent Saver’s Credit for ABLE Contributions (Increased Amount in 2027)

• Effective Date: Taxable years ending after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status and Amounts:
• Saver’s credit for ABLE contributions is made permanent.
• Credit amount increases to $2,100 for taxable years beginning after December 31, 2026 (i.e., starting January 1, 2027).
• Eligibility: All filing statuses; must meet general saver’s credit requirements.

15. Permanent Rollovers from 529 to ABLE Accounts

• Effective Date: Taxable years beginning after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All
• Benefit: Rollovers from 529 plans to ABLE accounts are made permanent.

16. Permanent Exclusion for Employer-Provided Child Care Credit (Increased Amount in 2026)

• Effective Date: Amounts paid or incurred after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All
• Benefit: Credit increased to 40% (50% for small businesses), up to $500,000 ($600,000 for small businesses), with inflation adjustments.

17. Permanent Increase in Adoption Credit Refundability

• Effective Date: Taxable years beginning after December 31, 2024 (i.e., starting January 1, 2025)
• Filing Status: All
• Benefit: Up to $5,000 of the adoption credit is refundable, with inflation adjustments.

18. Permanent Increase in Limitation on Contributions to ABLE Accounts

• Effective Date: Contributions made after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All
• Benefit: Increased ABLE contribution limit and inflation adjustment made permanent.

19. Permanent Extension of Rollovers from Qualified Tuition Programs to ABLE Accounts

• Effective Date: Taxable years beginning after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All
• Benefit: Rollovers from 529 to ABLE accounts made permanent.

20. Permanent Exclusion for Employer Payments of Student Loans

• Effective Date: Payments made after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All
• Benefit: Employer-paid student loan amounts are excluded from income, with inflation adjustments.

21. Permanent Increase in Limitation on Contributions to ABLE Accounts

• Effective Date: Contributions made after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All
• Benefit: Increased ABLE contribution limit and inflation adjustment made permanent.

22. Permanent Extension of Rollovers from Qualified Tuition Programs to ABLE Accounts

• Effective Date: Taxable years beginning after December 31, 2025 (i.e., starting January 1, 2026)
• Filing Status: All

Benefit: Rollovers from 529 to ABLE accounts made permanent.