The One Big Beautiful Bill Act (HR 1), signed into law on July 4, 2025, includes a wide range of tax provisions that affect both individuals and families. Below is a summary of the most impactful provisions that take effect beginning in 2025 and 2026, along with details on provisions that have been extended or made permanent.
Provisions Effective Beginning in 2025
Child Tax Credit
The Child Tax Credit has been increased to $2,200 per qualifying child. The refundable portion is set at $1,400 for 2025 and will be adjusted annually based on inflation.
Standard Deduction
The increased standard deduction from the Tax Cuts and Jobs Act has been made permanent. Additionally, the Act provides for an extra increase in the standard deduction:
- $1,500 for Married Filing Joint (MFJ)
- $1,125 for Head of Household
- $750 for all other filers
As a result, the 2025 standard deduction amounts are:
- $15,750 – Single
- $31,500 – Married Filing Joint
- $23,625 – Head of Household
Tip Income Deduction (2025–2028)
A new deduction for tip income is available up to $25,000 of qualified tip income. Key features:
- Deduction phases out at $150,000 AGI ($300,000 for MFJ)
- Applies to individuals working in specified service trades or businesses
- Tip income must be cash and received in an occupation traditionally tipped as of December 31, 2024
- Tip income remains subject to Social Security and Medicare taxes
Overtime Pay Deduction (2025–2028)
Taxpayers may deduct up to $12,500 ($25,000 for MFJ) of qualified overtime pay. The deduction applies to the premium portion of overtime pay. For example, if a worker is paid $20/hour regularly and $30/hour for overtime, the $10 premium qualifies. The deduction phases out at $150,000 AGI ($300,000 for MFJ) and remains subject to payroll taxes.
Senior Deduction (2025–2028)
A $6,000 deduction is available for each taxpayer age 65 or older. This deduction begins to phase out at $75,000 AGI ($150,000 for MFJ) and requires the taxpayer to have a valid Social Security Number.
Qualified Car Loan Interest Deduction (2025–2028)
Taxpayers may deduct up to $10,000 in interest paid on qualified vehicle loans. Requirements include:
- Vehicle must be new and for personal use
- Final assembly must occur in the United States
- Deduction is available even without itemizing
- Phases out at $100,000 AGI ($200,000 for MFJ)
- Vehicle Identification Number (VIN) must be reported on the tax return
State and Local Tax (SALT) Deduction Cap Increase (2025–2029)
Taxpayers may deduct up to $40,000 in state and local taxes as an itemized deduction. This cap begins phasing down at $500,000 AGI. Both the cap and phase-out threshold will increase by 1 percent annually.
Clean Vehicle Credits Expiration
The clean vehicle credit, used clean vehicle credit, and commercial clean vehicle credit will expire on September 30, 2025. Vehicles purchased after that date will not qualify for any of these credits.
Adoption Credit (2025–2028)
Up to $5,000 of the adoption credit will become refundable, making it more accessible to low- and middle-income families.
Bonus Depreciation
Taxpayers may now elect 100 percent bonus depreciation on qualified property acquired after January 19, 2025.
Provisions Effective Beginning in 2026
Charitable Deduction for Non-Itemizers
Taxpayers who do not itemize may deduct up to:
- $1,000 – Single
- $2,000 – Married Filing Joint
This applies to cash contributions only.
Expiration of Energy Credits
The Energy Efficient Home Improvement Credit and the Residential Energy Credit will expire at the end of 2025 and will no longer be available beginning in 2026.
Premium Tax Credit Repayment
All taxpayers who receive excess premium subsidies will be required to repay the full overpayment, regardless of income level.
Limitation on Itemized Deductions for High-Income Taxpayers
Itemized deductions will be limited for taxpayers in the highest income tax bracket starting in 2026.
Child and Dependent Care Credit Expansion
The percentage of eligible expenses used to calculate the Child and Dependent Care Credit is increased to 50 percent, with a minimum percentage of 35 percent, depending on the taxpayer’s income.
Introduction of Trump Accounts (2026 Onward)
A new tax-advantaged savings account for children under age 18 will be introduced in 2026. Details include:
- Annual contribution limit: $5,000 per child
- Funds must be used for higher education, credentialing, small business, or first-time homebuyer expenses
- Distributions may begin after the child turns 18
- The federal government will make a one-time $1,000 contribution for eligible children born between 2025 and 2028, if elected by the taxpayer
1099 Reporting Threshold Increase
The reporting threshold for Form 1099 will be increased to $2,000 starting in 2026. This amount will be adjusted annually for inflation.
Wagering Loss Deduction Changes
Beginning in 2026, taxpayers must first reduce their wagering losses by 10 percent before applying the limitation that restricts deductions to the amount of winnings.
Provisions Made Permanent
Several tax provisions that were set to expire at the end of 2025 have been made permanent:
- Home Mortgage Interest Deduction remains capped at interest on $750,000 of mortgage debt
- Casualty Losses are allowed only for federal or state-declared disasters
- Miscellaneous Itemized Deductions are permanently eliminated
- Moving Expense Deduction remains available only to:
- Members of the Armed Forces
- Starting in 2026, also available to certain intelligence community members
- Increased ABLE Account Contribution Limits have been made permanent
