THE BIG PICTURE PERMANENT TAX CUTS AND NEW RULES UNDER OBBBA
New Provisions in OBBBA Deduction on Tips (2025–2028) • Temporary below-the-line deduction on tip income up to $25,000. • Applies only to non-highly compensated employees (under $150,000). • Occupation must “traditionally and customarily” receive tips (not a specified service trade or business). • Tips remain subject to payroll and state income taxes. Deduction on Overtime (2025–2028) • Temporary below-the-line deduction for overtime pay above regular rate, up to $12,500. • Applies only to non-highly compensated employees (under $150,000). • Overtime still subject to payroll and state income taxes. Deduction for Seniors • Additional $6,000 deduction for taxpayers over 65 with income under $75,000 ($150,000 for couples). • Phases out fully at $175,000 for individuals and $250,000 for couples. Student Loan and Education Changes • Income-contingent repayment plan eliminated. • Three new repayment options introduced: two standard plans and one Repayment Assistance Plan. • Pell Grant eligibility and loan amounts restricted for graduate/ professional students. Trump Savings Accounts • Tax-deferred accounts; withdrawals taxed at capital gains rates for qualified expenses. • Contributions allowed up to $5,000 per year before the beneficiary turns 18. • One-time federal match of $1,000 for qualifying children born 2025–2028. Other Notable Changes • Energy credits end after 2025 for new property. • Auto loan interest deduction: up to $10,000 for new U.S.- made vehicles; income capped at $100,000. • Medicaid and food assistance: cuts with new work requirements. • New tax credit for donations to scholarship-granting organizations. • Increased spending on defense and border security.
On July 4, 2025, President Trump signed H.R. 1: the One Big Beautiful Bill Act (OBBBA). The law makes permanent many of the 2017 Tax Cuts and Jobs Act (TCJA) provisions and introduces new rules that could affect income, estate, and investment planning. Below is a summary of the key changes that may impact you. Extended and Amended TCJA Provisions Marginal Tax Brackets and AMT Permanently extended, along with the alternative minimum tax (AMT) exemption.
Standard Deduction • Permanently extended with 2025 increases:
• $31,500 for married filing jointly • $23,625 for heads of household • $15,750 for single filers • Indexed for inflation in future years.
Above-the-Line Charitable Deduction Permanently allows non-itemizers to deduct charitable contributions: • Up to $2,000 for married filing jointly • Up to $1,000 for other filers Personal Exemptions and Misc. Itemized Deductions • Permanently eliminated. State and Local Tax (SALT) Deduction Cap • Raised to $40,000 through 2029. • Phases down to $10,000 for taxpayers with adjusted gross income (AGI) over $500,000. Mortgage Interest Deduction • $750,000 indebtedness limit and home equity loan restriction permanently extended.
Child Tax Credit • Increased to $2,200 beginning in 2026.
Section 199A Deduction (Qualified Business Income) • Permanently extended. • Deduction remains 20 percent of qualified business income (QBI). Gift and Estate Tax Threshold • Permanently increased to $15 million per person ($30 million per couple), indexed for inflation starting in 2026.
(Source: IRS.Gov)
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