July 15, 2025
Individual Provisions in the One Big Beautiful Bill
The One Big Beautiful Bill Act, which was signed into law in early July, calls for several significant changes to various business, individual, estate tax, and energy tax provisions. In many cases, the changes implemented served as extensions of expiring provisions initially called for in the Tax Cuts and Jobs Act (TCJA) Of 2017. However, others are completely new incentives that benefit individuals and families. This includes an extension of the individual tax brackets, the standard deduction, new tip income deduction, and the senior tax deduction. To help clients, prospects, and others, Wilson Lewis has provided a summary of the major individual tax provisions below.
- Individual Tax Brackets – During the President’s first term, the Administration passed the TCJA which included a reduction of the highest individual income tax bracket from 39% to 37%. In addition, there were changes to the total number of tax brackets. The culmination of the modification is that many taxpayers ended up changing brackets. The OBBB has made these brackets permanent meaning the highest tax bracket for individual income taxes is now set at 37%.
- Standard Deduction – Under the TCJA the standard deduction was nearly doubled from $6,500 to $12,000 for single filers and $13,000 to $24,000 for married filing jointly. These amounts were also set to annually index for inflation as well. This change was set to expire at the end of this year. However, the OBBB makes permanent these changes and has also increased the standard deduction amounts. For those individual taxpayers it is now $15,750 for individuals and $23,625 for heads of household.
- Lifetime Estate and Gift Tax Exclusion – The TCJA temporarily doubled the federal estate and gift tax exclusion amount. It was increased from $5M to $10M per individual, annually indexed for inflation. This higher amount was scheduled to revert to pre-TCJA levels, a much smaller exclusion amount. The OBBB has extended the exclusion amount, assuaging concerns by many about the sharp reduction. The annual gift tax exclusion amount also remains the same (currently $19,000 per person – annually indexed for inflation). This change now offers the stability needed to engage in long-term tax planning.
- Mortgage Interest Deduction – The OBBB also made changes to the mortgage interest deduction by permanently extending the $750,000 limit. This means for mortgages taken after December 2017, homeowners can now deduct the interest paid on up to $750,000 in mortgage debt. Mortgages taken prior to December 2017 are not subject to the $750,000 ceiling and can rather rely on the previous limit of $1M. It is important to note there is no deduction available for interest paid as part of home equity loans.
- Child Tax Credit – The OBBB made several changes to the Child Tax Credit to provide additional savings for eligible families. The maximum credit amount is now set at $2,200 per eligible child under 17 years old, the amount will now be adjusted for inflation, and there are new eligibility requirements. To claim the credit, both the parents and child must have a Social Security number. It phases out at $200,000 for single filers and heads of household and $400,000 for married couples filing jointly.
- New Trump Accounts – Named after the President, these are individual retirement accounts for minors. It is part of a pilot program where the federal government makes contributions to each child with a valid Social Security number. The child must be born between December 1, 2025, and December 31, 2028, for the one-time $1,000 contribution. Other contributions made to the account from others are not considered tax deductible. It is important to note, a parent’s employer may contribute up to $2,500 to a child’s Trump account.
- Tip Income Deduction – New under the OBBB, there is a deduction of up to $25,000 on qualified tips received by workers. Generally, these are cash tips received by employees working in an occupation where cash tips are regularly given. The good news is that the deduction is available to those who itemize deductions and those who do not. The new deduction will expire at the end of 2028.
- Senior Tax Deduction – The OBBB introduces a new tax deduction for individuals 65 years and older. The new deduction is available starting in 2025 and expires at the end of 2028. The amount of the credit is dependent on income and filing status. Single filers with taxable income under $75,000 and married couples with less than $150,000 will receive a $6,000 deduction. The deduction can be used in addition to the standard deduction.
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The individual tax provision changes called for in the One Big Beautiful Bill Act provide significant saving opportunities for Atlanta individuals and families. It is important to become familiar with the major changes to determine how you will be impacted. If you have questions about the information outlined above or need assistance with another tax question, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.
