Breakdown of the One Big Beautiful Bill Act

Below are select highlights of the individual tax provisions included in the Bill. (Provisions 1-9 below were previously mentioned in our May 2025 newsletter but have been updated with the final provision of the OBBBA).

1. Enhanced Senior Deduction
   The Bill provides a temporary deduction for seniors (65+) of $6,000 for eligible taxpayers for tax years 2025-2028. Phase out: single filers with income of $75,000 or more (joint filers with income of $150,000 or more).
2. No Tax on Tips and Overtime Pay
   Tip Deduction: The Bill allows up to a $25,000 deduction per taxpayer for qualified tips for tax years 2025-2028. (Phase out: when the taxpayer’s Modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 in the case of a joint return).
   Overtime Deduction: The Bill provides a temporary deduction of up to $12,500 ($25,000 on joint return) per taxpayer for qualified overtime compensation for tax years 2025-2028. (Phase out: when the taxpayer’s MAGI exceeds $150,000 ($300,000 for a joint return)
3. Estate and Gift Tax Exemption
   The Bill increased the estate, gift, and the generation-skipping transfer tax exemption to $15 million per individual ($30 million per married couple) in 2026. (indexed for inflation).
4. Child Tax Credit 
   The Bill raises the credit to $2,200 per child; refundable portion $1,400 for 2025.
5. State and Local Tax Deduction (SALT) Cap 
   The Bill temporarily raises the SALT deduction cap from $10,000 to $40,000 ($20,000 for married individuals filing separately). Phase-out of the increased SALT deduction cap begins when an individual’s modified adjusted gross income reaches a $500,000 threshold ($250,000 for married individuals filing separately). The cap and phase-out threshold increase incrementally each year, but the cap permanently reverts to $10,000 beginning with the 2030 tax year.
6. Qualified Business Income Deduction
   The Bill makes the 20% deduction for pass-through income permanent, expands the deduction limit phase-in range, and adds a $400 minimum deduction for those with at least $1,000 of QBI. The 20% qualified business income (QBI) deduction for pass-through entities (including law firms and partnerships) is made permanent. The Bill increases the QBI phase-in threshold for single filers from $50,000 to $75,000 and for joint filers from $100,000 to $150,000, with inflation adjustments applying after 2026.
7. Eliminate the Clean Vehicle Credit (includes electric vehicles) 
   The Bill terminates a large number of clean energy tax incentives:
   • The clean vehicle credits for both previously owned and new vehicles (Sections 25E and 30D) will end for vehicles purchased after September 30, 2025.
   • The energy-efficient home improvement credit (Section 25C) and the residential clean energy credit (Section 25D) will both expire for qualifying improvements or expenditures made after December 31, 2025. This means that eligible projects must be completed by the end of 2025 to claim these credits.
8. Tax Deduction for Interest on New Car Loans 
   The Bill makes auto loan interest deductible for taxable years 2025 through 2028 for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle that had their final assembly in the United States, The deduction is limited to $10,000 and is phased out for taxpayers with modified adjusted gross income exceeding $100,000 ($200,000 for a joint return).
9. An Above-the-Line Deduction for Charitable Contributions 
   The Bill allows non-itemizers to claim a deduction of up to $1,000 for single filers or $2,000 for married taxpayers filing jointly for “cash” charitable contributions beginning in 2025. For itemizers, will only be allowed to claim charitable contributions as deductions to the extent that the aggregate of such contributions exceeds 0.5% of the individual’s adjusted gross income.
10. Trump Accounts 
    The Bill creates a new tax-deferred savings account, “Trump Accounts,” providing every baby who is a U.S. citizen born between 2025 and before 2029 with a $1,000 federally funded investment account. Tax-favored growth until age 18.
11. Pass-Through Entity Tax Regimes (PTET) 
    There were no changes or new limitations to the pass-through entity tax (PTET) regimes, i.e., existing PTET/SALT workarounds remain fully available to taxpayers.
12. Mortgage Interest Deduction
    For tax years beginning after December 31, 2025, the $750,000 principal limit for the home mortgage interest deduction has been made permanent.