CHANGES FROM THE OBBB (ONE BIG BEAUTIFUL BILL) ACT

IMPACT ON INDIVIDUAL TAXPAYERS

STATE & LOCAL TAX DEDUCTION FOR ITEMIZERS (SALT)

The SALT deduction limit for individuals who itemize deductions is temporarily increased for tax years 2025 through 2029. The limit is $40,000 ($20,000 if married filing separately) for 2025.  This increase from $10,000 will be especially beneficial for taxpayers with larger or multiple real estate tax bills.

SENIOR DEDUCTION

Temporary senior deduction. For tax years beginning after December 31, 2024, and before January 1, 2029, a qualified individual is allowed to claim an additional $6,000 deduction on his or her return.  A qualified individual is a taxpayer who has attained age 65 before the close of the tax year. The senior deduction begins to phase out when the taxpayer’s modified adjusted gross income (AGI) exceeds $75,000 ($150,000 for a joint return). 

NON-ITEMIZERS

Standard deduction amount is increased for tax years beginning in 2025 to $31,500 for married individuals filing jointly and surviving spouses, $23,625 for head of household, and $15,750 for a married individual filing separately and an unmarried individual.  An additional standard deduction amount is available for an individual who is 65 or older- $1,600 if married filing jointly, married filing separately, or a surviving spouse, and $2,000 if an unmarried individual or head of household.

Starting with tax years after 2025, a new permanent rule allows non-itemizers to deduct up to $1,000 ($2,000 for joint filers) for qualified cash charitable contributions.

INTEREST DEDUCTION ON CAR LOANS

For tax years beginning after 2024 and before 2029, an individual may claim a deduction of up to $10,000 for interest paid or accrued on a post-2024 loan for the purchase of a qualified passenger vehicle for personal use. The deduction begins to phase out when the taxpayer’s modified adjusted gross income exceeds $100,000 ($200,000 in the case of a joint return).

ESTATE TAX

The basic exclusion amount is increased from $13.99 million in 2025 to a base amount of $15 million for decedents dying in 2026, adjusted for inflation thereafter.

TIP DEDUCTION

A deduction from income for amounts received as tips, capped at $25,000 and subject to phaseout for taxpayers with modified AGI exceeding $150,000 or $300,000 for joint filers.

OVERTIME DEDUCTION

A deduction from income for overtime pay, capped at $12,500 ($25,000 for joint filers) and subject to phaseout for taxpayers with modified AGI exceeding $150,000 or $300,000 for joint filers.

Green Energy Credit Terminations

The OBBB Act terminates various green energy credits applicable to consumers. Under the OBBB Act, affected credits include the following (termination generally after 2025):

• previously-owned clean vehicle credit;
• clean vehicle credit;
• alternative fuel refueling property credit;
• energy efficient home improvement credit; and
• residential clean energy credit.