‘One Big Beautiful Bill Act’ Tax Law Changes: What You Need to Know to Avoid Surprises and Maximize Deductions

The “One Big Beautiful Bill Act” brings the most significant tax changes in years, impacting nearly every taxpayer—whether you’re an employee, retiree, parent, homeowner, or business owner. Here’s a detailed look at the key tax law updates for 2025 and beyond.

1. Standard Deduction Permanently Increased

The standard deduction is now permanently set at $15,750 for individuals and $31,500 for married couples filing jointly. This amount will be adjusted annually for inflation. The increase simplifies tax filing for most Americans by reducing the need to itemize deductions, and ensures that a larger portion of your income is not taxed.

Why it matters:
This means more of your income is shielded from taxation, simplifying tax filing for many taxpayers who previously itemized deductions.

Tax Help Tip:
If you usually itemize but your deductions are close to the old standard deduction, you may save time and money by taking the higher standard deduction. Review your prior returns to compare.

2. Marginal Tax Rates and TCJA Permanence

The lower marginal tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent for individuals, starting in 2026. This means the 10% and 12% tax brackets will remain in place, with additional adjustments for inflation. Taxpayers can expect more predictable tax brackets and lower rates compared to pre-TCJA law.

3. Child Tax Credit Expansion

The maximum child tax credit increases by $2,200 per child beginning in 2025, and the credit amount will be indexed for inflation. The refundable portion of the credit ($1,400) is now permanent and will also adjust for inflation. Income thresholds remain at $200,000 for individuals and $400,000 for joint filers. There is also a $500 nonrefundable credit for other dependents, such as elderly parents or college students.

Why it matters:
Families with children will see a bigger tax credit, which can significantly reduce their tax bills or increase refunds.

Tax Help Tip:
Update your payroll withholding or estimated tax payments to reflect the larger credit, preventing overpayment during the year.

4. Mortgage Interest Deduction Made Permanent

Taxpayers can now permanently deduct interest on up to $750,000 of home mortgage debt. This provision is especially beneficial for homeowners in high-cost areas, providing long-term certainty for those planning to buy or refinance homes.

Why it matters:
Homeowners, especially in high-cost housing markets, can continue to deduct mortgage interest, reducing taxable income.

Tax Help Tip:
If you’re considering buying or refinancing a home, you can plan with confidence knowing this deduction won’t disappear.

5. State and Local Tax (SALT) Deduction Expanded

The cap on the state and local tax (SALT) deduction is temporarily increased from $10,000 to $40,000 for households with income under $500,000, effective through 2029. The cap increases by 1% each year until then. In 2030, the limit reverts to $10,000. For higher-income households, the deduction phases down to a minimum of $10,000. Notably, there are no new limits on SALT deductions for pass-through businesses, allowing state-level workarounds to continue.

Why it matters:
Taxpayers in high-tax states like California, New York, and New Jersey can deduct more of their state and local taxes, reducing federal tax liability.

Tax Help Tip:
If you pay significant property or state income taxes, consider timing payments or prepaying to maximize deductions during these years.

6. Alternative Minimum Tax (AMT) Relief

The increased exemption for the Alternative Minimum Tax (AMT), originally set by the TCJA, is now permanent. This reduces the number of taxpayers subject to the AMT, particularly those in higher-tax states or with larger families.

What’s new:
The increased AMT exemption from the 2017 Tax Cuts and Jobs Act is now permanent, reducing the number of taxpayers subject to AMT.

Why it matters:
Fewer taxpayers will face the AMT, which can be a surprise tax burden for some higher-income earners.

7. Estate and Gift Tax Exemption Increased

Starting in 2026, the estate and gift tax exemption is permanently set at $15 million for individuals and $30 million for married couples, indexed for inflation. This allows families to transfer significantly more wealth without incurring federal estate or gift taxes.

Why it matters:
This allows wealthy families to transfer more assets tax-free, reducing estate planning burdens.

Tax Help Tip:
If you’re planning to transfer wealth, consult an estate planning professional to leverage these higher exemptions.

8. Paid Family and Medical Leave Credit Made Permanent

Employers can now permanently claim a tax credit for providing paid family and medical leave, ranging from 12.5% to 25% of wages paid to employees on leave. This encourages businesses to offer more generous leave policies.

Why it matters:
This encourages businesses to offer paid leave benefits, supporting employee well-being.

9. New Deductions for Tips and Overtime Pay

From 2025 through 2028, employees in eligible industries can deduct up to $25,000 in qualified tips and up to $12,500 in overtime pay ($25,000 for joint filers). These deductions phase out for individuals earning more than $150,000 ($300,000 for joint filers). Certain professions (such as law, health care, consulting, financial services, athletics, and performing arts) are excluded from claiming the tip deduction.

Why it matters:
Service industry workers and those who regularly earn overtime can reduce taxable income.

Tax Help Tip:
Keep detailed records of tips and overtime pay to claim these deductions accurately.

10. Deduction for Seniors

Taxpayers aged 65 and older receive an additional $6,000 deduction from 2025 through 2028, on top of the standard deduction. This deduction phases out for individuals with income over $75,000 and for joint filers with income over $150,000.

Why it matters:
This provides extra tax relief for seniors, helping with retirement income planning.

11. Car Loan Interest Deduction

For tax years 2025 through 2028, taxpayers may deduct up to $10,000 in interest paid on loans for new cars assembled in the U.S. The deduction is reduced for individuals with income above $100,000 and joint filers above $200,000.

Why it matters:
This helps reduce the cost of financing new vehicles.

Tax Help Tip:
Check that your vehicle qualifies and consider timing your purchase to maximize this deduction.

12. Pass-Through Business Deduction (Section 199A) Enhanced

The 20% deduction for qualified business income from pass-through entities (such as S corporations, partnerships, and LLCs) is now permanent. The phase-out range is expanded, making the deduction more accessible for higher-income business owners. A new minimum deduction of $400 is established for eligible taxpayers with at least $1,000 of pass-through income, starting in 2026.

Why it matters:
Small business owners, freelancers, and entrepreneurs can reduce their taxable income significantly.

Tax Help Tip:
Review your business structure with a tax advisor to optimize your eligibility for this deduction.

13. Research and Development (R&D) Expensing

Businesses can now permanently deduct the full cost of domestic research and development expenses in the year incurred, reversing a previous change that required amortization. This encourages investment in innovation and technology.

Why it matters:
This incentivizes innovation and investment, especially for startups and tech companies.

14. Bonus Depreciation Restored

The bill permanently restores 100% bonus depreciation for qualifying property, allowing businesses to immediately write off the full cost of eligible assets in the year they are placed in service.

Why it matters:
Businesses can accelerate deductions on equipment and property purchases, improving cash flow.

15. Business Interest Expense Deduction

Businesses can now calculate their adjusted taxable income (ATI) for purposes of the interest deduction without subtracting depreciation and amortization, making it easier to deduct more interest expense. This provision is permanent.

Why it matters:
This change supports business expansion and financing flexibility.

16. Debt Limit Increase

The legislation also raises the federal debt limit by $5 trillion, reflecting the scale of the tax and spending changes.

How to Get IRS Tax Help in 2025

• Stay informed: Follow IRS updates and trusted tax news sources.
• Keep organized records: Documentation is key to claiming deductions and credits.
• Consult tax professionals: Complex tax situations benefit from expert advice.
• Act early: Early tax planning helps maximize benefits and avoid last-minute issues.

Final Thoughts

The “One Big Beautiful Bill Act” introduces significant tax changes that affect nearly all taxpayers. By understanding these provisions and planning accordingly, you can reduce your tax burden, increase your refund, and avoid IRS complications. Whether you’re an individual, parent, senior, or business owner, now is the time to review your tax strategy.

For personalized IRS tax help and to make the most of these changes, consult our qualified tax professional today.