On July 4, 2025, the One Big Beautiful Bill (OBBB)—officially called the 2025 Tax Act—was signed into law. This sweeping legislation brings major updates to individual taxation. While some provisions are extensions of past rules, others introduce brand-new opportunities and considerations for taxpayers.
Here’s a breakdown of the most impactful changes and how they may affect your financial planning.
Lower Individual Tax Rates Made Permanent
The Act makes permanent the lower individual rates introduced under the Tax Cuts and Jobs Act (TCJA). That means:
- The top tax rate remains 37% (instead of rising back to 39.6%).
- Marriage penalty relief continues for most brackets, allowing many married couples to avoid higher taxes than they would pay filing separately.
Higher Standard Deduction
Beginning in 2025, the standard deduction increases significantly:
- $31,500 for joint filers and surviving spouses
- $23,625 for heads of household
- $15,750 for singles and married filing separately
Expanded Family and Education Credits
The Child Tax Credit (CTC) is now permanent and increases to $2,200 per child, adjusted annually for inflation.
Starting in 2026, families may receive up to 50% of eligible expenses (up to $3,000 for one child, $6,000 for two or more). Income thresholds apply, so keep good records and coordinate with employer benefits.
From 2025, families adopting children can receive a refundable credit of up to $5,000 per child—even if they owe no tax.
For the American Opportunity and Lifetime Learning Credits, you’ll need to provide social security numbers (SSNs) for yourself and the student, plus the EIN of the institution where tuition was paid. Accuracy is key to avoiding denied credits.
New Deductions and Enhancements
- Senior Deduction: From 2025–2028, taxpayers age 65+ can claim a $6,000 deduction, available even if you don’t itemize.
- Car Loan Interest Deduction: For 2025–2028, you can deduct up to $10,000 of interest on new personal-use vehicles if income thresholds are met.
- SALT Deduction: Temporarily increased to $40,000 in 2025, gradually phasing out for higher-income taxpayers, before reverting back to $10,000 in 2030.
Other Notable Updates
- Charitable Contributions: Permanent 60% limit for cash donations to qualified charities.
- 529 Plans: Expanded to cover more K–12 and postsecondary expenses, with annual K–12 limits doubled to $20,000 starting in 2026.
- Estate & Gift Tax: Exclusion amount rises to $15 million beginning in 2026.
- New “Trump Accounts” for Children: Tax-deferred investment accounts with up to $5,000 in contributions annually, plus a $1,000 government contribution for eligible children born 2025–2028.
- Casualty Losses, Moving Expenses, Gambling Deductions: Rules are tightened, with some exceptions for disasters, military families, and educators.
The 2025 Tax Act reshapes many areas of individual tax planning—from deductions and credits to estate planning opportunities. With so many moving parts, the best approach is to review your personal situation with a qualified advisor and identify strategies tailored to your goals.
If you’d like help mapping out how these changes apply to you, reach out today to schedule a consultation.
Key Planning Tips
- With the tax rates locked in, now is a good time to revisit tax strategies like Roth conversions or harvesting capital gains while rates remain favorable.
- Because fewer taxpayers will itemize, consider “bunching” deductions—such as charitable donations or medical expenses—into one year to exceed the standard deduction, then taking the standard deduction in alternating years.
- Determine if you meet the income thresholds for any tax credits.