The recently enacted One Big Beautiful Bill Act (OBBBA) is certainly big, but is it “beautiful”? Many provisions in the OBBBA will have noticeable impacts on individual taxpayers, including some that are beneficial to your wallet.
What can you expect from the OBBBA?
Building on the TCJA
Signed into law in early July 2025, the OBBBA makes the largest set of federal tax changes since the 2017 Tax Cuts and Jobs Act (TCJA), which overhauled the US tax code by significantly lowering individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source rates and brackets, slashing the corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate, and allowing businesses to temporarily deduct 100 percent of the cost of short-lived capital assets through full expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs., among other notable changes.
Most of the individual TCJA reforms were only temporary and absent congressional action were set to expire at the end of 2025, reverting the tax code to how it was before 2018. The OBBBA’s passage was critical to preventing this eventuality and preserving some of the TCJA’s most pro-taxpayer and pro-growth features.
The law also introduced an assortment of new features that differ from the TCJA.
TJCA Era Individual Tax Provisions
The OBBBA made permanent key TCJA-era individual tax features, such as lower ordinary income tax rates and bracket widths. If not for this permanence, around 62 percent of taxpayers would have seen a tax hike in 2026.
Other important individual tax provisions, such as a larger standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. Taxpayers who take the standard deduction cannot also itemize their deductions; it serves as an alternative. and child tax credit (CTC), higher alternative minimum tax (AMT) exemption and threshold amount, and tighter limits on certain itemized deductions like home mortgage interest deductions (HMID), are also now permanent.
In some cases, the OBBBA has also made these TCJA tax provisions more generous. For instance, the law increases the standard deduction from $15,000 to $15,750 for single filers and $30,000 to $31,500 for joint filers for tax year 2025, and indexes it for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spendin moving forward.
For many of us, these tax changes preserve the incentive to take the standard deduction rather than itemize, simplifying the tax filing process. Likewise, the OBBBA increases the maximum CTC amount per qualifying child from $2,000 to $2,200 in 2026 and adjusts it for inflation in the future. It also modestly increases the child and dependent care tax credit, providing families with another type of cost-saving.
Relief comes for both taxpayers in both the lower and top brackets. The bill provides a minor inflation adjustment for ordinary income subject to the 10 and 12 percent brackets, cutting taxes slightly for income in these brackets. It also keeps the top tax rate of 37 percent in place, rather than allowing it to increase to 39.6 percent.
New Individual Tax Provisions
The OBBBA also includes a variety of new individual tax provisions, most of which are narrow and only temporary. Some changes include President Trump’s long-promised deductions for tips and overtime pay, as well as a new standard deduction for seniors and a deduction for car loan interest. For many, these tax provisions may have a direct impact on their personal finances.
For instance, for a taxpayer working in the food service industry (or in a different industry where tipping is common), up to $25,000 of the tip income is now tax-deductible. Similarly, if a taxpayer earns income from overtime work, up to $12,500 ($25,000 for joint filers) of the premium portion of this income is tax-deductible for tax years 2025 through 2028. In other words, such provisions reduce eligible workers’ amount of income subject to tax and, therefore, tax liability.
Other temporary new tax provisions (available 2025-2028) include a car loan interest deduction for newly financed automobiles that are assembled in the US, and a new $6,000 deduction for 65 and older qualifying seniors, also available from 2025 to 2028.
While many taxpayers may not qualify for all, or any, of these tax provisions due to their narrow focus and income phase-out specifications, at least some taxpayers will see higher take-home pay. Even so, such carve-outs are likely to increase the complexity of the tax code and may unintentionally encourage avoidance.
Big Picture
The OBBBA is comprised of many different tax provisions. Each provision has its own nuances, such as whether it is temporary or permanent, takes effect this year or next, or provides benefit for just a select few or for nearly all taxpayers.
This wide variety of provisions comes with important tradeoffs—notably, a more complicated tax code. Overall, the OBBBA increases taxpayers’ average after-tax incomes, which at the end of the day means more money in your pocket and for your family.
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