The “One Big Beautiful Bill” Is Now Law: What Taxpayers Need To Know

On July 4, the “One Big Beautiful Bill Act” (OBBBA) was signed into law, which could be one of the most consequential tax and fiscal packages in U.S. history. The legislation is as sprawling as it is significant. We’ve broken down key provisions for individuals and families below. From tax cuts, credits, and deductions to education, estate, and special needs planning, the law will have an impact on virtually every American taxpayer. 

While the full implications of the law will play out over the coming years, here’s what taxpayers need to know now: 

Tax Cuts and Jobs Act (TCJA) Provisions Now Permanent 

The new law makes permanent several key provisions from the Tax Cuts and Jobs Act (TCJA). Most notably: 

• Individual tax rates and brackets from the TCJA are here to stay. While initially set to expire in 2025, the OBBBA locks in the current tax rates and brackets permanently, with inflation adjustments taking effect in 2026.  

• The standard deduction, which nearly doubled under the TCJA, is permanently preserved and increased beginning this year as follows:
  • $15,750 for single filers
  • $23,625 for head of household
  • $31,500 for married filing jointly 

• Personal exemptions and miscellaneous itemized deductions—such as investment advisory fees and unreimbursed employee expenses—are permanently eliminated. 

• The Pease Limitation, which reduced itemized deductions for high-income earners, is replaced with a modified cap targeting top-bracket taxpayers. 

• Starting in 2026, the alternative minimum tax exemption amount will be permanently increased to $500,000 for single filers and $1 million for those married filing jointly, with further increases going forward. Additionally, the phaseout percentage will increase from 25% to 50% for 2026 and subsequent years. 

Credits and Deductions  

The new law includes many new or expanded tax credits and deductions. Below are some to be aware of: 

Child Tax Credit 

• The non-refundable child tax credit increases to $2,200 per child beginning in 2025 and will be indexed for inflation. The refundable portion of the credit, currently $1,700, is made permanent and inflation-adjusted. Income phaseout thresholds are locked in at $200,000 for single filers and $400,000 for joint filers. 

• A $500 non-refundable credit for other dependents (such as elderly parents or college-aged children) also becomes permanent. 

• Starting in 2026, dependent care benefits will increase from $5,000 to $7,500.

New Senior Deduction 

• Taxpayers aged 65 and older can now claim a $6,000 deduction, but it’s phased out for incomes over $75,000 (single) or $150,000 (joint). This provision runs through 2028.

Deductions for Tipped and Overtime Workers 

• Through 2028, workers in tipping jobs can deduct up to $25,000 of their tips from income annually, though employment taxes still apply. This phases out for incomes over $150,000 (single) or $300,000 (joint). 

• Additionally, through 2028, eligible workers can deduct up to $12,500 (single) or $25,000 (joint) in overtime pay, provided their income does not exceed $150,000 (single) or $300,000 (joint). Employment taxes still apply.

Auto Loan Interest Deduction 

• Through 2028, taxpayers can deduct up to $10,000 in interest on loans for certain U.S.-assembled vehicles acquired starting this year, with the deduction phasing out for incomes exceeding $100,000 (single) or $200,000 (joint).  

Families, Education, and Giving 

The law offers enhancements to savings and adoption incentives and deductions for some charitable donations including: 

• ABLE and 529 account rules are expanded to allow more rollover flexibility and a broader set of qualified expenses. 

• An adoption credit of up to $5,000 is now refundable. 

• A new above-the-line deduction allows non-itemizers to deduct up to $1,000 (single) or $2,000 (joint) in eligible charitable donations beginning in 2026. For anyone who itemizes, there will be a 0.5% floor starting in 2026. Finally, the 60% adjusted gross income limit for cash donations to public charities is now permanent.  

SALT Deduction Increase 

The State and Local Tax (SALT) deduction cap, originally set at $10,000 under the TCJA, is raised to $40,000, indexing at 1% per year. High-income earners—those with adjusted gross incomes of over $500,000—will see a phase-out of this expanded cap. The cap reverts to $10,000 in 2030. 

Estate and Gift Tax Exemption 

Although many high-net-worth families had feared the estate and gift tax exemption would revert to lower levels at the end of 2025, the new law provides welcome certainty. Starting in 2026, the exemption amount will permanently increase to $15 million per individual (up from $13.99 million currently), with inflation adjustments moving forward. This is a major change from the TCJA, which was set to reduce the threshold to roughly $7 million in 2026. The new law will effectively shield more estates from federal taxation. 

Conclusion 

The One Big Beautiful Bill Act marks a major reshaping of the U.S. tax landscape. While it builds on the foundation of the TCJA, this new law goes further in making permanent tax cuts and increasing or extending various credit and deduction limits. With many provisions already in effect or beginning soon, it’s important for this new legislation to be considered as part of a comprehensive financial plan. If you have any questions about this new legislation and the ways in which it could impact you or your financial situation has changed, please be sure to connect with your Sequoia advisor.