Key Tax Provisions in the One Big Beautiful Bill Act (OBBBA) Effective in 2025

The One Big Beautiful Bill Act (OBBBA) introduces a wide range of tax changes for individuals, families, and business owners, effective beginning in 2025.

At Rae’s Accounting, we’re breaking down the key provisions so you can stay informed and plan proactively.

Here’s what you need to know:

1. Marginal Tax Rates – No Change

The current marginal tax brackets—10%, 12%, 22%, 24%, 32%, 35%, and 37%—have been made permanent.

2. Standard Deduction Increases

• $15,750 – Single / Married Filing Separately

• $23,625 – Head of Household

• $31,500 – Married Filing Jointly

  These amounts will be adjusted annually for inflation.

3. New Senior Exemption

Taxpayers aged 65 and older can claim an additional $6,000 deduction.

• Phased out for Modified Adjusted Gross Income (MAGI) above $75,000 ($150,000 for MFJ).

• Applies from 2025 through 2028.

• Valid Social Security numbers are required.

4. SALT Deduction Cap Expanded

• New cap of $40,000 in 2025

• Increases by 1% annually through 2029

• Reverts to $10,000 in 2030

• Phased out for MAGI over $500,000

• Foreign taxes remain excluded from this cap

5. Child Tax Credit Increase

The credit increases to $2,200 per qualifying child starting in 2025 and will be indexed for inflation.

6. Adoption Credit Enhancement

• Up to $5,000 refundable for qualifying adoption expenses

• Maximum credit increases to $17,280 in 2025

• Indexed for inflation going forward

7. 529 Plan Expansion

Starting July 5, 2025, 529 plan distributions will be expanded to include:

• Books, tutoring, and testing fees

• Vocational training and apprenticeship programs

• The K–12 tuition limit doubles to $20,000 in 2026

8. New Tip Income Deduction

• Up to $25,000 above-the-line deduction for tipped employees in eligible industries

• Available 2025 through 2028

• Phases out at $150,000 MAGI (individual) or $300,000 (MFJ)

9. Overtime Pay Deduction

• Deduction for qualified overtime up to $12,500 (individual) / $25,000 (MFJ)

• Applies from 2025 through 2028

• Same phase-out thresholds as the tip income deduction

10. Trump Accounts for Newborns

• Starting in 2025, eligible newborns receive $1,000 in seed funding

• Contributions and withdrawals follow special tax-favored rules

11. 100% Bonus Depreciation Made Permanent

• Applies to qualified new or used property with a useful life of 20 years or less

• Effective starting January 19, 2025

12. Car Loan Interest Deduction

• Deduction of up to $10,000 for interest on new, personal-use vehicles assembled in the U.S.

• Phased out at $100,000 MAGI (single) and $200,000 (MFJ)

• Applies 2025 through 2028

13. Clean Vehicle Credits Repealed

• Sections 25E, 30D, and 45W credits end for vehicles acquired after September 30, 2025

Need Help Navigating the New Tax Law?

Every taxpayer’s situation is different. Whether you’re a business owner, working professional, or retiree, these changes may significantly impact your return.

Let’s get ahead of it.

Book your tax planning discovery call today and find out how Rae’s Accounting can help you prepare for 2025 and beyond.  Schedule a consultation