🏛️ The One Big Beautiful Bill (P.L. 119-21) permanently enacts many of the 2017 TCJA tax cuts, introduces new family- and business-friendly tax benefits, and refines several existing provisions. Below is a breakdown of the major changes:
💵 Permanent Reduction in Income Tax Rates
✅ Individual & Trust Brackets (Post-2025):
- Retains 7 individual rates: 10%, 12%, 22%, 24%, 32%, 35%, 37%
- Retains trust/estate brackets: 10%, 24%, 35%, 37%
✅ Marriage Penalty Relief:
- Keeps the doubled brackets for joint filers (except for the 37% rate).
📉 Capital Gains & Dividends:
- Retains 0%, 15%, and 20% rates. Keeps TCJA breakpoints permanently.
📈 Inflation Indexing Updated:
- For lower brackets (10%, 12%): CPI chained to 2016.
- For others: CPI chained to 2017.
📌 Ref: Act Sec. 70101, Code Sec. 1(j)
🧾 Standard Deduction – Increased & Indexed
New Base Amounts (post-2024):
- 👨👩👧👦 Joint filers: $31,500
- 👤 Head of household: $23,625
- 🧍♂️ Single/MFS: $15,750
🔄 Inflation Adjustment:
- CPI chained to 2024 instead of 2017.
📌 Ref: Act Sec. 70102, Code Sec. 63(c)(7)
👶 Child Tax Credit (CTC) & Other Dependents Credit
👧 CTC – Permanent Expansion
- Increased to $2,200/child, indexed for inflation (from 2026).
- Must include both parent and child SSNs.
👵 Other Dependents Credit
- $500 nonrefundable credit made permanent (e.g., for older children, parents).
⚠️ IRS can now automatically reject credits without valid SSNs (treated as a clerical error).
📌 Ref: Act Sec. 70104, Code Sec. 24(h), 6213(g)(2)(I)
🏘️ State and Local Tax (SALT) Deduction Cap
📈 Raised Cap:
- 2025: $40,000
- 2026: $40,400 ➕ 1%/year until 2029
⚠️ Phaseout for high earners:
- Begins at MAGI > $500,000 (2025), increases 1%/year
- Max 30% reduction, but deduction won’t go below $10,000
📌 Ref: Act Sec. 70120, Code Sec. 164(b)(6)
⚰️ Estate & Gift Tax – Higher Basic Exclusion
📈 Increased to $15 million (from $10M) starting 2026
- Indexed annually for inflation
- Spousal exclusion continues
📌 Ref: Act Sec. 70106, Code Sec. 2010(c)(3)
🚫 Pease Limitation Repealed
Previously reduced itemized deductions by 3% of income over certain thresholds.
📉 New rule: 2/37 reduction of the lesser of:
- Itemized deductions OR
- Income exceeding the 37% bracket threshold
✅ Exemption: Sec. 199A (QBI deduction)
📌 Ref: Act Sec. 70111, Code Sec. 68
🧮 Alternative Minimum Tax (AMT) – Higher Exemption
✅ Exemption thresholds permanently increased for individuals & joint filers
- $70,300 (single) / $109,400 (joint) ➕ inflation-adjusted
- Phaseouts start at $1,000,000
📌 Ref: Act Sec. 70107, Code Sec. 55(d)(4)
🚑 Premium Tax Credit (PTC) – Repayment Cap Removed
🧾 Previously, taxpayers had a cap on repaying excess PTCs based on income level.
🚨 Now: All taxpayers must repay the full excess advance PTC, regardless of income.📌
Ref: Act Sec. 71305, Code Sec. 36B(f)(2)
🏭 Business & Energy Highlights
✅ Full expensing for R&D and capital investments made permanent
🌆 Opportunity Zones – incentives extended
❌ EV tax credits for commercial vehicles eliminated
⚛️ Nuclear & domestic energy incentives added
💵 Permanent Reduction in Income Tax Rates
✅ Individual & Trust Brackets (Post-2025):
- Retains 7 individual rates: 10%, 12%, 22%, 24%, 32%, 35%, 37%
- Retains trust/estate brackets: 10%, 24%, 35%, 37%
✅ Marriage Penalty Relief:
- Keeps the doubled brackets for joint filers (except for the 37% rate).
📉 Capital Gains & Dividends:
- Retains 0%, 15%, and 20% rates. Keeps TCJA breakpoints permanently.
📈 Inflation Indexing Updated:
- For lower brackets (10%, 12%): CPI chained to 2016.
- For others: CPI chained to 2017.
📌 Ref: Act Sec. 70101, Code Sec. 1(j)
🧾 Standard Deduction – Increased & Indexed
New Base Amounts (post-2024):
- 👨👩👧👦 Joint filers: $31,500
- 👤 Head of household: $23,625
- 🧍♂️ Single/MFS: $15,750
🔄 Inflation Adjustment:
- CPI chained to 2024 instead of 2017.
📌 Ref: Act Sec. 70102, Code Sec. 63(c)(7)
👶 Child Tax Credit (CTC) & Other Dependents Credit
👧 CTC – Permanent Expansion
- Increased to $2,200/child, indexed for inflation (from 2026).
- Must include both parent and child SSNs.
👵 Other Dependents Credit
- $500 nonrefundable credit made permanent (e.g., for older children, parents).
⚠️ IRS can now automatically reject credits without valid SSNs (treated as a clerical error).
📌 Ref: Act Sec. 70104, Code Sec. 24(h), 6213(g)(2)(I)
🏘️ State and Local Tax (SALT) Deduction Cap
📈 Raised Cap:
- 2025: $40,000
- 2026: $40,400 ➕ 1%/year until 2029
⚠️ Phaseout for high earners:
- Begins at MAGI > $500,000 (2025), increases 1%/year
- Max 30% reduction, but deduction won’t go below $10,000
📌 Ref: Act Sec. 70120, Code Sec. 164(b)(6)
⚰️ Estate & Gift Tax – Higher Basic Exclusion
📈 Increased to $15 million (from $10M) starting 2026
- Indexed annually for inflation
- Spousal exclusion continues
📌 Ref: Act Sec. 70106, Code Sec. 2010(c)(3)
🚫 Pease Limitation Repealed
Previously reduced itemized deductions by 3% of income over certain thresholds.
📉 New rule: 2/37 reduction of the lesser of:
- Itemized deductions OR
- Income exceeding the 37% bracket threshold
✅ Exemption: Sec. 199A (QBI deduction)
📌 Ref: Act Sec. 70111, Code Sec. 68
🧮 Alternative Minimum Tax (AMT) – Higher Exemption
✅ Exemption thresholds permanently increased for individuals & joint filers
- $70,300 (single) / $109,400 (joint) ➕ inflation-adjusted
- Phaseouts start at $1,000,000
📌 Ref: Act Sec. 70107, Code Sec. 55(d)(4)
🚑 Premium Tax Credit (PTC) – Repayment Cap Removed
🧾 Previously, taxpayers had a cap on repaying excess PTCs based on income level.
🚨 Now: All taxpayers must repay the full excess advance PTC, regardless of income.
📌 Ref: Act Sec. 71305, Code Sec. 36B(f)(2))
👵 Senior Deduction Replaces Personal Exemptions
❌ Personal Exemptions Permanently Eliminated
- Pre-2018 deduction no longer returns
✅ New Senior Deduction (2025–2028):
Phased out at AGI over $75,000 ($150,000 joint)
$6,000 per qualifying taxpayer age 65+
📌 Must include SSN on return to qualify 📌 Clerical error rules apply for missing SSNs
📌 Ref: Act Sec. 70103, Code Sec. 151(d)(5), 6213(g)(2)
🚗 New Car Loan Interest Deduction (2025–2028)
🆕 Up to $10,000 per year in interest deduction
✅ Conditions:
- Vehicle must be new, personal-use, U.S.-assembled, under 14,000 lbs
- Secured by first lien loan
- VIN must be reported
- Phaseout begins at $100,000 MAGI ($200,000 joint)
📌 Lenders must report interest to IRS 📌 Ref: Act Sec. 70203, Code Sec. 613(h), 6050AA
👶 Enhanced Child & Dependent Care Credit
💰 Credit rate increased to 50%, phased down to 35%, then to 20% for higher incomes
✅ Maximum qualifying expenses:
- $3,000 (1 dependent)
- $6,000 (2+ dependents)
📌 Effective for tax years after 2025
📌 Ref: Act Sec. 70405, Code Sec. 21A
🎓 $1,700 Scholarship Credit for Donations
💳 Credit for donations to state-approved scholarship-granting organizations
✅ Max $1,700 credit/year ✅ Only available in participating states ✅ Excess credit can be carried forward 5 years
⚠️ Cannot double-count as a charitable deduction 📌 Ref: Act Sec. 70411, Code Sec. 25F, 139K
🌪️ Disaster Loss Deduction Extended
🚨 Victims of natural disasters can:
- Claim losses without itemizing
- Use increased $500 per-casualty threshold
- Add net disaster loss to standard deduction
📌 Ref: Act Sec. 70438, Code Sec. 165(h)
🧑🎓 SSN/EIN Requirement for Education Credits
✅ To claim AOTC/Lifetime Learning Credit:
- Must include student SSN
- Must include school EIN for tuition payments
📌 Missing SSNs/EINs treated as clerical errors 📌 Ref: Act Sec. 70606, Code Sec. 25A, 6213
💵 Permanent Reduction in Income Tax Rates
✅ Individual & Trust Brackets (Post-2025):
- Retains 7 individual rates: 10%, 12%, 22%, 24%, 32%, 35%, 37%
- Retains trust/estate brackets: 10%, 24%, 35%, 37%
✅ Marriage Penalty Relief:
- Keeps the doubled brackets for joint filers (except for the 37% rate).
📉 Capital Gains & Dividends:
- Retains 0%, 15%, and 20% rates. Keeps TCJA breakpoints permanently.
📈 Inflation Indexing Updated:
- For lower brackets (10%, 12%): CPI chained to 2016.
- For others: CPI chained to 2017.
📌 Ref: Act Sec. 70101, Code Sec. 1(j), 6213
🧾 Standard Deduction – Increased & Indexed
New Base Amounts (post-2024):
- 👨👩👧👦 Joint filers: $31,500
- 👤 Head of household: $23,625
- 🧍♂️ Single/MFS: $15,750
🔄 Inflation Adjustment:
- CPI chained to 2024 instead of 2017.
📌 Ref: Act Sec. 70102, Code Sec. 63(c)(7)
👶 Child Tax Credit (CTC) & Other Dependents Credit
👧 CTC – Permanent Expansion
- Increased to $2,200/child, indexed for inflation (from 2026).
- Must include both parent and child SSNs.
👵 Other Dependents Credit
- $500 nonrefundable credit made permanent (e.g., for older children, parents).
⚠️ IRS can now automatically reject credits without valid SSNs (treated as a clerical error).
📌 Ref: Act Sec. 70104, Code Sec. 24(h), 6213(g)(2)(I)
🏘️ State and Local Tax (SALT) Deduction Cap
📈 Raised Cap:
- 2025: $40,000
- 2026: $40,400 ➕ 1%/year until 2029
⚠️ Phaseout for high earners:
- Begins at MAGI > $500,000 (2025), increases 1%/year
- Max 30% reduction, but deduction won’t go below $10,000
📌 Ref: Act Sec. 70120, Code Sec. 164(b)(6)
⚰️ Estate & Gift Tax – Higher Basic Exclusion
📈 Increased to $15 million (from $10M) starting 2026
- Indexed annually for inflation
- Spousal exclusion continues
📌 Ref: Act Sec. 70106, Code Sec. 2010(c)(3)
🚫 Pease Limitation Repealed
Previously reduced itemized deductions by 3% of income over certain thresholds.
📉 New rule: 2/37 reduction of the lesser of:
- Itemized deductions OR
- Income exceeding the 37% bracket threshold
✅ Exemption: Sec. 199A (QBI deduction)
📌 Ref: Act Sec. 70111, Code Sec. 68
🧮 Alternative Minimum Tax (AMT) – Higher Exemption
✅ Exemption thresholds permanently increased for individuals & joint filers
- $70,300 (single) / $109,400 (joint) ➕ inflation-adjusted
- Phaseouts start at $1,000,000
📌 Ref: Act Sec. 70107, Code Sec. 55(d)(4)
🚑 Premium Tax Credit (PTC) Changes
❌ Full Repayment of Excess APTC Required
- No income-based cap; entire excess must be repaid.
- 📌 Ref: Act Sec. 71305, Code Sec. 36B(f)(2)
👤 Some Lawfully Present Aliens Now Ineligible
- PTC only allowed for “eligible aliens” (e.g., green card holders, COFA residents, Cuban/Haitian entrants).
- 📌 Ref: Act Sec. 71301, Code Sec. 36B(e)
✅ Exchange Verification Required
- PTC only allowed after eligibility verified by Exchange
- Pre-enrollment verification process required by August 1
- 📌 Ref: Act Sec. 71303, Code Sec. 36B(c)
🚫 No PTC for Lawfully Present Aliens Below Poverty Line
- Eliminates Medicaid exception for such aliens
- 📌 Ref: Act Sec. 71302, Code Sec. 36B(c)(1)
❗️ No PTC for Certain Special Enrollment Plans
- Disqualifies plans enrolled via income-only SEPs
📌 Ref: Act Sec. 71304, Code Sec. 36B(c)(3)(A)
👵 Senior Deduction Replaces Personal Exemptions
❌ Personal Exemptions Permanently Eliminated
- Pre-2018 deduction no longer returns
✅ New Senior Deduction (2025–2028):
- $6,000 per qualifying taxpayer age 65+
- Phased out at AGI over $75,000 ($150,000 joint)
📌 Must include SSN on return to qualify 📌 Clerical error rules apply for missing SSNs
📌 Ref: Act Sec. 70103, Code Sec. 151(d)(5), 6213(g)(2)
🚗 New Car Loan Interest Deduction (2025–2028)
🆕 Up to $10,000 per year in interest deduction
✅ Conditions:
- Vehicle must be new, personal-use, U.S.-assembled, under 14,000 lbs
- Secured by first lien loan
- VIN must be reported
- Phaseout begins at $100,000 MAGI ($200,000 joint)
📌 Lenders must report interest to IRS
📌 Ref: Act Sec. 70203, Code Sec. 613(h), 6050AA
👶 Enhanced Child & Dependent Care Credit
💰 Credit rate increased to 50%, phased down to 35%, then to 20% for higher incomes
✅ Maximum qualifying expenses:
- $3,000 (1 dependent)
- $6,000 (2+ dependents)
📌 Effective for tax years after 2025 📌 Ref: Act Sec. 70405, Code Sec. 21
🎓 $1,700 Scholarship Credit for Donations
💳 Credit for donations to state-approved scholarship-granting organizations
✅ Max $1,700 credit/year ✅ Only available in participating states ✅ Excess credit can be carried forward 5 years
⚠️ Cannot double-count as a charitable deduction 📌 Ref: Act Sec. 70411, Code Sec. 25F, 139K
🌪️ Disaster Loss Deduction Extended
🚨 Victims of natural disasters can:
- Claim losses without itemizing
- Use increased $500 per-casualty threshold
- Add net disaster loss to standard deduction
📌 Ref: Act Sec. 70438, Code Sec. 165(h)
🧑🎓 SSN/EIN Requirement for Education Credits
✅ To claim AOTC/Lifetime Learning Credit:
- Must include student SSN
- Must include school EIN for tuition payments
📌 Missing SSNs/EINs treated as clerical errors 📌 Ref: Act Sec. 70606, Code Sec. 25A, 6213
🧾 Miscellaneous Deductions Eliminated, Educator Deduction Added
❌ Permanent end to miscellaneous itemized deductions ✅ New deduction for educators’ unreimbursed expenses under Code Sec. 67(b)
📌 Ref: Act Sec. 70110, Code Sec. 67(g)
🍼 New Trump Investment Accounts for Children
🏦 Tax-deferred accounts for U.S. citizen children with SSNs
✅ $5,000/year limit (inflation-adjusted)
✅ $1,000 newborn pilot deposit (2025–2028 births)
✅ Grows tax-deferred in index fund
✅ No withdrawals before age 18 (with exceptions)
📌 IRS will auto-open account if not done by first tax filing 📌 Ref: Act Sec. 70204, Code Secs. 530A, 128, 139J, 6434
