The OBBA is here and comes with some significant changes.  Officially signed into law on July 4^th, the OBBA introduces new provisions, removes existing, and expands certain provisions from the 2017 Tax Cut and Jobs Act (TCJA) impacting individuals and businesses.  Since a number of these provisions take effect in 2025 and 2026, it would be a good idea to keep reading and make sure you are informed!

What’s New?

Senior Deduction

There is a new $6,000 deduction for seniors 65 or older.  This deduction is per individual so $12,000 if married and 65+.

Now, it is important to note that this deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 if married).

This deduction is effective for the tax years of 2025-2028.

No Tax on Tips

Yes, you heard right. No tax on tips…up to $25,000.  Can’t forget that part.

The deduction starts to phase out for individuals with modified adjusted gross income over $150,000 ($300,000 if married).

This deduction is not available to self-employed individuals in a Specified Service Trade or Business (SSTB). In addition, this deduction is not available for employees of a SSTB employer.

This deduction is effective for the tax years of 2025-2028.

No Tax on Overtime

What’s the catch? Not necessarily a catch but there definitely are limitations. There will be no tax on overtime up to $12,500 ($25,000 for joint filers).

This deduction is effective for the tax years of 2025-2028.

No Tax on Car Loan Interest

That new vehicle you just bought this year… yes that one. You will receive a tax deduction up to $10,000 for the interest IF

• The vehicle was purchased after December 31, 2024.
• The vehicle is new (sorry used vehicles don’t qualify).
• The vehicle is for personal use (no business or commercial use)
• Secured by a lien on the vehicle.
• The vehicle is less than 14,000 pounds and undergone final assembly in the United States

This deduction starts to phase out for taxpayers with modified adjusted gross income of $100,000 ($200,000 married filing joint).

This deduction is effective for the tax years of 2025-2028.

Charitable Contribution Floor and Non-Itemizer deduction

Beginning in 2026, there will be a .5% floor before you can deduct charitable contributions (for itemizers). What does that look like? See below.

Adjusted Gross Income (AGI): $100,000

New Floor: $500 ($100,000 x.005)

Charitable Contributions: $2,000

Eligible deduction: $1,500 ($2,000 contribution – $500 floor)

There is also an introduction of a charitable contribution deduction for taxpayers that do not itemize. The deduction amount is up to $1,000 for single filers ($2,000 if married filing joint).

What received an upgrade?

Increased SALT deduction

Homeowners and taxpayers with state income tax are beaming over this one.  For the years of 2025-2029, there is a temporary increase of the state and local tax deduction of up to $40,000 ($10,000 previously).

Important note, you must itemize to take this deduction.

This deduction begins to phase out for taxpayers with modified adjusted gross income of $500,000 ($250,000 if married filing separately).

This deduction and income threshold will increase by 1% annually from 2026-2029.

Increased Child Tax Credit

The tax credit has increased from $2,000 to $2,200 per qualifying child.

Adoption Credit Refundable

The adoption credit is partially refundable up to $5,000. For context, it was non-refundable prior to OBBA.

What does refundable mean? This means that the credit can take your bill below zero, triggering a refund.

What was cut?

New Clean Vehicle Credit

That electric vehicle credit of $7,500 you used to hear about… yeah that’s gone for vehicles purchased after September 30, 2025.  If you purchased an electric vehicle prior to that date, you could still be eligible to take the credit.

Used Clean Vehicle Credit

The $4,000 credit for used electric vehicles is no longer available for vehicles purchased after September 30, 2025.

Qualified Commercial Clean Vehicle Credit

Similar to the credits above, this credit is no longer available for vehicles purchased after September 30, 2025.

Energy Efficient Home Improvement Credit

Energy efficient upgrades to your home will no longer qualify for a tax credit after December 31, 2025.

Residential Clean Energy Credit

If you were contemplating on those solar panels… you may want to make that decision swiftly as the credit will no longer be available after December 31, 2025.

What remained the same?

• Tax Brackets-The 7 brackets will remain ranging from 10% to 37%
• Increased Standard Deduction Permanent

2025 Amounts

• Single or Married Filing Separately — $15,750
• Head of Household — $23,625
• Married Filing Jointly or Qualifying Surviving Spouse — $31,500
• Personal exemption eliminated
• Child Tax Credit Income Limits- The phase out remains at $200,000 for individuals ($400,000 for married filing joint)
• QBI Deduction- The deduction up to 20% for business owners is here to stay.
• Corporate Tax Rate- This remains at 21%
• Mortgage Interest Deduction Limits- The limit stays at $750,000 for married couples ($375,000 for married filing separate).
• Section 1031 Exchanges- No changes here. I know the real estate investors are pleased.

Note, this list is not exhaustive.

Sources:

https://www.congress.gov/bill/119th-congress/house-bill/1/text

https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions