A Summary of the One Big Beautiful Act

On July 4th, President Trump signed into law H.R. 1, formally known as the One Big Beautiful Act. This new legislation makes permanent several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) and introduces new tax measures. Below is a summary of the key changes affecting individual taxpayers:

Permanent Provisions

The following tax provisions, originally set to expire on December 31, 2025, have now been made permanent:

• Tax Rates: The current tax brackets—10%, 12%, 22%, 24%, 32%, 35%, and 37%—will remain in place.
• Tax Bracket Thresholds: These will continue at the increased TCJA levels and will be adjusted annually for inflation.
• Standard Deduction: $15,750 for single filers and $31,500 for married couples filing jointly in 2025, indexed for inflation.
• Child Tax Credit: Increased to $2,200 per child, with the refundable portion also made permanent and indexed for inflation.
• Home Equity Interest Deduction: Deduction remains only when the loan is used to buy, improve, or expand a home.
• Casualty and Theft Losses: Permanently suspended unless related to a federally or state-declared disaster.
• Miscellaneous Itemized Deductions: Permanently suspended, except for educator expense deductions.
• Alternative Minimum Tax (AMT): Exemption is permanent; phaseouts revert in 2026 to 2018 levels: $500,000 (single) or $1,000,000 (joint)
• Estate and Gift Tax Exemption: Made permanent, increasing to $15 million per person starting in 2026, indexed for inflation from 2027.

New Provisions

• State and Local Tax (SALT) Deduction Cap: $10,000 cap remains through 2024; increases to $40,000 in 2025 and $40,400 in 2026. Increases 1% annually from 2027–2029, then reverts to $10,000 in 2030.
• Charitable Deduction for Standard Filers: $1,000 (single) and $2,000 (joint), effective after December 31, 2025.
• Overtime Pay Deduction: Up to $12,500 (single) or $25,000 (joint); phaseouts begin at $150,000 (single)/$300,000 (joint). Applies to 2025–2028.
• Cash Tip Deduction: Up to $25,000; same phaseouts and inflation adjustments as overtime deduction. Applies to 2025–2028.
• Auto Loan Interest Deduction: Up to $10,000 on new U.S. assembled cars purchased between 2025–2028; phaseouts at $100,000 (single)/$200,000 (joint).
• Senior Deduction: $6,000 for taxpayers over 65; phaseouts at $75,000 (single)/$150,000 (joint). Applies to 2025–2028, indexed for inflation from 2026.
• Section 529 Plans: The Act expands 529 plan benefits to include certain postsecondary credentialing expenses. It also increases the annual withdrawal limit for qualified K-12 tuition expenses from $10,000 to $20,000, effective for distributions made after the date of enactment.
• Consumer Green Energy Credits: The Act terminates several consumer green energy credits, including those for electric vehicles and residential energy-efficient home improvements. The phase-out period for these credits’ ranges from 9/30/2025 – 6/30/2026, depending on the specific credit.

We anticipate that technical corrections and Treasury regulations will be issued to clarify implementation of these new provisions. The early passage of this bill is welcomed by tax professionals, as it allows for proactive tax planning before year-end.

If you have any questions, please contact Sanderson Wealth Management or your tax professional.