Individual Taxpayers Will Find Expanded Tax Benefits in ‘Beautiful’ Tax Bill

For individual taxpayers, the new tax bill signed into law on July 4, 2025, can be seen as a mixed bag, but with enough positive provisions to look forward to. The good news is that many popular provisions of the 2017 Tax Cuts and Jobs Act (TCJA) — including lower individual tax rates, a higher standard deduction and a significantly higher estate tax exclusion — are maintained and made permanent in the new law. The bad news is that several new tax benefits that may prove popular with taxpayers are temporary and many have income limitations that will reduce or eliminate the benefit for many of our clients.

But overall, the so-called “One Big Beautiful Bill” (OB3) contains numerous provisions that will benefit individuals and businesses. Moreover, it is the cornerstone of President Trump’s tax and policy goals and will set the tax agenda for the nation over the next several years.

Following is a summary of the legislation’s major provisions that will affect individual taxpayers. In the coming months, as we analyze the new law further, we will continue to inform you of provisions that may impact your business and personal tax positions.

Individual Tax Rates (permanent)
The TCJA lowered individual income tax rates and brackets for tax years through 2025, with the top tax rate dropping from 39.6% in 2017 to the current 37%. The OB3 bill permanently retains individual income tax rates at the current level set by TCJA, indexed for inflation annually.
Standard Deduction and Personal Exemptions (permanent)
The OB3 makes permanent the increased standard deduction that was created by the TCJA. Under the TCJA, the standard deduction was raised significantly and indexed to inflation, eliminating the need for many taxpayers to itemize deductions. The OB3 sets the standard deduction for 2025 at $15,750 for single taxpayers and $31,500 for married joint filers, and the deduction will be indexed for inflation in future years. The OB3 permanently eliminates personal exemptions by setting the deduction for personal exemptions at zero.
Additional Senior Deduction (temporary)
The OB3 provides a temporary $6,000 deduction for individual taxpayers who are age 65 or older. This senior deduction begins to phase out when a taxpayer’s modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for married joint filers). It will be in effect for tax years 2025 through 2028.
Child Tax Credit and Other Dependent Credits (permanent)
The OB3 increases the amount of the non-refundable child tax credit to $2,200 per child beginning with the 2025 tax year, and indexes the credit amount annually for inflation. The new law requires that each child and at least one parent have a Social Security number in order to qualify for the Child Tax Credit.The bill also makes permanent the $1,400 refundable child tax credit, indexed for inflation. Additionally, it makes permanent the increased income phaseout threshold amounts of $200,000 ($400,000 for married joint filers), as well as the $500 non-refundable credit for each dependent of the taxpayer other than a qualifying child.
Adoption Credit (permanent)
The bill makes a portion (up to $5,000) of the Sec. 23 adoption credit refundable. That amount will be indexed for inflation.

Trump Accounts (permanent)
The OB3 creates a new type of tax-deferred savings account for minors known as “Trump Accounts.” The accounts are structured as a type of individual retirement account (IRA, but not a Roth IRA) under Sec. 408(a), and are designated for the exclusive benefit of children under age 18. Contributions are capped at $5,000 a year, indexed for inflation after 2027, and can only be made in calendar years before the beneficiary turns 18. Distributions can be made starting in the calendar year the beneficiary turns 18. Trump accounts will have to be designated as such when they are set up, and the bill does not allow contributions until 12 months after the date of enactment of the bill, which is helpful since it is an entirely new type of account.
Estate Tax Exemption (permanent)
The OB3 permanently sets the federal estate tax exemption at $15 million ($30 million for married joint filers) and indexes it annually for inflation. Under the TCJA, the estate tax exemption was roughly doubled from its previous levels, and with indexing had reached $13.99 million per individual ($27.9 million for married joint filers) as of 2025. The new exclusion of $15 million is effective for the 2025 tax year.
State and Local Tax Deduction (temporary)
One of the most controversial provisions of the TCJA was a $10,000 cap on the amount of state and local taxes (SALT) taxpayers could deduct on their federal income tax returns. This hit taxpayers hard in states with both high taxes and high property values, and in response, 36 states enacted “SALT workaround” laws that enabled owners of pass-through businesses to claim their SALT deductions as a business expense, which avoided the cap.

The OB3 temporarily raises the SALT deduction cap to $40,000, indexed to a 1% annual increase, effective for the 2025 tax year. However, this more generous cap comes with limits. The $40,000 cap begins to phase out for taxpayers with adjusted gross income of more than $500,000 but not below the existing $10,000 limit. Additionally, the cap will revert to $10,000 in 2030.
Mortgage Interest Deduction (permanent)
The deduction for home mortgage interest is now permanently limited to interest on the first $750,000 of total home acquisition debt (for married couples filing jointly or single filers). This locks in the lower cap introduced with TCJA, which was set to expire in 2025. It means large mortgages will continue to get only a partial interest write-off.The new law also makes permanent the restrictions on deducting home equity debt interest, which means interest on home equity loans or HELOCs is deductible only if the loan is used to buy, build, or substantially improve your home.

On the bright side, the new law reinstates the deduction for mortgage insurance premiums (PMI) and makes it permanent, which will benefit first-time and low-down payment buyers. If you pay premiums for PMI or government mortgage insurance (e.g., FHA, VA, USDA loan insurance), those premiums can now be treated like mortgage interest and deducted as an itemized deduction each year.

Miscellaneous Itemized Deductions (permanent)
The bill makes permanent the TCJA’s suspension of deduction for miscellaneous itemized deductions, including investment management fees and unreimbursed employee expenses. However, OB3 does remove unreimbursed employee expenses for eligible educators from the list of disallowed miscellaneous itemized deductions.

Gambling Losses Limitation (permanent)
The OB3 reduces the deductibility of gambling losses to 90% of losses and limits the deduction to being claimed only against gains made from wagering. Previously, gamblers were able to deduct 100% of their gambling losses up to the extent of their winnings. In other words, if a gambler had $3,000 in losses in a particular year, and $2,500 in winnings, they could deduct $2,500 in losses against those winnings. Reduction of the wagering losses deduction means that gamblers who break even or have small losses will likely have tax liability on their winnings, even though they are in a negative position. Additionally, since gambling losses are an itemized deduction, someone with winnings will also need to itemize in order to reduce income by their losses.

Charitable Contributions (temporary)
The OB3 creates a charitable contribution deduction allowing non-itemizers to claim a deduction of up to $1,000 for single filers and $2,000 for married joint filers. For itemizers, the bill imposes a 0.5% floor on the charitable contribution deduction. The amount of an individual’s charitable contributions for a tax year is reduced by 0.5% of the taxpayer’s adjusted gross income. This means that amounts up to $1,000 for individual taxpayers, minus .05% of their AGI, are deductible. For corporations, the floor will be 1% of the corporation’s taxable income, and the charitable contribution deduction cannot exceed the current 10%-of-taxable-income limit.

Tax Deduction on Tips (temporary)
Contrary to widespread expectations before the bill was enacted, the OB3 does not exclude tip income from taxation. What the act provides is a temporary tax deduction that workers can claim against tip income. Taxpayers need not itemize in order to take this deduction, but a Social Security number is required to claim it. The deduction is capped at $25,000 and begins to phase out at MAGI over $150,000 ($300,000 for joint filers). The deduction expires after the 2028 tax year. There will be guidance to ensure that only workers in roles where tips are customary will benefit.
Tax Deduction on Overtime Pay (temporary)
Similar to the deduction for tip income, under OB3 taxpayers may claim a deduction for overtime pay without itemizing. This temporary deduction is capped at $12,500 and begins to phase out at MAGI over $100,000 ($200,000 for joint filers). The deduction expires after the 2028 tax year. It is also important to note that the deduction is only for the “half” portion of “time and a half” pay for overtime.

Auto Loan Interest Deduction (temporary)
Under OB3, new car buyers will be able to deduct up to $10,000 in qualified passenger vehicle loan interest during a given taxable year, beginning in 2025 and extending through 2028. Taxpayers need not itemize deductions to be eligible for this deduction. The deduction applies only to the purchase of new cars (not used) and does not apply to leased autos. The exclusion is capped at $10,000 per year and will phase out for taxpayers with MAGI in excess of $100,000 ($200,000 for married taxpayers filing jointly).To qualify for the deduction, a vehicle also must be assembled in the U.S. The deduction only applies to vehicles purchased for personal use, not for fleets or commercial purposes.

Student Loan Payments by Employers (permanent)
Employers may provide employees with undergraduate or graduate-level educational assistance, including payments toward their student loans, through their employee benefit plans. The option to use educational assistance programs for student loans was set to expire at the end of 2025. However, OB3 permanently extends this student loan payment option. Additionally, tax-free benefits under any educational assistance program are limited to $5,250 per employee per year. Typically, educational assistance provided above this level is taxable as wages. Beginning in 2027, the OB3 annually indexes the $5,250 limit for inflation.
100% Bonus Depreciation and Sec. 179 Deduction Limits (permanent)
For owners of pass-through entities, the OB3 provides significant tax benefits in the way of restored 100% bonus depreciation and increased Sec. 179 deduction limits.

The TCJA had provided 100% bonus depreciation, with a step-down of 20% per year starting in 2023 until expiration in 2027. The step-down reached 40% in 2025. With restoration of 100% bonus depreciation retroactive to January 19, 2025, as provided by the bill, businesses that have already made capital expenditures in 2025 with the expectation of 40% bonus depreciation will reap an additional benefit.

Like bonus depreciation, Sec. 179 allows businesses to deduct the cost of certain equipment immediately, rather than over time. Qualifying purchases include office furniture, computers and certain software, business machinery and certain vehicles such as cargo vans.Under previous law, taxpayers were limited to claiming a maximum $1.25 million deduction under Sec. 179 on a single item, and a cumulative maximum of $3.13 million in a single tax year.

The OB3 law raises those limits to $2.5 million and $4 million, respectively.

Clean Energy Tax Credits Terminated
The bill terminates and changes a large number of clean energy tax incentives for businesses and individuals. These changes include credits on clean energy vehicles, energy efficient home improvements, including solar and commercial building energy improvements. For those impacted, these are important changes, and additional information can be provided.

We’re here to help

When looking at OB3 as a whole, the act appears to provide more advantages than disadvantages for taxpayers, depending on income and other circumstances and their ability to navigate the complexities of new rules. We will continue to analyze the legislation and do our best to keep you informed about provisions that may affect you. In the meantime, if you have questions or concerns, contact your JLK Rosenberger team member or click here to contact us. We look forward to speaking with you.