What is the One Big Beautiful Bill and how does it change my 2025 taxes?

The One Big Beautiful Bill Act (OBBBA) was signed into law in 2025. It permanently extended most Tax Cuts and Jobs Act (TCJA) provisions that were set to expire at the end of 2025, while adding several new deductions. Here is a plain-English summary of the changes that affect your 2025 tax return (filed in 2026).

Standard Deduction (Higher)

• Single: $15,750 (up from $14,600 in 2024)
• Married Filing Jointly: $31,500 (up from $29,200 in 2024)
• Head of Household: $22,500

The OBBBA boosted these by an extra $750/$1,500 beyond the normal inflation adjustment. Most Americans will still take the standard deduction rather than itemize.

New Deductions for 2025

• No tax on tips: Up to $25,000 in qualified tip income is deductible (above-the-line) for workers in traditionally tipped industries such as food service, hospitality, and beauty. Income must be below $150,000 single / $300,000 joint to qualify.
• No tax on overtime: Overtime pay above the regular wage rate is deductible up to $12,500 ($25,000 married filing jointly). Must be hourly workers covered by the Fair Labor Standards Act. Same income phase-out applies.
• Car loan interest: Interest on a qualified personal vehicle loan is deductible up to $10,000 for new vehicles assembled in the U.S. Income limit: $100,000 single / $200,000 joint.
• SALT cap raised to $40,000: The state and local tax deduction cap jumped from $10,000 to $40,000. Phases out at $500,000 income.
• Senior extra deduction: Taxpayers age 65 or older can claim an additional $6,000 deduction (above the standard deduction). Phases out above $75,000 single / $150,000 joint.
• Charitable giving for non-itemizers: Up to $1,000 ($2,000 married) for cash donations made to qualifying charities, even if you take the standard deduction.
• Child Tax Credit: Increased to $2,200 per qualifying child (up from $2,000).

TCJA Provisions Made Permanent

• Lower individual tax rates (37% top rate stays; the 39.6% rate never returned)
• Higher estate tax exemption ($15 million per individual)
• 20% pass-through deduction for qualified business income (QBI) made permanent
• 100% bonus depreciation restored for business equipment
• Miscellaneous itemized deductions remain permanently eliminated

What stays the same for most people

• Tax brackets are inflation-adjusted but structurally unchanged
• Capital gains rates (0%, 15%, 20%) are unchanged
• 401(k) and IRA contribution limits are set by IRS separately, not the OBBBA

For most W-2 workers, the main items to focus on are: the higher standard deduction, the tips/overtime deductions if applicable, and the SALT cap increase if you pay significant state and local taxes.