One Big Beautiful Bill Act updates: Individual Taxation
The "One Big Beautiful Bill Act" introduces significant, permanent changes to the tax code affecting individuals and investors. Below is a summary of the key updates:
Individual Income Tax Rates: The 2017 tax brackets are now permanent, locking in the top 37% rate and indexing all brackets for inflation.
Standard Deductions: The current doubled standard deduction amounts (approximately $15,750 for singles and $31,500 for married couples) are made permanent to avoid a scheduled 50% reduction.
SALT Deductions: The cap on State and Local Tax (SALT) deductions has been increased from $10,000 to $40,000, and the business election for entity-level state tax payments is codified.
Miscellaneous Itemized Deductions: The elimination of miscellaneous itemized deductions for legal, professional, and financial planning fees is now permanent.
Senior Deduction: Individuals turning 65 now qualify for an additional $6,000 deduction per person, with phased-out benefits for those exceeding specific modified adjusted gross income thresholds.
Tax on Tips and Overtime: A new federal deduction is introduced for service workers in industries that customarily receive tips (up to $25,000) and for overtime pay (up to $12,500 for singles and $25,000 for married couples), effective through 2028.
Child & Adoption Credits: The Child Tax Credit is permanently increased to $2,200 per child with inflationary indexing and a refundable portion, while the Adoption Tax Credit is now partially refundable up to $17,000.
Mortgage & Auto Loan Interest: Mortgage interest deductions for primary residences are maintained with strict indebtedness rules, and a new deduction for interest on new US-assembled car loans (up to $10,000) is available through 2028.
529 Plans & Education: 529 plan rules are now permanent, allowing for $20,000 in annual withdrawals to cover workforce training and credentialing expenses.
AMT & Estate Taxes: The Alternative Minimum Tax (AMT) relief is made permanent, and the lifetime estate tax exemption has been raised to $15 million per individual, indexed for inflation.
HSAs: Health Savings Account (HSA) eligibility has been expanded to include more insurance plan types, facilitating continued triple-tax-advantaged savings . To be eligible for HSA, individuals must meet requirements, including being covered by a high deductible health plan (HDHP), can’t have disqualifying health coverage (e.g., Medicare), and not claimed as someone else’s dependent. Self-only HDHP coverage ($4,400 per year); Family HDHP coverage ($8,750 per year). Catch-up contributions, additional $1,000 per person per year for individuals age 55 or older.
Disclaimer:
This blog is intended for informational and educational purposes only and should not be construed as tax, legal, investment, or accounting advice. The content is based on general tax principles and may not reflect the most current legal developments or individual tax situations. Tax laws are subject to interpretation and change, and outcomes may vary based on specific facts and circumstances. You should consult a licensed tax professional or advisor regarding your specific situation before taking any action. Reading this blog does not create a client-advisor relationship.