Navigating Individual Tax Changes Under The One Big Beautiful Bill Act (OBBBA)

December 16, 2025

Key Updates and Practical Tax Strategies for Individuals

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, delivered a mix of permanent extensions of the 2017 Tax Cuts and Jobs Act (TCJA) provisions, new temporary incentives, and subtle limitations to year-end planning. While many headline items (no tax on tips, no tax on overtime, increased SALT cap) are temporary and phase out between 2028 and 2029, the core TCJA framework, which includes lower rates, higher standard deductions, and the 20% pass-through deduction, has been made permanent.

GBQ Partners recently presented a comprehensive webinar focusing on multistate income taxes. Keep reading for the most important changes and actionable tax strategies for individuals heading into the 2025 and 2026 tax years. Alternatively, click here to access the on-demand presentation of “Multistate Income Tax: Year in Review & 2026 Outlook.”

Check Out Our OBBBA Resource Library For A Complete List Of Resources.

Permanent Extensions That Provide Long-Term Stability

The OBBBA locked in several taxpayer-friendly TCJA provisions:

The top individual rate remains 37% (instead of reverting to 39.6%).
Standard deduction stays elevated: $31,500 (married filing jointly) and $15,750 (single) for 2025, indexed annually.
20% qualified business income (Section 199A) deduction is now permanent.
$750,000 mortgage-interest debt limit is permanent.
Personal exemptions remain eliminated (simplified into the larger standard deduction).

These changes remove the large “sunset cliff” that many families feared for 2026.

New (Mostly Temporary) Individual Benefits

Enhanced Deduction For Seniors (Above-the-Line)

Age 65+: additional deduction of up to $6,000 (single) or $12,000 (married filing jointly).
Available even if you take the standard deduction.
Phases out starting at $75,000 (single) / $150,000 (married filing jointly); not available for married filing separately.
Runs through 2028.

Car Loan Interest Deduction (Above-the-Line)

Interest on new passenger-vehicle loans originated after Dec 31, 2024, and before Jan 1, 2029.
Vehicle must be U.S.-assembled and weigh ≤14,000 lbs.
Phases out for AGI above $200,000 (single) / $400,000 (married filing jointly).
Lenders will eventually issue a new Form 1098-style statement.

SALT Cap Increased To $40,000

New cap: $40,000 (up from $10,000) for taxpayers with modified adjusted gross income (MAGI) below $500,000 (married filing jointly).
Fully phases out at $600,000 MAGI.
Indexed for inflation after 2025; expires after 2028.
Still an itemized deduction only.

No Tax On Tips (Up to $25,000) & Overtime Premium

Tips: Cash tips only (not service charges); specific tipped occupations; phases out at $150k/$300k MAGI.
Overtime: Only the premium portion required by the Fair Labor Standards Act (FLSA) qualifies; not contractual overtime when weekly hours are still ≤40.
Both are above-the-line deductions reported on the new Schedule 1-A; they expire after 2028.

Child Tax Credit Raised To $2,200 per Child

A modest increase from $2,000 and a big improvement over the $1,000 that would have returned without the OBBBA.

Year-End 2025 Charitable Planning – The Biggest Opportunity

Charitable deductions become slightly less valuable beginning in 2026 because of two new limitations:

Overall itemized-deduction haircut (similar to the Pease limitation that was effective in tax years prior to 2018) that effectively caps the value of deductions at 35¢ on the dollar for top-bracket taxpayers.
New 0.5% of AGI floor on itemized deductions (including charity).

Strategy: Accelerate 2025 charitable giving, especially large gifts, to capture the full 37% top-rate benefit. The most efficient vehicle is a Donor-Advised Fund (DAF):

Contribute cash or appreciated securities in 2025 → immediate deduction at full fair-market value.
Recommend grants to operating charities over future years.
“Bunch” multiple years of planned giving into 2025 to push you well over the standard deduction and take the standard deduction in future years.

Non-itemizers also get a new above-the-line deduction: $1,000 (single) / $2,000 (married filing jointly) for cash gifts to public charities (not DAFs).

Other Notable Changes

Energy credits (EV, home-efficiency, etc.) largely sunset at year-end 2025.
Alternative Minimum Tax (AMT) exemption phases out faster → more taxpayers may hit AMT.
Qualified Small Business Stock (QSBS) exclusion increased to $15 million gain (indexed) with new 50%/75%/100% tiers for 3–5+ year holds.
Estate & gift tax exemption raised to $15 million per person ($30 million per couple) – still use it early for appreciation removal.
New “Trump Accounts” – tax-deferred savings vehicles for children (government seeds $1,000 for kids born 2024–2029).

Quick Year-End Checklist

Bunch charitable contributions (especially via DAF) before Dec. 31, 2025.
Prepay 2026 state income and property taxes in 2025 if you’ll benefit from the $40,000 SALT cap.
Harvest capital losses.
Take required minimum distributions (consider QCDs up to $108,000 per spouse).
Review tipped/overtime workers’ records for the new deductions.
Confirm car loan eligibility and retain documentation.

The rules are complex, and many details (especially reporting tips/overtime and car-loan interest) are still being finalized.

For complete insight into how the One Big Beautiful Bill Act affects your specific situation, watch the full on-demand GBQ Q4 2025 Year-End Individual Tax Update webinar and schedule a consultation with a GBQ tax professional today. Personalized planning has never been more valuable.

By Scott Eichar, CPA, CFP, PFS, Tax & Advisory; Jennifer Zimmerman, CPA, Tax & Advisory; and Rob Roll, CPA, Tax & Advisory