Recently, President Trump signed into law the One Big Beautiful Bill Act, which contains a number of provisions affecting individual income taxes. Many of these provisions extend existing tax law provisions originally introduced in the 2017 Tax Cuts and Jobs Act.
Here are some of the changes you should be aware of:
-The top marginal income tax rate of 37% becomes permanent (replacing the 39.6% rate that would have applied in 2026 with the expiration of the rates introduced in the 2017 law).
–The current larger standard deduction is now permanent ($31,500 in 2025 for married filing joint taxpayers and $15,750 for most other filers).
–The bill retains the limitation on itemized deductions for state and local taxes (the SALT cap) that was introduced by the 2017 tax law, but increases it from $10,000 to $40,000. This cap amount increases by 1% each year beginning in 2026, but reverts to $10,000 in 2030. The cap amount is reduced for taxpayers having “modified adjusted gross income” (MAGI) over $500,000 ($250,000 for married taxpayers filing separately), although the cap will not fall below $10,000 ($5,000 for married taxpayers filing separately).
–For individuals who don’t itemize deductions, a short-term provision was added in 2020 and 2021 allowing a $300 ($600 if married filing jointly) deduction for certain charitable contributions. The bill brings back this provision, makes it permanent, and increases the deduction amount to $1,000 for individuals and $2,000 for joint filers.
–The bill creates a deduction of up to $25,000 annually for qualified tips received by an individual in an occupation that customarily and regularly receives tips; this applies to both employees and independent contractors. This deduction exists from 2025 through 2028, and expires after 2028. The deduction begins to phase out when the taxpayer’s MAGI exceeds certain amounts ($300,000 for married couples filing jointly; $150,000 for most other returns).
–The bill creates a deduction of up to $12,500 annually ($25,000 in the case of married couples filing jointly) for “qualified overtime compensation” received by an individual. This deduction exists from 2025 through 2028, and expires after 2028. This deduction begins to phase out when the taxpayer’s MAGI exceeds certain threshold amounts ($300,000 for married couples filing jointly; $150,000 for most other returns). “Qualified overtime compensation” is determined under existing federal law.
–The bill makes permanent the 2017 tax law’s removal of the overall limitation on itemized deductions, but adds a new limitation intended to cap the tax benefits of itemized deductions for those in the highest tax brackets.
–The bill retains the 2017 tax law’s increased exemption amounts for alternative minimum tax. These exemption amounts are phased out for taxpayers having income over certain amounts ($1,000,000 for married couples filing jointly; $500,000 for single filers).
–The 2017 tax law’s elimination of miscellaneous itemized deductions is now permanent.
Most people will be affected by at least one of these provisions. Please contact our office if you’d like more information about how these changes could affect you.