The “One Big Beautiful Bill” (OBBB), signed into law on July 4, 2025, represents the most sweeping tax reform since the Tax Cuts and Jobs Act (TCJA). While the legislation spans hundreds of pages, individual taxpayers need to be aware of five key provisions that will immediately impact them.

1. Permanent Extension of Current Individual Tax Rates

The OBBB makes permanent the reduced individual tax rates that were previously enacted under the TJCA and were scheduled to expire at the end of 2025. The tax rates for individuals are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Why it matters: Without this legislation, individual tax rates would have reverted to pre-TJCA levels: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The permanent extension of the individual tax rates allows for greater certainty in tax planning. This is particularly important for self-employed people and others who make quarterly estimated tax payments.

2. Increased Standard Deduction Amounts Made Permanent—with Enhancements

Taxpayers can choose between taking the sum of their itemized deductions or taking the standard deduction amount (typically, they choose whichever amount is higher). The standard deduction amount depends on filing status. For 2025, the standard deduction amounts are:

· $31,500 for Married Filing Jointly and Surviving Spouses (increase of $2,300 vs. 2024)

· $15,570 for Unmarried and Married Filing Separately (increase of $1,150 vs. 2024)

· $23,625 for Head of Household (increase of $1,725 vs. 2024)

There is also a “bonus” deduction of $6K for taxpayers aged 65 and above. However, this provision is temporary and expires after 2028. This deduction begins to phase out for taxpayers whose modified adjusted gross income exceeds $75K ($150K for Married Filing Jointly).

Why it matters: Higher standard deduction amounts will simplify tax planning and tax preparation, because fewer taxpayers will have to worry about itemizing deductions.

3. Extension and Enhancement of Child Tax Credit

The TJCA temporarily increased the Child Tax Credit (CTC) amount from $1K to $2K per qualifying child (with the refundable portion being $1,400) and increased the income threshold amounts at which the credit begins to phase out ($400K for Married Filing Jointly;

$200K for all others). The TCJA also introduced a $500 Credit for Other Dependents (could be dependent relatives other than children, or children too old to qualify for the CTC). These provisions were scheduled to expire after 2025.

The new law makes the TCJA changes to the CTC permanent and further increases the nonrefundable credit amount to $2,200 per qualifying child. The $500 Credit for Other Dependents is also made permanent.

The TJCA required a Social Security Number for each child to claim the CTC. The new law also makes this change permanent.

Why it matters: This provision provides certainty for taxpayers who claim children or other dependents on their tax returns. Taxpayers now do not have to be concerned with facing a higher tax liability just because of the expiration of the TJCA CTC amounts.

4. State and Local Tax Deduction Temporarily Increased

Under the TCJA, the state and local tax (SALT) deduction was capped at $10K ($5K for married taxpayers filing separately). This meant that taxpayers living in states and localities with high personal income taxes and/or real property taxes often were not able to deduct the full amount of state and local taxes they paid. Under the new law, the cap is increased to $40K for 2025, $40,400 for 2026, and further 1% increases for 2027, 2028, and 2029. Additionally, the cap is reduced for taxpayers whose modified adjusted gross income exceeds $500K (slightly higher for 2026-2029) – but the cap is never reduced below $10K. Importantly, unlike other provisions in the bill, this increase is not permanent – the cap is scheduled to revert to $10K after 2029.

Why it matters: Taxpayers in higher-tax states and localities will be able to immediately benefit from deducting more of their state and local taxes. However, the interplay between this provision and the increased standard deduction amounts may mean that fewer taxpayers overall need to itemize deductions.

5. Estate and Gift Tax Exclusion Amount Increased

Prior to the TCJA, the basic estate and gift tax exclusion was $5M. The TJCA temporarily increased this amount to $10M, but the increase was scheduled to expire at the end of 2025. Under the new law, the basic estate and gift tax exclusion is permanently increased to $15M, effective for gifts made and decedents dying after 2025. The $15M amount will also be adjusted for inflation going forward.

Why it matters: The permanent increase in the estate and gift tax exclusion will allow for greater certainly in estate planning, since taxpayers will no longer have to make contingency plans in the event of the expiration of the higher exclusion amount.

Next Steps

To navigate the new rules effectively, individual taxpayers should:

• Review tax withholdings and/or quarterly estimated tax payments.
• Check to see whether they will benefit from the increased standard deduction.
• Review the status of their dependents.
• Review how much they are paying in state and local taxes.
• Review their wills / estate plans.

Contact your YHB advisor today to discuss how these changes can impact you.