How The Big Beautiful Bill (OBBBA) Impacts Your Taxes
- Del Sol CPA
- Oct 19
- 6 min read
Updated: Nov 2
Just a few months ago, the One Big Beautiful Bill Act (OBBBA) was passed into law by Congress as part of the annual budget reconciliation process. Among other things, this piece of legislation enacted sweeping changes to the US Tax Code that affect almost every US taxpayer.
Perhaps most notably, the OBBBA made permanent many of the tax cuts introduced by the 2017 Tax Cuts and Jobs Act (TCJA) which were set to expire at the end of this year (2025). Many types of income were also newly, albeit temporarily, exempted from tax (e.g. tips, overtime).
Regardless of your opinion on the OBBBA, it’s clear that the new rules will have a major impact on how US taxpayers prepare their financial and tax strategies in 2025 and beyond.
In this article, we will attempt to summarize in simple terms the most impactful tax changes implemented by the OBBBA. Due to the broad scope of the legislation, we may not cover an exhaustive list of all the new tax changes. We will especially focus on tax changes affecting individual taxpayers, although the OBBBA also includes a number of provisions that significantly impact business taxation.
If our readers want to learn more about specific areas of the OBBBA Tax changes that we have not addressed in this article, we encourage them to reach out to us in the contact form on our website.
Disclaimer:
The tax rules and changes described in this article will affect every taxpayer differently. We strongly encourage readers to carefully research their own situation, and consider consulting with a tax professional to gain a full understanding of how their taxes may be impacted by the OBBBA. We also recognize that figures and rules may change over time, so be sure to keep an eye on our blog and subscribe to our email newsletter for up-to-date information and critical updates.
The full text of the OBBBA Law is available on the official website of US Congress here.
TCJA - Background and Context OBBBA tax impact
In order to understand the OBBBA Tax changes, it is also necessary to understand the basics of the 2017 Tax Cuts and Jobs Act legislation. To summarize, the TCJA:
Reduced taxes for most individuals and businesses
Most of these changes were set to expire at the end of 2025
These expirations would have increased tax burdens on an estimated 62% of US Tax filers
Some of the notable specific tax changes in the TCJA Included:
A larger standard deduction
A More generous child tax credit (CTC)
Lower ordinary income tax rates
Making permanent the expanded deductions for estate taxes
The permanence of TCJA provisions is the primary source of tax cuts implemented in the OBBBA.
Are the OBBBA Tax Provisions Permanent or Temporary?
Short answer: a bit of both. Generally speaking, many of the expiring TCJA policies were made permanent, while some newly introduced income tax deductions are temporary, and are set to expire on a range of dates between 2028 and 2030.
TCJA Rules Made Permanent
Standard Deduction Changes
Effective from 2025
Under the OBBBA, the increased standard deduction introduced by the TCJA was made permanent, and further increased the allowed deduction amounts. The standard deduction amounts are set to be adjusted annually based on inflation.
Filing Status | 2025 Standard Deduction | 2026 Standard Deduction |
Singled or Married Filing Separately (MFS) | $15,750 | $16,100 |
Head of Household | $23,625 | $24,150 |
Married Filing Jointly (MFJ) or Qualifying Surviving Spouse | $31,500 | $32,200 |
Tax Tip:
The standard deduction is a flat amount that reduces your taxable income. The amount is set by the IRS and varies by tax year and filing status. Taking the standard deduction means you cannot itemize deductions (claiming specific deductions for expenses such as mortgage interest or state and local taxes). To learn more about deductions and filing status, check out our primer on US Tax Filing here.
Elimination of Personal Exemptions
Until 2017, the personal exemption provided a $4,050 deduction per filer/dependent. This was suspended by the TCJA and scheduled to resume in 2025.
Under the OBBBA, with certain exceptions for seniors, all personal exemptions for individuals, spouses, and dependents are permanently removed.
Income Tax Rates & Brackets
The OBBBA makes the tax rates and brackets introduced by the TCJA permanent, with an initial inflation adjustment for the first two brackets. The new tax brackets for 2026 are as follows:
Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
10% | $0 - $12,400 | $0 - $24,800 | $0 - $17,700 |
12% | $12,401 - $50,400 | $24,801 - $100,800 | $17,701 - $67,450 |
22% | $50,401 - $105,700 | $100,801 - $211,400 | $67,451 - $105,700 |
24% | $105,701 - $201,775 | $211,401 - $403,550 | $105,701 - $201,775 |
32% | $201,776 - $256,225 | $403,551 - $512,450 | $201,776 - $256,200 |
35% | $256,226 - $640,600 | $512,451 - $768,700 | $256,201 - $640,600 |
37% | $640,601 + | $768,701 + | $640,601 + |
Child Tax Credit Expansion
Effective from 2025
The Child Tax Credit (CTC) was set in the TCJA to default to $1,000 after 2025. The OBBBA instead increased the CTC to $2,200 for every qualifying child, starting in 2025.
The refundable credit amount will be set at $1,700 and adjusted for inflation annually beginning from 2026.
However, eligibility for this credit has become more strict, now requiring a social security number for the taxpayer claiming the credit, and for the child. The benefit also phases out for taxpayers with modified adjusted gross income (MAGI) above $200,000 (single file) or $400,000 (joint file)
Families with dependents who do not qualify for the CTC could instead qualify for the Other Dependent Credit ($500) which was also made permanent by the OBBBA.
Tax Tip:
Modified Gross Adjusted Income is a benchmark number used by the IRS to determine whether or not a taxpayer is eligible to receive certain tax breaks or benefits. Confusingly, the definition and calculation of MAGI can differ based on the context in which it is being used. For more information or guidance on determining your MAGI, refer to our US Tax guide or reach out to us for support.
Tax Rule Changes Affecting Estate and Gift Taxes (Wealth Planning)
In this section we will address the OBBBA changes that specifically affect high-net-worth taxpayers.
Preservation of Expanded Estate and Gift Tax Exemptions
Before the OBBBA was passed, the federal estate tax exemption was scheduled to drop by 50% from $14 million in 2025 to $7.1 million in 2026. This would have significantly increased the portion of estates which were subject to estate tax and likewise increased the tax burden on medium-large size estates.
The OBBBA made the $14 million exemption permanent, and increased it to $15 million per decedent – further adjusted for inflation each year.
Alternative Minimum Tax (AMT)
The OBBBA Preserves and makes permanent the TCJA changes which increased the exemption amounts for the alternative minimum tax. The exemption was previously raised:
From $54,300 to $70,300 for single filers in 2017
From $84,500 to $109,400 for joint filers in 2018
The TCJA also increased the phase-out thresholds:
From $127,000 to $500,000 for single filers
From $160,900 to $1 million for joint filers
The above figures were all set to be adjusted for inflation and to expire in 2025. The OBBBA instead made these changes permanent, with the exception of setting the phase-out thresholds for single and joint filers in 2026 back to the 2018 values of $500,000 and $1 million, respectively – also subject to inflation adjustments.
Tax Tip:
The AMT is a tax system that requires some individual taxpayers to calculate their tax liability twice, and pay the higher amount. If you are a high-earning taxpayer subject to the alternative minimum tax, your annual tax filing obligation is likely to be significantly more complicated than the average taxpayer. Refer to our US Taxpayer guide for more information on the AMT, or reach out to us if you have any questions
Itemized Deduction Limits
Effective from 2026
From 2026, for taxpayers in the highest tax bracket, the tax benefit gained from itemized deductions cannot exceed 35% of the deducted amount. In other words, they can only benefit up to 35 cents for every dollar deducted.
📚 Article Series: One Big Beautiful Bill Act
New Changes introduced by OBBBA—Coming Soon
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