On July 4, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, permanently extending key Tax Cuts and Jobs Act (TCJA) provisions while introducing new tax breaks. The law provides expanded relief for individuals, families, and seniors, while simplifying certain filing rules.

Families & Kids

• Child Tax Credit: Permanent $2,000+, rising to $2,200 in 2025 (indexed for inflation).
• Child & Dependent Care Credit: Increases from 35% to 50% of expenses, with a new two-tier income phaseout starting in 2026.
  • Regardless of how high your adjusted gross income (AGI) is, the credit percentage cannot drop below 20%.
  • The credit remains limited by the current expense caps: $3,000 for one dependent or $6,000 for two or more dependents.
• Dependent Care FSAs: Limit rises to $7,500 in 2026.

Deductions & Credits

• SALT Cap: Rises to $40,000 for 2025–2029 (income-tested), then reverts to $10,000. For 2025, taxpayers with MAGI exceeding $500,000 ($250,000 MFS) are ineligible for the increased cap.
• Mortgage Interest: $750,000 cap made permanent; PMI now deductible.
• Charitable Giving: New 0.5% “floor” before deductions count. Only the amount of charitable contributions above this floor can be deducted. Non-itemizers can deduct up to $1,000 ($2,000 MFJ).
• Miscellaneous Deductions: Permanently gone, except educator expenses (expanded to coaches/admins).

Workers’ Relief

• No Tax on Overtime Pay: Up to $25,000 deduction (2025–2028).
• No Tax on Tips: Up to $25,000 deduction for certain workers in tip-based industries (2025–2028).
• Car Loan Interest Deduction: Up to $10,000 annually (2025–2028).

Savings & Education

• Trump Accounts: New savings vehicle for minors. One-time $1,000 government deposit plus up to $5,000 annual contributions. Tax-deferred growth. For qualifying children born after Dec. 31, 2024, and before Jan. 1, 2029.
• 529 Plans: Annual K–12 tuition limit doubled to $20,000; expanded for credentialing/licensing programs.
• Adoption Credit: Up to $5,000 refundable.

Other Provisions

• Estate Tax Exemption: Raised to $15 million (indexed).
• Student Loan Forgiveness (Death/Disability): Permanently tax-free.
• Employer Student Loan Repayments: $5,250 tax-free benefit made permanent (indexed in 2027).
• ABLE Accounts: Contribution increases and saver’s credit enhancements made permanent.

Planning Takeaways

• Individuals & Families: Higher deductions and permanent credits mean broader tax savings.
• Seniors: New $6,000 deduction helps offset repeal of personal exemptions.
• High Earners: Phase limitation on itemized deductions returns in 2026, reducing benefits at top incomes.
• Energy Incentives: Clean energy and EV credits phase out starting in 2025 — act soon if you’re considering upgrades.

Bottom Line: The OBBBA cements the TCJA into permanent law while adding new deductions and credits for families, workers, and seniors. With many provisions starting after Dec. 31, 2024, now is the time to adjust tax planning strategies.