It has been a little time since I last graced these pages but the nature of announcements, executive orders, and tariffs as well as the frequency of revisions, changes or extensions make any observation out dated prior to finishing a sentence. At least one thing has occurred that will not change for at least a while. I am referring to the One Big Beautiful Bill Act (OBBBA). That is what the bill was called, I did not make that up. The Bill passed and was signed into law, so its provisions are set, until they are changed by Congressional Action. Some of its provisions are applicable for the 2025 tax year.
The 2017 Tax Cuts and Jobs Act (TCJA) was to expire at year end. OBBBA made permanent the tax rates and structure so individual marginal tax brackets remain at 10%, 12%, 22%, 32%, 35% and 37%. Also made permanent are the larger standard deduction. For 2025 the standard deductions are $31,500 for married filing jointly, $15,750 for single and for married filing separately, and $26,625 for filing as head of household. The deduction for personal exemptions, last available in 2017, has been permanently eliminated.
The prior temporary increase to the child tax credit, the refundable portion of the credit, and income phase-out ranges are made permanent. The child tax credit increased to $2,200 for each qualifying child starting in 2025.
The $750,000 ($375,000 for married filing separately) limit on qualifying mortgage debt for purposes of the mortgage interest deduction is made permanent. Interest on home equity indebtedness is now permanently nondeductible. The previously expired provision allowing for the deduction of mortgage insurance premiums as interest is reinstated and made permanent (subject to income limitations) beginning in 2026.
The larger estate and gift tax exemption amount implemented by TCJA is made permanent. The exemption amount was also increased to $15 million ($30 million for married couples), in 2026 and will be indexed for inflation in subsequent years.
OBBBA temporarily increases the cap on the state and local tax deduction from $10,000 to $40,000. The increased cap is retroactively effective for 2025. The $40,000 cap will increase to $40,400 in 2026 and by 1% for each of the following 3 years. The cap is reduced for those with modified adjusted gross incomes exceeding $500,000 for tax year 2025 and adjusted for inflation in subsequent years. The limit is never reduced below $10,000. In 2030, the deduction cap will return to $10,000.
OBBBA also significantly rolls back energy related tax incentives. The Clean Vehicle Credit, the Previously Owned Clean Vehicle Credit and the Qualified Commercial Clean Vehicles Credit are eliminated effective for vehicles acquired after September 2025. The Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit are repealed for property placed in service after December 31, 2025.
OBBBA makes broad and sweeping changes in tax legislation. The above are just some of the changes made affecting individuals and estates. The legislation also makes significant changes in other areas. You should consult with your tax professional on how these and other changes may affect your individual and business tax situation.
