One Big Beautiful Bill Tax Changes for Individuals (2025-2029)

Quick reference: provisions and effective years

Permanent changes

The law prevented a large tax increase that was scheduled for 2026. Without it, rates would have returned to their pre-2018 levels (topping out at 39.6%), the standard deduction would have roughly halved, and the child tax credit would have dropped to $1,000. Instead, the 10/12/22/24/32/35/37% rates are permanent, the standard deduction got an extra boost for 2025 and is indexed after that, the child tax credit is $2,200 per child for 2025 and 2026 (up to $1,700 refundable), and the $500 credit for other dependents is permanent. The qualified business income deduction for pass-through owners is also permanent, with a new $400 minimum deduction starting in 2026 for those with at least $1,000 of active QBI.

New temporary deductions (2025 through 2028)

Four new deductions are claimed on Schedule 1-A of Form 1040, whether you itemize or not. They reduce taxable income but not AGI, and all require joint filing if married.

• Senior deduction: $6,000 for each person age 65 or older ($12,000 for a couple who both qualify), on top of the regular additional standard deduction. It is reduced by 6% of MAGI above $75,000 ($150,000 joint). A single 67-year-old with $85,000 of MAGI gets $5,400.
• Qualified tips: up to $25,000 per return for workers in listed tipped occupations; reduced by $100 per $1,000 of MAGI above $150,000 ($300,000 joint).
• Qualified overtime: the FLSA-required premium portion, up to $12,500 ($25,000 joint), same phaseout as tips.
• Car loan interest: up to $10,000 a year of interest on a loan taken out after 2024 to buy a new car, SUV, pickup, van or motorcycle for personal use with final assembly in the United States. Reduced by $200 per $1,000 of MAGI above $100,000 ($200,000 joint). You must report the VIN on your return.

SALT deduction changes

The cap on itemized deductions for state and local income, sales and property taxes rose from $10,000 to $40,000 for 2025 and $40,400 for 2026, increasing 1% a year through 2029 ($20,000 and $20,200 for married filing separately). The cap is reduced by 30% of modified AGI above $500,000 for 2025 ($505,000 for 2026) but never below $10,000. In 2030 the cap reverts to $10,000 unless Congress acts. This only helps people who itemize.

Changes starting in 2026

• Non-itemizers can deduct up to $1,000 ($2,000 joint) of cash gifts to qualifying charities.
• Itemizers can deduct charitable gifts only above 0.5% of AGI, and taxpayers in the 37% bracket face a new overall reduction of itemized deductions.
• The child and dependent care credit rate rises to as much as 50% of up to $3,000 of expenses ($6,000 for two or more), and the limit for employer dependent care assistance rises to $7,500.
• Gambling loss deductions are limited to 90% of losses, up to winnings.
• Repayment caps on excess advance premium tax credits are removed.
• A 1% excise tax applies to certain cash remittance transfers sent abroad.
• The AMT exemption is $90,100 single and $140,200 joint, but phases out faster starting at $500,000 and $1,000,000.

What it means for a typical household

Example: a married couple, both 66, with $90,000 of pension and IRA income in 2026. Their standard deduction is $32,200 plus $3,300 for age, and they each qualify for the full $6,000 senior deduction because their MAGI is under $150,000. Total deductions: $47,500, leaving $42,500 of taxable income and about $4,604 of federal income tax. Without the senior deduction, taxable income would be $54,500 and tax about $6,044, so the new deduction saves them about $1,440.

Bigger refunds in early 2026 reflected these changes: the IRS reported an average refund of $3,275 through April 17, 2026, up 11.3% from the prior year. If your withholding did not account for the new deductions, consider updating your Form W-4, which now includes lines for them.