The One Big Beautiful Bill Act (OBBBA)—an extensive piece of tax and spending legislation—was signed into law on July 4, 2025, meeting the president’s deadline and extending many provisions from the 2017 Tax Cuts and Jobs Act.
The nearly 900-page bill makes permanent several key tax policies, including the seven income tax brackets; the expanded standard deductions and estate tax exemptions; the repeal of personal exemptions; bonus depreciation; and the qualified business income deduction, to name a few. Of course, “permanent” simply means in effect until a future Congress or administration decides otherwise.
For now, let’s look at some of the new provisions affecting individuals:
While the campaign promise to eliminate taxes on Social Security benefits didn’t come to fruition, OBBBA introduces a temporary $6,000 deduction per person for seniors age 65 and older—regardless of whether they itemize or take the standard deduction. Notably, this age-based deduction applies even if the individual is not receiving Social Security. It is available for tax years 2025 through 2028.
Another campaign promise—“no tax on tips”—did make it into the bill, though with some limitations. The deduction is capped at $25,000 in tips for individuals with adjusted gross income (AGI) under $150,000 ($300,000 for joint filers) and phases out for higher incomes. Before placing a tip jar on your desk, keep in mind that the IRS will publish a list of qualifying occupations—those that customarily receive tips—by October 2025. Importantly, tips must still be reported as income in order to claim the deduction. Eligible employees may also consider adjusting their withholding to reflect this new benefit. The deduction is available through 2028.
The Act also establishes an above-the-line deduction for overtime pay for those with AGIs below $150,000 ($300,000 for joint filers), with a phaseout at higher income levels. The deduction allows individuals to exclude from taxable income the portion of their overtime compensation that exceeds their regular pay rate. However, keep in mind that most salaried employees are classified as “exempt” and therefore generally not eligible for overtime pay.
A particularly welcome change is the increase in the state and local tax (SALT) deduction cap to $40,000, up significantly from the previous $10,000 limit. This expanded deduction, available from 2025 through 2028, applies to state and local taxes paid—including property and state income taxes—for taxpayers with modified adjusted gross incomes of $500,000 or less. It phases out at higher income levels. Only taxpayers who itemize their deductions can claim the SALT deduction, but it should be especially beneficial for homeowners who also deduct mortgage interest and pay substantial property taxes.
OBBBA also creates a charitable contribution deduction for non-itemizers. According to the Tax Policy Center, nearly 90% of taxpayers claimed the standard deduction on their 2020 returns and therefore received no tax benefit for charitable giving. Beginning in 2026, the new provision allows non-itemizers to deduct up to $1,000 in cash contributions to qualifying charities ($2,000 for joint filers).
These are just a few of the notable provisions for individual taxpayers and don’t even touch on the significant changes for businesses. The Act covers a wide range of measures, and we expect more guidance as the law is implemented. In the meantime, it’s important to stay informed about how these changes may affect your specific financial situation.
If you have questions or need help navigating the complexities of the new tax laws, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the August 2, 2025 “Henssler Money Talks” episode.
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