On Jul. 4, 2025, President Trump signed The One Big Beautiful Bill Act (OBBBA) into law as Public Law 119-21. Title XI of the law contains the tax provisions for the 2025–2026 federal budget.

Chapter 1 of Subtitle A of the OBBBA is titled Providing Permanent Tax Relief for Middle-Class Families and Workers.

Part I of Subtitle A makes permanent the tax law changes originally enacted under the Tax Cuts and Jobs Act of 2017 (TCJA), which were scheduled to expire after Dec. 31, 2025.

Estate and Gift Tax

Permanent Extension of Increased Exemptions

Under prior law, the increased estate and lifetime gift tax exemption amounts were scheduled to expire after Dec. 31, 2025.

Section 70106 of the OBBBA permanently extends these exemptions and raises the threshold to $15 million for single filers and $30 million for married couples filing jointly, beginning in 2026. The exemption amounts will be indexed for inflation going forward.

Personal Income Tax

Making Permanent and Modifying the TCJA

Extension and Modification of Tax Rates

Section 70101 makes the TCJA tax rates permanent beginning Jan. 1, 2026. The lowest three brackets (the 10 percent and 12 percent brackets) receive one extra year of inflation adjustment.

Extension of Increased Standard Deduction and Temporary Enhancement

Section 70102 makes the TCJA’s higher standard deduction amounts permanent. For tax years beginning after 2024, the standard deduction is set as follows:

 

Standard Deduction (2025)
Filing Status	Current Law 2025 Before the OBBB	Projected Current Law 2025 After the OBBB
Single	$15,000	$15,750
Head of Household	$22,500	$23,625
Married Filing Jointly	$30,000	$31,500
Married Filing Separately	$15,000	$15,750

 

Section 70102 also provides a temporary $6,000 standard deduction for individual taxpayers age 65 or older. This senior deduction begins to phase out when a taxpayer’s MAGI exceeds $75,000 ($150,000 for joint filers). It will be in effect from 2025 through 2028.

MAGI is defined as the taxpayer’s adjusted gross income for the taxable year, increased by any amount excluded from gross income under:

• Section 911 (foreign earned income and certain housing costs)
• Section 931 (income from sources within Guam, American Samoa, or the Northern Mariana Islands)
• Section 933 (income from sources within Puerto Rico)

Limitation on Individual Deductions for Certain State and Local Taxes

Under the TCJA, the federal deduction for state and local taxes (the SALT cap) was limited to $10,000 and was scheduled to expire after 2025.

Section 70120 temporarily increases the SALT deduction limit to $40,000 (from the current $10,000) and adjusts it for inflation. In 2026, the cap will be $40,400 and will increase by 1 percent annually through 2029. Starting in 2030, it reverts to $10,000.

Termination of the Deduction for Personal Exemptions

Under the TCJA, the deduction for personal exemptions was set to return after Dec. 31, 2025.

Section 70103 permanently repeals the deduction for personal exemptions.

Extension of Increased Child Tax Credit and Temporary Enhancement

Under the TCJA, the child tax credit would have reverted to pre-2017 levels after Dec. 31, 2025, reducing it from $2,000 to $1,000 per child. The requirement for a child's Social Security number (SSN) would have been removed, fewer families would qualify due to the lower income phase-out thresholds, and the $500 nonrefundable credit for non-child dependents would expire.

Section 70104 raises the child tax credit to $2,200 per child for tax years beginning in 2025, maintains the current income phase-out levels, retains the non-refundable child dependent credit, and indexes the credit amount for inflation beginning after 2026. It continues to require SSNs for qualifying children and requires both the taxpayer’s and spouse's SSNs for joint filers.

Permanent Extension of the Deduction for Qualified Business Income

Under the TCJA, individuals were allowed to deduct 20 percent of qualified business income from partnerships, S corporations, sole proprietorships, certain real estate investment trust dividends, and publicly traded partnership income. This deduction is limited to 20 percent of taxable income minus net capital gain.

Section 70105 makes the Section 199A QBI deduction permanent at a 20 percent rate. It also raises the phase-in limits for SSTBs and related entities to $75,000 for non-joint returns and $150,000 for joint returns. Additionally, the bill adds an inflation-adjusted minimum $400 deduction for taxpayers with at least $1,000 in QBI from active businesses in which they materially participate.

Extension of Increased Alternative Minimum Tax Exemption and Phase-out Thresholds

The TCJA set the increased individual alternative minimum tax (AMT) exemption amounts and phase-out thresholds, which were scheduled to expire after Dec. 31, 2025. 

Section 70107 makes the TCJA’s higher individual AMT exemption amounts permanent, reverting phase-out thresholds to 2018 levels ($500,000; $1 million for joint filers), adjusted for inflation.

Extension of Limitation on Deduction for Qualified Residence Interest

The limitation on home mortgage interest deduction was scheduled to increase from $750,000 to $1,000,000 of home mortgage acquisition debt after Dec. 31, 2025.

Section 70108 permanently reduces the deduction to $750,000 in home mortgage acquisition debt.

Extension of Limitation of Casualty Loss Deduction

Starting Dec. 31, 2025, the itemized deduction for all uncompensated personal casualty losses from events like fires, storms, shipwrecks, and theft was scheduled to return.

Section 70109 permanently limits itemized deductions for personal casualty losses to federally declared disasters, but now also covers certain state-declared disasters.

Termination of Miscellaneous Itemized Deductions

Under the TCJA, certain miscellaneous itemized deductions were scheduled to return for taxable years beginning after Dec. 31, 2025.

Section 70110 permanently eliminates miscellaneous itemized deductions.

Limitation on Itemized Deductions

Under the TCJA, beginning in 2026, individual taxpayers with adjusted gross income above these thresholds will face the Pease limitation:

• $339,850 for single filers
• $373,850 for head of household filers
• $407,850 for married joint filers

Taxpayers must reduce itemized deductions by 3 percent of the amount exceeding their applicable threshold. The value of itemized deductions depends on the taxpayer's marginal tax rate; for a 37 percent bracket, each dollar is worth $0.37.

Section 70111 permanently repeals the Pease limitation and replaces it with a cap of $0.35 per dollar of itemized deductions for taxpayers in the highest tax bracket, effective for taxable years beginning after Dec. 31, 2025.

Termination of Qualified Bicycle Commuting Reimbursement Exclusion

The $20 per month qualified bicycle commuting reimbursement exclusion received by an employee from an employer was to return for taxable years beginning after Dec. 31, 2025.

Section 70112 permanently eliminates the qualified bicycle commuting reimbursement exclusion.

Extension of Limitation on Exclusion and Deduction for Moving Expenses

Under the TCJA, both the exclusion for qualified moving expenses reimbursement and the deduction for moving expenses were to be reinstated for taxable years beginning after Dec. 31, 2025.

Section 70113 permanently removes both the exclusion for qualified moving expenses reimbursement and the deduction for moving expenses, except for active-duty members of the Armed Forces.

Extension of Limitation on Wagering Losses

Under the TCJA, the deduction of wagering losses up to the amount of winnings, as well as other wagering-related expenses regardless of winnings, was scheduled to return.

Section 70114 permanently limits all such deductions to the extent of wagering winnings.

Extension of Increased Limitation on Contributions to ABLE Accounts

Under the TCJA, the additional contribution limit to Achieving a Better Life Experience (ABLE) accounts was equal to the lesser of:

1. The applicable federal poverty level for a one-person household in the prior year, or
2. The beneficiary’s compensation for the year
   
   

This provision was set to expire on Dec. 31, 2025.

Section 70115 authorizes the continued allowance of supplemental contributions to ABLE accounts and extends the inflation adjustment for the base limit by an additional year.

Extension of the Savers Credit Allowed for ABLE Contributions

Under the TCJA, eligibility for the Saver’s Credit for designated beneficiaries who make qualified contributions to their ABLE accounts was set to expire on Dec. 31, 2025.

Section 70116 permanently allows designated beneficiaries who make qualified contributions to their ABLE accounts to qualify for the Saver’s Credit.

Extension of Rollovers from Qualified Tuition Plans to ABLE Accounts

The TCJA allowed tax-free rollovers from Section 529 qualified tuition plans to qualified ABLE accounts until Dec. 31, 2025.

Section 70117 permanently allows tax-free rollovers of amounts in Section 529 qualified tuition programs to qualified ABLE programs.

Extension of Treatment of Certain Individuals Performing Services in the Sinai Peninsula

Under the TCJA, the Sinai Peninsula will no longer be considered a qualified hazardous duty area for tax purposes after Dec. 31, 2025.

Section 70118 permanently lists the Sinai Peninsula, in addition to Kenya, Mali, Burkina Faso, and Chad, as a qualified hazardous duty area for tax purposes.

Extension of Exclusion from Gross Income of Student Loans Discharged on Account of Death or Disability

Under the TCJA, the provision that excludes income from discharged student debt due to death or total disability from taxable income was set to expire after Dec. 31, 2025.

Section 70119 permanently extends this exclusion and requires the taxpayer's Social Security number to claim it.

Additional Tax Relief for American Families and Workers

No Tax on Tips

While Section 70201 is titled “no tax on tips”, it only allows a limited above-the-line deduction of up to $25,000 for tips received in occupations that traditionally receive tips. Qualified tips must be paid voluntarily, not subject to negotiation, and determined by the payor. 

The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return). This temporary deduction will be available for tax years 2025 through 2028.

This deduction applies to W-2 employees and independent contractors with forms 1099-K, 1099-NEC, or Form 4317. The term “qualified tips” means cash tips received by an individual in an occupation that customarily and regularly received tips on or before Dec. 31, 2024. Qualified tips cannot come from any trade or business involving the performance of services in the fields of:

• Health
• Law
• Engineering
• Architecture
• Accounting
• Actuarial science
• Performing arts
• Consulting, athletics
• Financial services
• Brokerage services
• Any trade or business where the principal asset of a trade or business is the reputation or skill of one or more of its employees. Highly compensated employees are ineligible, and a work-eligible Social Security number is required. 

Highly compensated employees are not eligible, and a valid Social Security number is required.

MAGI is defined as the adjusted gross income of the taxpayer for the taxable year, increased by any amount excluded from gross income under:

• Section 911 (foreign earned income and certain housing costs),
• Section 931 (income from sources within Guam, American Samoa, or the Northern Mariana Islands)
• Section 933 (income from sources within Puerto Rico)

The deduction is applicable for tax years 2025–2028.

No Tax on Overtime

While Section 70202 is titled “no tax on overtime,” it only allows a temporary above-the-line deduction of up to $12,500 ($25,000 for joint filers) for qualified overtime pay from 2025 to 2028. The deduction phases out once MAGI (see MAGI above) exceeds $150,000 ($300,000 for joint returns). To qualify, overtime must meet Fair Labor Standards Act definitions and be reported separately on Form W-2 or 1099.

This temporary deduction will be available for tax years 2025 through 2028.

Enhanced Deduction for Seniors

This provision allows a deduction for seniors (age 65 or older) of $4,000 per eligible filer with a modified adjusted gross income not exceeding $75,000 for single filers ($150,000 for married filing jointly). The senior deduction applies to both itemizers and non-itemizers. This deduction is permitted for tax years 2025 through 2028.

No Tax on Car Loan Interest

Section 70203 allows a deduction of up to $10,000 for qualified passenger vehicle loan interest per taxable year. The deduction starts to phase out when the taxpayer's MAGI (see MAGI above) exceeds $100,000 ($200,000 for joint returns).

An applicable passenger vehicle, for which interest can be deducted, must:

• Be primarily manufactured for public streets, roads, and highways
• Have at least two wheels
• Be a car, minivan, van, SUV, pickup truck, or motorcycle
• Have its final assembly in the US

It also includes all-terrain vehicles and recreational vehicles assembled in the US.

The deduction applies from tax years 2025 through 2028.

Trump Accounts Contribution Pilot Program

Section 70204 creates Trump Accounts, a new kind of savings account that provides US citizens born between Jan. 1, 2024, and Dec. 31, 2028, a federal government contribution of $1,000 per child into every eligible Trump account. The term “Trump Account” means an individual retirement account (as defined in section 408(a)), which is not designated as a Roth IRA. For newborns, Trump Accounts may be opened by parents or guardians. To be eligible for an account and receive the $1,000 contributions, the child must be a US citizen, and both parents must provide their SSNs. 

If the Secretary of the Treasury determines that an eligible individual does not have an account opened for them by the first tax return where the child is claimed as a qualifying child, the Secretary will establish an account on the child’s behalf, taking into account, to the extent possible, the parents’ preferred custodian and investment fund. Parents will be provided the option to opt out of the account.

Also beginning Jan. 1, 2026, Section 70204 allows parents of children under eight (born before Jan. 1, 2024) to open a Trump account for their child. These accounts may receive contributions from parents, relatives, taxable entities, nonprofits, and government bodies via the Treasury Department. The child must be a US citizen, and at least one work-eligible parent's SSN is required to open the account. Trump Account funds must be invested in a diversified fund tracking a recognized US equity index.

Taxable entities may contribute up to $5,000 annually of after-tax dollars to a Trump Account. The $5,000 contribution limit is indexed for inflation.

No additional contributions of any kind shall be made to Trump Accounts after the beneficiary has reached the age of 18.

Contributions provided to Trump Accounts from tax-exempt entities, such as private foundations, are not subject to the $5,000 annual limit. These contributions from unrelated third parties must be provided to all children within a qualified group (i.e., all children in a state, specific school district, or educational institution, etc.).

Trump Account holders may not take distributions until age 18. Account holders may access the funds as follows:

• At age 18, account holders may withdraw up to 50 percent of funds for higher education, training programs, small business loans, or first-time home purchases. 
• At age 25, account holders may withdraw any amount up to the full balance of the account for these limited purposes. 
• At age 30, account holders have access to the full balance of the account for any purpose.

Distributions taken for qualified purposes are taxed as long-term capital gains, while distributions for any other purposes are taxed as ordinary income.

Enhancement of Adoption Credit

For the 2024 tax year, the adoption tax credit was capped at $16,810 for qualified adoption expenses when adopting an eligible child. The credit began to phase out for adjusted gross incomes (AGIs) over $252,150 and completely phases out at AGIs over $292,150. Both the credit and AGI limits are indexed for inflation. The credit was nonrefundable; however, any unused credit could be carried forward for up to five years.

Section 70402 makes the adoption tax credit partially refundable up to $5,000 (indexed for inflation) beginning in tax years starting after Dec. 31, 2024. The refundable portion of the credit cannot be carried forward.

Tax Credit for Contributions of Individuals to Scholarship Granting Organizations

Starting in 2026, Section 70411 introduces a new Section 25F, a credit limited to $1,700 tax for eligible individuals who donate to tax-exempt organizations that provide scholarships to elementary and secondary school students.  

The amount allowed as a credit under Section 25F for a taxable year shall be reduced by the amount allowed as a credit on any State tax return of the taxpayer for qualified contributions made by the taxpayer during the taxable year.

Eligible students must belong to households with incomes at or below 300 percent of the area median gross income and qualify to enroll in public schools. The tax credit program will be available until the end of 2029.

Section 70411 also creates a new Section 139K, which excludes from gross income scholarships for the qualified secondary or elementary education expenses of eligible students.

Exclusion for Employer Payments of Student Loans

Section 70412 extends the tax-free Status indefinitely: Employers would be able to contribute up to $5,250 per year toward an employee’s student loans tax-free for the employer and employees indefinitely.

Additional Elementary, Secondary, and Home School Expenses Treated as Qualified Higher Education Expenses for Purposes of 529 Accounts

Section 70413 permits tax-free distributions from 529 savings plans for additional educational expenses related to elementary, secondary, or home schooling, including:

• Curriculum and materials
• Books or instructional materials
• Online resources
• Tutoring or external classes
• Testing fees
• Dual enrollment fees
• Educational therapies for students with disabilities

Certain Postsecondary Credentialing Expenses Treated as Qualified Higher Education Expenses for Purposes of 529 Accounts

Section 70414 allows tax-exempt distributions from 529 savings plans to be used for additional qualified higher education expenses, including “qualified postsecondary credentialing expenses” in connection with “recognized postsecondary credential programs” and “recognized postsecondary credentials.”

The term “qualified postsecondary credentialing expenses” means:

• Tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in a recognized postsecondary credential program
• Any other expense incurred in connection with enrollment in or attendance at a recognized postsecondary credential program if such expense would, if incurred in connection with enrollment or attendance at an eligible educational institution
• Fees for testing if such testing is required to obtain or maintain a recognized postsecondary credential, and fees for continuing education if such education is required to maintain a recognized postsecondary credential

The term “recognized postsecondary credential program” means any program to obtain a recognized postsecondary credential if:

• Such a program is included on a state list prepared under section 122(d) of the Workforce Innovation and Opportunity Act
• Such a program is listed in the public directory of the Web Enabled Approval Management System (WEAMS) of the Veterans Benefits Administration, or a successor directory of such a  program
• An examination (developed or administered by an organization widely recognized as providing reputable credentials in the occupation) is required to obtain or maintain such credential, and such organization recognizes such program as providing training or education that prepares individuals to take such examination
• Such a program is identified by the Secretary, after consultation with the Secretary of Labor, as being a reputable program for obtaining a recognized postsecondary

Reinstatement of Partial Deduction for Contributions of Individuals who do not Elect to Itemize

Section 70424 establishes a temporary deduction for non-itemizing taxpayers, allowing up to $150 for single filers and $300 for married couples filing jointly, for charitable cash contributions made during tax years 2025 through 2028. The contributions must be directed to qualified charities and are not eligible for Donor-Advised Funds or supporting organizations.

Termination of Green New Deal Subsidies

Section 70501 terminates the previously owned clean vehicle credit under Section 25E effective Sept. 30, 2025.

Section 70502. Terminates the clean vehicle credit under Section 31D effective Sept. 30, 2025.

Section 70505. Terminates the energy efficient home improvement credit under Section 25C for energy efficient home improvements placed in service after Dec. 31, 2025.

Section 70506. Terminates the residential clean energy credit under Section 25 for any clean energy expenditures made after Dec. 31, 2025.

Section 70508. Terminates the new energy efficient home credit under Section 45L for qualified new energy efficient homes acquired after Dec. 31, 2025.

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Mark. H. Levin, CPA, MS (Taxation) graduated from the Bernard M. Baruch School of Business and Public Administration of the City College of New York in 1967 with a BBA Degree in Accounting and received his certificate as a CPA  in 1969.  He received his MS in Taxation from Baruch College in 2006. Mr. Levin was previously an Adjunct Assistant Professor at York College/CUNY.  He was formerly a Tax Manager at Anchin, Block & Anchin LLP.  He has worked in the field of public accounting since 1961 and has specialized in taxation since 1972. He is past Chair of the NYCPA’s New York, Multi-state, and Local Taxation Community and has been an active member of that community since 1986.  Mr. Levin previously chaired the subcommittee on Relations with the New York City Department of Finance. He was also a member of both the New York State Department of Taxation and Finance Commissioner's Advisory Council and the New York City Finance Commissioner's Advisory Council.

 

Mr. Levin has published numerous articles in the Tax, Accounting and Regulatory Bulletin, Buffalo Law Journal, The CPA Journal, The Trusted Professional and the TaxStringer. He has spoken extensively at seminars sponsored by FAE, the New Jersey Society of CPAs, the Connecticut Society of CPAs, Long Island University, the C.W. Post School of Professional Accountancy Tax Institute, H. J. Behrman & Company, The Empire State Association of Public Accountants, The National Conference of CPA Practitioners and for various other professional organizations.