The One Big Beautiful Bill and How It Will Affect Your 2025 Taxes

The “One Big Beautiful Bill” has been making waves in the news with its sweeping changes to the tax code. But what does it mean for you and your taxes? We’re here to break down the main points of the bill, tax policy changes, the impact on social security taxes, and what to expect in the coming years.

What is “The One Big Beautiful Bill”?

The One Big Beautiful Bill Act is a piece of legislation that aims to overhaul areas of the existing tax system. This bill introduces significant changes to tax rates, deductions, and credits, with the goal of simplifying the tax code and encouraging economic growth. 

By altering tax rates and introducing new incentives, the bill seeks to stimulate economic activity. Proponents argue that these changes will lead to increased consumer spending, business investment, and job creation. Critics, however, caution that the benefits may disproportionately favor certain groups, potentially widening economic disparities.

Let’s dive into the key components and how they might impact you.

Higher Standard Deduction

The OBBBA significantly increases the standard deduction. That being said, this simplifies the tax-filing process for many Americans, as fewer people will need to itemize their deductions. For tax year 2025, here are the following standard deduction amounts:

Filing Status	Standard Deduction (Tax Year 2025)
Single or Married Filing Separately	$15,000
Married Filing Jointly	$30,000
Head of Household	$22,500
Qualifying Widower or Surviving Spouse	$31,500

While this is a big win for simplicity, it may also alter how people approach charitable donations or other expenses that were previously responsible for reducing taxable income.

Senior Tax Deduction

Starting with the 2025 tax year and continuing through 2028, a new, temporary deduction is available for taxpayers age 65 and older. This new “Senior Deduction” allows eligible individuals to claim an additional $6,000 deduction, or $12,000 for a married couple where both spouses qualify.

This new deduction is in addition to the existing additional standard deduction for seniors already in place, which is $2,000. It’s also available to all taxpayers, regardless of whether you choose to take the standard deduction or itemize your deductions.

To be eligible for this deduction, you must be 65 years old on or before the last day of the tax year. The deduction begins to phase out for taxpayers with a modified adjusted gross income (MAGI) over $75,000 ($150,000 for joint filers).

To claim the deduction, taxpayers must include the Social Security Number of the qualifying individual(s) on their return and, if married, file jointly.

Lower Income Tax Rates & Brackets

The new bill restructures tax brackets to be more progressive. This means middle-income earners will receive some tax relief, whereas top earners will be subject to higher rates.

The top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:

• 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
• 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
• 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
• 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
• 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
• 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

This shift is designed to boost disposable income for many households, which is expected to stimulate economic spending.

Expanded Child Tax Credit 

Families with children are getting a boost! The Child Tax Credit (CTC) has been expanded, offering more financial support, particularly for lower-income households. This change aims to reduce child poverty and improve the living standards for millions of children.

For the 2025 tax year, the CTC is worth up to $2,200 per child, and the refundable portion of the CTC, called the Additional Child Tax Credit (ACTC), is $1,700.

No Tax on Tips

For tax years 2025 through 2028, a new “No Tax on Tips” deduction allows employees and self-employed individuals to deduct up to $25,000 in qualifying tips. This deduction is available to both itemizers and non-itemizers.

To be eligible, tips must be received in an occupation that the IRS defines as “customarily and regularly” receiving tips. The deduction begins to phase out for taxpayers with a modified adjusted gross income over $150,000 ($300,000 for joint filers). To claim the deduction, you must include your Social Security Number on your return and file jointly if married. All tips must be properly reported on a Form W-2 or 1099.

No Tax on Overtime

A new “No Tax on Overtime” deduction allows workers to save on their federal taxes.

This new law lets you deduct the extra pay you receive for overtime work—that “half” portion of your “time-and-a-half” pay. The deduction is capped at $12,500 per year, or $25,000 for married couples filing jointly. It’s available to all taxpayers, regardless of whether you itemize your deductions or take the standard deduction.

The deduction begins to phase out for individuals with a modified adjusted gross income over $150,000 ($300,000 for joint filers). To claim the deduction, your employer must report your qualified overtime pay on your W-2. You also need to include your Social Security Number on your return and, if married, we recommend filing jointly.

No Tax on Car Loan Interest

Beginning in 2025 and running through 2028, if you pay up to $10,000 in interest on a loan for a new, personal-use vehicle, you can now deduct it. The catch is, the manufacturer must assemble the vehicle in the United States.

This deduction is available even if you don’t itemize. It starts to phase out for taxpayers with a modified adjusted gross income over $100,000 ($200,000 for joint filers). To claim the deduction, you must include the vehicle’s VIN on your tax return.

Estate and Gift Tax

The One Big Beautiful Bill Act affects individuals planning for their future and the next generation. Luckily, the OBBBA increases the lifetime exclusion amount for the federal estate and gift tax. For 2026, the exclusion will be an inflation-adjusted $15 million per individual and $30 million per married couple. It’s best to keep in mind that these amounts will be subject to inflation for long-term estate planning.

What’s Next?

When there are changes in tax policies, we recommend that you have a to-do list to check that you are up to date on how it affects you. 

• Review your withholding by checking your paycheck to make sure you’re not overpaying or underpaying your taxes throughout the year.
• Consult a tax professional to help you understand these complex changes and maximize your benefits.
• Stay informed by keeping up with news and updates to anticipate any further changes.

The main takeaway is that the tax rules you’ve gotten used to are largely here to stay, and there are some new, temporary tax breaks you might be able to claim. It’s a win-win that provides stability and a chance for extra savings. 

Just be sure to check with a tax pro to make sure you’re getting all the benefits that apply to you! Our user-friendly tax website can guide you step-by-step to make sure you’re taking full advantage of all these changes when tax season approaches. 

Feel free to contact us if you have any questions about our tax services. 

This entry was posted on Friday, August 15th, 2025 at 10:24 pm and is filed under Tax and Life Changes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.