Breaking Down the One Big Beautiful Bill: Taxes, SALT, and the Future

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, enacting one of the most significant tax and spending overhauls in recent years. Building on the 2017 Tax Cuts and Jobs Act (TCJA), the legislation permanently extends reduced tax rates, introduces new deductions for working families, and alters policies on education, charitable giving, clean energy, and public assistance. While politically divisive, the law reshapes the federal tax code with most provisions beginning in 2025.

Permanent Tax Rate Extensions and Deductions

OBBBA makes permanent the TCJA’s lower income tax brackets, preventing them from expiring in 2026. The standard deduction is locked in at $15,750 for single filers and $31,500 for joint filers starting in 2025, with temporary boosts of $1,000 and $2,000, respectively, through 2028. These figures will be adjusted for inflation starting in 2026.

The child tax credit increases from $2,000 to $2,200 per child in 2025, with the refundable portion set at $1,700. The credit phases out beginning at $200,000 for single filers and $400,000 for joint filers, and will be indexed for inflation starting in 2026.

New Temporary Deductions (2025–2028)

Taxpayers over age 65 may claim an additional deduction of $6,000 (single) or $12,000 (joint) from 2025 through 2028. This benefit begins to phase out at $75,000 (single) and $150,000 (joint) and is fully phased out at $175,000 and $250,000, respectively.

A new deduction of up to $10,000 in interest on loans for U.S.-made vehicles applies for purchases made between 2025 and 2028. This benefit phases out beginning at $100,000 AGI (single) and $200,000 (joint), with full phaseout at $150,000 and $250,000.

Changes to the SALT Deduction

The state and local tax (SALT) deduction cap increases to $40,000 in 2025, with a 1% annual increase through 2029. It then reverts to $10,000 in 2030. However, this expanded deduction phases out for taxpayers with AGI over $500,000, reducing by 30 cents for every dollar above the threshold. The deduction may not fall below $10,000.

Charitable Giving Updates

for single filers or $2,000 for joint filers for cash donations made directly to public charities. Contributions to donor-advised funds (DAFs) do not qualify. For itemizers, only amounts exceeding 0.5 percent of adjusted gross income (AGI) are deductible. For high earners, the value of the deduction is capped at a 35 percent marginal tax benefit, reduced from 37 percent. Donor-advised fund contributions are still permitted but must exceed the AGI floor and are subject to the same cap, which slightly reduces their overall tax benefit.

Education and Student Loan Reforms

OBBBA expands 529 savings plans to include a broader range of K–12 and credentialing expenses. The annual cap for K–12 tuition withdrawals increases to $20,000 per student starting in 2026. Rollovers to ABLE accounts for children with disabilities are now permanently allowed.

Trump Savings Accounts

Trump Savings Accounts are created for children born between 2025 and 2028, offering a $1,000 government contribution at birth. Parents can contribute up to $5,000 annually, and employers up to $2,500. Funds grow tax-deferred and can be used for education, housing, or retirement. The Treasury Department will automatically create and fund a Trump account when a parent files a tax return that includes an eligible child if a parent does not voluntarily create one.

Major Changes to Federal Student Loans Under OBBBA

The bill significantly changes federal student loan programs starting in 2026. For new borrowers, subsidized federal loans will be eliminated as of the 2026-2027 academic year, meaning interest will accrue from the point of disbursement. Graduate PLUS loans are also eliminated for new borrowers beginning in 2026, with a full phaseout by 2029-2030. Additionally, a new lifetime borrowing cap has been imposed: $100,000 for graduate students, $200,000 for professional degrees, and an overall limit of $257,000 per student.

Clean Energy Credit Phaseouts

Most clean energy tax credits from the Inflation Reduction Act are phased out or eliminated. The electric vehicle credit ends after September 30, 2025. Credits for residential solar, energy-efficient homes, and commercial upgrades expire after December 31, 2025.

Looking Ahead

The Congressional Budget Office estimates the legislation will increase the deficit by $3.4 trillion over 10 years. While some taxpayers will see benefits, several provisions are temporary or income-restricted. With implementation beginning in 2025, families and individuals should review their eligibility, plan for expiring incentives, and consult with a tax professional to understand how OBBBA may affect their financial outlook.