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OBBBA Estate and Individual Income Tax Changes

Here are some highlights of the changes impacting estate and individual income taxes under the new law.  We are continuing to review details of the law and will provide updates as more information becomes available.  

Estate Tax

Exemption for Estate and Gift Tax (applies to decedents dying and gifts made after December 31, 2025)

  • Will increase the exemption from $13.61 million per person in 2025 to $15 million per individual and from $27.22 million per married couple to $30 million indexed for inflation after 2025. 
  • Rather than sunsetting as scheduled under the  TCJA, this is to be a permanent increase. 

Individual Tax

Tax Rates and Brackets (taxable years beginning January 1, 2025)

  • The top rate is set permanently at 37% for individuals (previously scheduled to expire and increase to 39.6% after 2025).

Standard Deduction (taxable years beginning January 1, 2025)

  • Increases the (now permanent) standard deduction as indexed for inflation and adds a temporary increase of $1,000 for single filers and $2,000 for married filing jointly, $1,500 for head of household through 2028. 
  • For 2025, the standard deduction is: 
    • Single - $15,750
    • MFJ –   $31, 500
    • HOH – $23, 625

State and Local Tax Deduction (taxable years beginning January 1, 2025)

  • Increases the federal state and local deduction cap from $10,000 to $40,400 (or $20,200 for married filing separately), for taxpayers with AGI over $505,000 (or $202,500 MFS), the cap is gradually reduced — but never below $10,000 (or $5,000 MFS). 

Senior Bonus Deduction (taxable years beginning after December 31, 2024, and before January 1, 2029)

  • Seniors (aged 65) and up qualify for an additional temporary deduction of $6,000 per taxpayer which is available even if a taxpayer itemizes their deductions.  It is phased out at MAGI(Modified Adjust Gross Income) over $75,000 for singles, $150,000 for married filing jointly. (Valid, work-eligible Social Security numbers are required.)

Auto Loan Interest (indebtedness incurred during tax years beginning after December 31, 2024, and before January 1, 2029)

  • Interest incurred to buy a passenger vehicle for personal use will be deductible above the line (for calculating AGI). Final assembly of the auto must have taken place in the U.S. This is subject to phase out above MAGI of $100,000 for a single taxpayer and $200,000 for married filing jointly.  

Tip  and Overtime Income Deduction (for tax years beginning after December 31, 2024, and before January 1, 2029)

  • For individuals whose earned income does not exceed $150,000 for single and $300,000 for married filing jointly annually, there is a new above the line deduction (this means it is not an itemized deduction) for:
    • Qualified tip income - exclude up to $25,000 for single filers, $50,000 for MFJ
    • Overtime income - exclude up to $12,500 for single filers, $25,000 for MFJ

Other Individual Provisions 

529 Plan Expansion (for distributions made after July 4, 2025)

  • K–12 Education: Expands tax-free 529 withdrawals to cover elementary, secondary, or homeschool expense and includes private and religious schools. 
  • Costs for Credentials: Plans can now cover fees, books, supplies, and other costs for recognized postsecondary credentialing programs

Charitable Deduction (for taxable years beginning January 1, 2026)

  • Above the Line: Non-itemizers can deduct up to $1,000 (single) or $2,000 (joint) in qualified charitable contributions
  • Itemized Deductions: Only amounts donated in excess of .5% of AGI will be deductible. 

Trump Accounts for Children (effective July 4, 2026 which is 12 months after enactment)

  • New tax-advantaged account for children under 8
  • Contribute up to $5,000/year, inflation-adjusted
  • With some limitations, funds can generally be used for education, small business, or a first-time home purchase
  • There are additional limitations based on age and amounts used from these funds. 

Trump Account Pilot Program (children born after December 31, 2024, and before January 1, 2029)

  • One-time $1,000 federal deposit into Trump accounts, subject to eligibility

Business Income Tax Changes

Click here to learn about changes in the law that impact businesses.