OBBBA Redefines Individual Taxes, Family Benefits, and Estate Planning

A tax cut just became permanent—and new benefits for families, workers, and high-net-worth individuals are here to stay. Signed by President Trump on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) cements the 2017 Tax Cuts and Jobs Act (TCJA) while introducing deductions, credits, and estate planning reforms that could reshape your financial future. Here’s how OBBBA affects you.

Permanent Tax Relief for Individuals

OBBBA locks in the TCJA’s individual tax rates, preventing a scheduled hike after 2025. It also permanently eliminates the personal exemption, replacing it with a higher standard deduction: $31,500 for joint filers, $23,625 for heads of household, and $15,750 for singles, all indexed for inflation. This ensures long-term predictability for millions of households.

Targeted Deductions for Working Americans

Through 2028, OBBBA offers temporary relief for workers:

• Tips and Overtime: Up to $25,000 in tip income and $12,500 in overtime pay ($25,000 for joint filers) are tax-free, phasing out for individuals with adjusted gross income (AGI) above $150,000 ($300,000 for couples).

• Auto Loan Interest: Interest on up to $10,000 for U.S.-assembled vehicle loans is deductible, phasing out at $100,000 AGI ($200,000 for joint filers). For a family buying a new American-made car, this could save hundreds annually.

These provisions support middle-income earners and align with domestic manufacturing goals.

Modernizing Itemized Deductions

OBBBA refines itemized deductions:

• The state and local tax (SALT) deduction cap rises to $40,000 in 2025, increasing 1% annually until reverting to $10,000 in 2033. Higher earners (AGI above $250,000 for singles, $500,000 for couples) see this benefit reduced.

• Miscellaneous deductions are permanently eliminated, simplifying returns.

• The high-income deduction limit is repealed, benefiting top earners.

• Charitable contributions: Non-itemizers can deduct up to $1,000 ($2,000 for couples) above the line, while itemizers reduce deductions by 0.5% of their contribution base to curb aggressive tax sheltering.

Enhanced Family Credits

OBBBA strengthens family support:

• The Child Tax Credit (CTC) rises to $2,200 per child in 2026, indexed for inflation. For a family with two kids, this means an extra $4,400 to offset rising costs.

• The Child and Dependent Care Credit (CDCC) now covers 50% of qualifying expenses, phasing down to 20% for AGI above $15,000, easing childcare burdens for working parents.

Estate Planning Opportunities

High-net-worth individuals gain flexibility with a permanent estate and gift tax exemption of $15 million per person ($30 million for couples), indexed for inflation. This enables advanced trust structures and generational wealth transfers without immediate tax liability, a boon for strategic estate planning.

Key Takeaways for Individuals

• Secure Tax Savings: Leverage permanent tax rates and higher standard deductions.

• Claim New Deductions: Maximize tax-free tips, overtime, and auto loan interest through 2028.

• Support Families: Use enhanced CTC and CDCC to offset childcare and living costs.

• Plan Estates: Update strategies to utilize the $15 million exemption.

• Consult Experts: Work with a financial advisor to navigate OBBBA’s opportunities.

OBBBA evolves the TCJA with permanent tax relief, targeted deductions, and robust family and estate planning benefits. With changes effective now, consult IC Americas to maximize these opportunities and ensure compliance. Stay ahead in this transformed tax landscape.