What the One Big Beautiful Bill Act Means for Your 2025 Taxes

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Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) introduces sweeping changes to the U.S. tax code. The legislation permanently extends and modifies many provisions from the 2017 Tax Cuts and Jobs Act, which were previously set to expire at the end of 2025. Below is a summary of key changes affecting individuals, families and businesses.

Tax changes for individuals

Several TCJA-era provisions are made permanent, while new deductions and credits aim to provide broader tax relief for households.

• The top individual income tax rate of 37% is permanently extended, avoiding the scheduled increase to 39.6%. All other TCJA income tax rates and threshold reductions for individuals, estates and trusts are also made permanent.
• Beginning in 2026, the standard deduction increases to:
  • $15,750 for single filers
  • $23,625 for heads of household
  • $31,500 for married couples filing jointly
• Starting in 2025, the Child Tax Credit increases to $2,200 per qualifying child and is permanently indexed to inflation, with higher phaseout thresholds.
• The SALT (state and local tax) deduction cap is raised to $40,000, with a phaseout beginning at $500,000 of income. The deduction cannot fall below $10,000. This provision sunsets after 2029.
• Alternative Minimum Tax exemptions are permanently extended, and phaseout rates increase from 25% to 50%.
• A new senior deduction of $6,000 is available for tax years 2025-2028. It is reduced (but not below zero) by 6% of adjusted gross income over $75,000 for individuals and $150,000 for joint filers.
• Charitable contribution deductions are now subject to a floor equal to 0.5% of the taxpayer’s contribution base.

Tax changes for estate planning

The bill enhances estate planning flexibility and introduces a new tax-advantaged savings vehicle for children.

• The estate and gift tax exemption is permanently increased to $15 million per person beginning in 2026, avoiding the scheduled drop to approximately $7 million per person in 2026. This exemption will be indexed annually for inflation.
• New tax-exempt "Trump accounts" are introduced for qualifying children:
  • Function similarly to IRAs, with tax-deferred growth.
  • Withdrawals are taxed at capital gains rates, with a 10% penalty for non-qualified withdrawals before age 59½.
  • Qualified withdrawals include expenses for higher education, a first home and childbirth.
  • Annual after-tax contributions are capped at $5,000 (with certain exceptions) in total until the child turns 18 (indexed), with employer contributions of up to $2,500 excluded from gross income.
  • Children born between Jan. 1, 2025, and Dec. 31, 2028, receive a $1,000 government seed contribution.
  • Children born earlier are eligible for these accounts, but do not receive the seed gift.

Tax changes for business owners

Business owners benefit from extended deductions, expanded investment incentives and enhanced planning tools.

• The 20% qualified business income deduction is permanently extended, with increased phase-in income thresholds.
• The Qualified Opportunity Zone program is extended and expanded, continuing to offer gain deferral, basis step-ups and potential gain exclusion for investments held at least five years.
• Qualified Small Business Stock benefits are enhanced:
  • Tiered gain exclusions: 50% (three years), 75% (four years), 100% (five years or more).
  • Lifetime exclusion increases from $10 million to $15 million.
  • Gross asset limit rises from $50 million to $75 million, indexed starting in 2027.
• 100% bonus depreciation under Section 168(k) is permanently restored, allowing immediate expensing of qualifying property.
• Corporate charitable contribution deductions are limited to a minimum of 1% and a maximum of 10% of taxable income. Excess contributions may be carried forward for up to five years on a first-in-first-out basis, with limitations based on their impact on taxable income and net operating loss carryovers (with certain exceptions).

Looking Ahead

The One Big Beautiful Bill Act creates unique planning opportunities for individuals, families and businesses. Your Fifth Third Private Bank team is ready to help you explore how these changes may benefit your wealth strategy. To learn more, contact your Fifth Third Private Bank advisor.