One Big Beautiful Bill Continued

Tax changes take effect this year and next… Thanks to the massive new federal legislation commonly referred to as the “One Big Beautiful Bill,” which President Trump signed as promised on July 4.

There are over 100 tax sections in the OBBB. The changes permanently extend most tax provisions in the 2017 Tax Cuts and Jobs Act that were slated to expire on Dec. 31 and enhance some of them, provide new tax breaks, repeal clean-energy credits in the 2022 Inflation Reduction Act, and much more. Many changes begin in 2025. Others in 2026. Most are permanent. Some are temporary. This newsletter is devoted to the key tax changes enacted in the OBBB.

Tax Rates

Income tax rates for C corps, individuals, trusts and estates stay the same. C corps are taxed at a 21% rate, and individuals have a top rate of 37%. The individual alternative minimum tax easings are permanent, with a few changes.

Standard Deductions

Standard deductions increase by $1,500 for joint filers, $750 for singles and $1,125 for household heads, beginning with 2025 returns filed next year. For 2025 returns, the basic standard deduction is $31,500 for joint filers, $15,750 for singles and $23,625 for heads of household. Filers 65 and older get $1,600 more per spouse on joint returns and $2,000 more on single and head-of-household returns.

Child Credit

The child tax credit rises to $2,200 per qualifying child…up from $2,000… beginning with 2025 returns, and will be annually adjusted for inflation. The refundable part for lower-incomers is $1,700. Filers need Social Security numbers to claim the child credit. On joint returns, at least one spouse must have an SSN. And, as before, each child for whom the credit is claimed must have an SSN.

Child Care

Three breaks for child and dependent care are bigger, beginning in 2026: The child and dependent care credit is more generous. The maximum credit for 2025 is $1,050 for one dependent and $2,100 for two or more dependents. The OBBB increases the top credit to $1,500…$3,000 for two or more dependents.

Working parents can contribute up to $7,500 to a dependent care FSA, beginning in 2026. The 2025 cap for this type of flexible spending account is $5,000. Employers that provide child care for their workers also get more relief. The $150,000 maximum credit is rising to $500,000…$600,000 for small businesses.

SSN’s

Lots of the tax breaks require filers to have Social Security numbers: The $6,000 bonus deduction for seniors. The deductions for tip income and overtime. The American Opportunity and Lifetime Learning credits. Plus more.

Estate Tax

The higher lifetime estate and gift tax exemption is now permanent… And bigger…$15 million starting with 2026 deaths. The exemption for 2025 deaths is $13,990,000. The top federal estate tax rate stays at 40%.

We will be sending out more information about The Big Beautiful Bill in the coming weeks. Stay tuned.