On July 4, 2025, President Trump signed H.R.1, titled the “One Big Beautiful Bill Act” (the “Act”) into law. The Act contains important changes to the Internal Revenue Code (the “Tax Code”) which affect individuals, businesses, and estates. This update outlines several key changes to the Tax Code contained in the Act which affect individuals.
Please see another helpful blog post for a discussion of the Act’s impact on estate and gift taxes.
- Individual Income Tax Rates Under the Tax Cuts and Jobs Act Made Permanent
In 2017, the Tax Cuts and Jobs Act (the “TCJA”) lowered the individual income tax rates and brackets for tax years through 2025. The top tax rate went from 39.6% in 2017 to 37% for tax years 2018 through 2025. Prior to the enactment of the Act, the individual income tax rates and brackets were set to “sunset,” or revert to pre-2017 levels. The income brackets will continue to be indexed for inflation by the Internal Revenue Service each year.
For reference, the tax brackets for the 2025 tax year are as follows:
| Rate | Single | Married, Filing Jointly |
| 37% | $626,351+ | $751,601+ |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 |
| 10% | Up to $11,925 | Up to $23,850 |
- Increased Standard Deduction Under the TCJA Made Permanent
The TCJA significantly increased the standard deduction for tax years through 2025. Prior to the TCJA, the standard deduction was $6,350 for single taxpayers and $12,700 for married taxpayers filing jointly. In 2018, under the TCJA, the standard deduction increased to $12,000 for single taxpayers and $24,000 for married taxpayers filing jointly. The standard deduction is indexed for inflation each year. The Act retroactively adjusts the standard deduction for 2025 to $15,750 for single taxpayers and $31,500 for married taxpayers filing jointly.
- Increased State and Local Tax (“SALT”) Deduction
The TCJA capped the SALT deduction at $10,000 for tax years through 2025. Prior to the enactment of the Act, the $10,000 SALT deduction cap under the TCJA was set to sunset after 2025, which would have allowed greater deductions for state and local taxes including real estate taxes, state or local income taxes, and personal property taxes.
Under the Act, the SALT deduction cap is increased to $40,000 for the 2025 tax year. The SALT deduction cap will increase to $40,400 for the 2026 tax year and will be increased by 1% in each of the 2027, 2028, and 2029 tax years. Beginning in 2030, the SALT deduction cap will revert to $10,000.
The new increased SALT deduction is available for individuals with modified adjusted gross income (“MAGI”) of $500,000 or less.
- Increased Child Tax Credit (“CTC”)
The TCJA doubled the CTC from $1,000 to $2,000 per qualifying child for tax years through 2025. Prior to the enactment of the Act, the CTC was set to revert to $1,000 per qualifying child in 2026. Under the Act, the increased CTC was made permanent, and increased to $2,200 per qualifying child beginning in 2025, which will be indexed for inflation each year.
- “Trump Accounts”
The Act introduces the “Trump Account,” which is an Individual Retirement Account (“IRA”) (but not a Roth IRA) which may be established by the government for a child under age 18.
The Act provides for a $1,000 tax credit for opening a Trump Account for a child born between Jan. 1, 2025, and Dec. 31, 2028.
Contributions to Trump Accounts are not allowed until July 4, 2026 (12 months after the enactment of the Act). Generally, contributions to Trump Accounts are capped at $5,000 per calendar year, to be indexed for inflation each year after 2027.
Generally, distributions from Trump Accounts are not allowed before the first day of the calendar year in which the account beneficiary turns 18. Trump Accounts generally may only hold investments in qualified, low-fee index funds (i.e. S&P 500 index funds).
Contributions made by employers to the Trump Account of an employee or the employee’s dependent are excluded from the employee’s gross income, up to a cap of $2,500, to be indexed for inflation each year after 2027.
- Limitation of Deduction of Wagering Losses
Under the Act, deductions allowed for wagering (i.e., gambling) losses are capped at 90% of the amount of wagering losses incurred by the taxpayer during the tax year, up to the amount of the taxpayer’s wagering gains during the tax year. For example, a gambler who “breaks even” (i.e., has an equal amount of wagering gains and losses) will only be allowed to deduct 90% of the wagering losses from the wagering gains, resulting in 10% of their wagering gains being taxable as income.
- Temporary Limited Deduction for Tips
The Act provides for a temporary above-the-line deduction (i.e., applicable regardless of whether the taxpayer claims the standard deduction or itemizes deductions) equal to the amount of “qualified tips” received by the taxpayer, up to a cap of $25,000. The deduction applies for tax years 2025 through 2028. “Qualified tips” means cash tips received by an individual in an occupation which customarily and regularly receives tips. The Act directs the Department of the treasury to publish a list within 90 days of the enactment of the Act outlining each “occupation which customarily and regularly receives tips” for purposes of determining whether a taxpayer is entitled to the deduction.
The $25,000 cap is reduced by $100 for each $1,000 by which MAGI exceeds $150,000 (or $300,000 in the case of a joint return). For example, if a single taxpayer’s MAGI is $200,000 ($50,000 more than $150,000), then the cap is reduced by $5,000.
- Temporary Limited Deduction for Overtime Pay
The Act provides for a temporary above-the-line deduction equal to the amount of “qualified overtime compensation” received by the taxpayer during the tax year, up to a cap of $12,500 ($25,000 in the case of a joint return). The deduction applies for tax years 2025 through 2028. “Qualified overtime compensation” means overtime compensation paid to an individual required under section 7 of the Fair Labor Standards Act of 1938 that is in excess of the regular rate at which such individual is employed. “Qualified overtime compensation” excludes tips.
The $12,500 (or $25,000) cap is reduced by $100 for each $1,000 by which the taxpayer’s MAGI exceeds $150,000 (or $300,000 in the case of a joint return). For example, if a single taxpayer’s MAGI is $200,000 ($50,000 more than $150,000), then the cap is reduced by $5,000.
- Temporary Deduction for Taxpayers Age 65 and Up
The Act provides for a temporary $6,000 deduction for taxpayers who are age 65 and up for tax years 2025 through 2028. The deduction applies to any taxpayer with respect to a tax year in which the taxpayer has turned 65 before the end of the tax year.
The deduction is reduced by 6% of the taxpayer’s MAGI which exceeds $75,000 (or $150,000 in the case of a joint return). For example, if a single taxpayer’s MAGI is $100,000 ($25,000 more than $75,000), then the deduction is reduced by $1,500 (6% of $25,000).
The Act does not contain any provisions directly eliminating or reducing taxes on Social Security benefits.
There are numerous other provisions of the Act which affect individual taxpayers that are not discussed in this update. Please contact Cooper Levenson’s Tax Law Practice Group to discuss the Act’s impact on your personal tax obligations.
Steven Land is an attorney in Cooper Levenson’s Business & Tax practice group in its Atlantic City office. He concentrates his practice on business transactions, mergers and acquisitions, tax matters, and estate planning and administration. Steven may be reached at (609) 572-7530 or via e-mail at sland@cooperlevenson.com.
The content of this post should not be construed as legal advice. You should consult a lawyer concerning your particular situation and any specific legal question you may have.