The Key OBBB Act Tax Changes for Individual Investors

This month’s passage of the One Big Beautiful Bill (OBBB) Act brought both certainty and new tax-planning opportunities for individual investors. The OBBB Act addressed most sunset provisions of the Tax Cuts and Jobs Act (TCJA), giving us individual investors clarity through the end of 2028.

I’ve been reading the OBBB Act and tax experts’ commentary about it for a special tax update that will appear in the September 2025 AAII Journal. The OBBB Act creates both new tax-saving opportunities and additional complexity. Many changes are already in effect, while others will take effect in 2026.

Rather than having you wait, I share a summary of the key changes made by the OBBB Act in this week’s Investor Update so you can get a head start on tax planning.

OBBB Act Tax Law Changes Already in Effect for 2025

• Enhanced senior deduction: Taxpayers age 65 or older can claim an additional $6,000 deduction ($12,000 for married couples filing jointly) through 2028, phasing out at modified adjusted gross income (MAGI) over $75,000 for single filers and $150,000 for married joint filers. The enhanced benefit is in addition to the existing additional standard deductions for older adults and those who are blind. Both married joint filers and single filers can claim the extra deduction regardless of whether they take the standard deduction or itemize.
• Higher standard deductions: Standard deductions for this year are increased to $31,500 for married filing jointly, $23,625 for heads of household and $15,750 for singles. The larger standard deductions instituted by the TCJA are now permanent.
• Expanded SALT deduction: The cap on deducting state and local taxes (SALT) is $40,000 through 2029, with phaseouts starting at MAGI of $500,000 (married filing jointly and singles). The previous SALT deduction of $10,000 was set to sunset at the end of this year.
• Increased child tax credit: The child tax credit is permanently raised to $2,200 per qualifying child, though with stricter Social Security number requirements.
• Auto loan interest deduction: Up to $10,000 of interest can be deducted annually for new U.S.-assembled vehicles purchased between January 1, 2025, and December 31, 2028. This deduction can be claimed even if the standard deduction is claimed, but it does not apply to lease financing.
• New worker deductions: Tips up to $25,000 and qualified overtime up to $25,000 (married filing jointly) or $12,500 (singles) can be deducted through 2028. Both deductions can be taken regardless of whether a taxpayer itemizes or takes the standard deduction.
• Trump accounts for minors: The OBBB Act introduced new tax-deferred savings accounts with a $1,000 Treasury contribution for citizens born between January 1, 2025, and December 31, 2028. Contributions of up to $5,000 can be made to Trump accounts for children under the age of 18 once accounts become available for contributions in 2026. However, the rules regarding withdrawals are strict.

2026 OBBB Act Tax Law Changes

• Permanent lower tax brackets: Rather than sunsetting, the lower tax brackets put in place by the TCJA tax rates have been made permanent. In addition, the OBBB Act added an additional year of inflation adjustments to the 10% and 12% tax brackets. (There is uncertainty about the 22% bracket because of how the law is written.)
• New cap on itemized deductions: The tax value of itemized deductions will be effectively capped at the 35% tax rate for taxpayers in the 37% bracket. This new restriction applies to all itemized deductions, including the enhanced SALT deduction.
• Charitable contribution changes: Standard deduction filers will be able to deduct up to $2,000 (married filing jointly) or $1,000 (singles) in cash donations. Those who itemize will only be able to deduct donations that are more than 0.5% of their contribution base (typically adjusted gross income).
• Revised AMT phaseouts: The alternative minimum tax (AMT) exemption phaseout rate will double from 25% to 50% at $1 million for married couples filing jointly and $500,000 for singles. This accelerated phaseout effectively expands the reach of the AMT.
• Enhanced 529 plans: The annual limit for tax-free K–12 withdrawals from 529 plans will increase permanently from $10,000 to $20,000 per beneficiary.
• Higher estate tax exemption: The base exemption will be permanently set at $15 million per person. It was scheduled to sunset to lower levels.
• Miscellaneous deductions eliminated: Investment fee and tax preparation fee deductions will be permanently removed. They had been suspended under the TCJA.

As noted above, I will explain these changes in greater detail in the September 2025 AAII Journal. Should you have questions about how these changes impact your personal situation, contact a tax professional.