The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025, and it’s bringing some significant changes to your tax situation. Think of it as making permanent many of the tax breaks you’ve been enjoying since 2017 – plus adding some new ones. Here’s what you need to know.
Your Tax Rates Aren’t Going Up
Good news first: those lower tax rates (10% through 37%) that you’ve been benefiting from? They’re now permanent. No more worrying about them expiring or changing – they’re here to stay, with annual adjustments for inflation.
Standard Deduction Stays Higher
Remember when the standard deduction nearly doubled a few years ago? That’s permanent too. For 2025, you can deduct:
- $15,750 if you’re single or married filing separately
- $31,500 if you’re married filing jointly
- $23,625 if you’re head of household
If you’re legally blind, you get an extra $2,000 (single/head of household) or $1,600 per spouse (married couples) on top of these amounts.
Better Child Tax Credit
The Child Tax Credit bumps up from $2,000 to $2,200 per qualifying child, and it’ll increase with inflation each year. Both you and your child need Social Security numbers to qualify – nothing new there.
State and Local Tax Relief (For Now)
Here’s where it gets interesting. That $10,000 cap on state and local tax deductions? It jumps to $40,000 for 2025, then increases by 1% each year through 2029. But there’s a catch – it phases out if you make over $500,000, and it drops back to $10,000 in 2030.
What About Other Deductions?
Some things stay the same as they have been:
- Personal exemptions are still eliminated (the higher standard deduction more than makes up for it)
- Mortgage interest deduction stays capped at $750,000 of loan balance, but mortgage insurance premiums are now permanently deductible
- Miscellaneous itemized deductions (like unreimbursed employee expenses and tax prep fees) are still gone
- Alternative Minimum Tax keeps its higher exemption levels, though the phase-out thresholds went back to 2018 levels
Teachers Get a Break
If you’re an educator, your unreimbursed expense deduction will be unlimited starting in 2026 (currently $300 max per year), with broader categories of qualifying expenses. In addition, starting in 2026, it is an itemized deduction.
What This Means for Your Planning
The permanence of these changes gives you certainty for long-term planning. Most families will continue benefiting from higher standard deductions and enhanced child tax credits without needing complex strategies.
If you’re in a higher income bracket, pay attention to that temporary SALT boost through 2029 – it might influence when you pay certain state and local taxes. Teachers should keep better track of qualifying expenses since the deduction is now more valuable. And families with multiple children will see those extra $200 per child really add up over time.
