In a series of marathon Senate and House sessions leading up to the July 4th holiday, Congress passed the Act (P.L. 119-21, formerly referred to as the One Big Beautiful Bill or OBBB). The Act makes the 2017 Tax Cuts and Jobs Act tax cuts permanent. The Act provides additional tax relief, including enhanced child tax credits, standard deductions, and small business deductions. It introduces new tax breaks for workers (e.g., no tax on tips, overtime, or auto loan interest for U.S.-made cars) and families (e.g., expanded childcare credits, school choice credits, senior exemptions, and savings accounts for children). The effective date of the Act is July 4, 2025.
The legislation also restores and makes permanent many business provisions, such as full expensing for R&D and capital investments, and enhances Opportunity Zone incentives. It cuts Inflation Reduction Act spending, eliminates certain tax credits (like for commercial EVs), and promotes domestic energy production, including nuclear.
This Executive Summary provides an overview of the major provisions of the Act.
Extension and Enhancement of Reduced Income Tax Rate
Rate reductions, bracket changes. Under pre-Act law, for tax years 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) temporarily modified the number of income tax brackets and reduced the income tax rates for individuals and trusts and estates. For individuals, the rates and brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For trusts and estates, the rates and brackets are: 10%, 24%, 35% and 37%.
After 2025, the pre-TCJA rates and brackets were scheduled to apply once again. For individuals, those would be rates and brackets of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, and for trusts and estates, rates and brackets of 15%, 28%, 31%, 36% and 39.6%.
In addition, for 2018-2025, the TCJA expanded the income range for each tax rate bracket, and eliminated most of the “marriage penalty” in the individual tax rate structure (i.e., the result where married joint filers end up paying more tax than they would as single filers) by setting the joint filing tax brackets at twice the single tax bracket amounts, other than for the top tax bracket.
The TCJA didn’t change the net capital gains and qualified dividends tax rates (of 0%, 15%, and 20%), but did modify the “breakpoints” at which those rates apply for 2018 through 2025.
This section makes the TCJA tax rate reductions and bracket changes, marriage penalty fix, and capital gains/qualified income breakpoints permanent. (Act Sec. 70101(a) amends Code Sec. 1(j))
Indexing for inflation. The TCJA also modified the rules for the inflation indexing of the income tax brackets to require that the brackets be adjusted annually for inflation each tax year using the percentage by which the Chained Consumer Price Index for all Urban Consumers (“chained CPI”) for the prior year exceeds the chained CPI for 2017.
For tax years beginning after December 31, 2025, the section makes the base tax year for measuring the prior year chained CPI, 2016 (instead of 2017) for the 10% and 12% individual tax brackets, and the 10% trust and estate tax bracket. The base year remains 2017 for the 22%, 24%, 32%, 35%, and 37% individual tax rate brackets, and the 24%, 35% and 37% trust and estate tax brackets. (Act Sec. 70101(b) amends Code Sec. 1(j)(3)(B)(i))
The section is effective for tax years beginning after December 31, 2025. (Act Sec. 70101(c))
Extension and Enhancement of Increased Standard Deduction
The standard deduction is the sum of the basic standard deduction based on filing status and the additional standard deduction amounts for age 65 and older, and/or blindness. These amounts are indexed annually for inflation.
Under pre-Act law, for tax years 2018 through 2025, the TCJA temporarily increased the basic standard deduction amounts, but not the additional standard deduction. For tax years 2018 through 2025, the basic standard deduction statutory amounts (before any inflation adjustment) are: $24,000 for joint filers and surviving spouses (computed as 200% of the single filers’ amount); $18,000 for heads of household; and $12,000 for singles and marrieds filing separately.
The TCJA also modified the rules for the inflation indexing of the statutory base standard deduction amounts to require that they be adjusted annually for inflation each tax year using the percentage by which the Chained Consumer Price Index for all Urban Consumers (“chained CPI”) for the prior year exceeds the chained CPI for 2017. (For 2025, the inflation-adjusted basic standard deduction amounts are: $30,000 for joint filers and surviving spouses; $22,500 for heads of household; and $15,000 for singles and marrieds filing separately.)
For tax years beginning after December 31, 2025, the basic standard deduction amounts were scheduled to revert to the pre-TCJA statutory amounts. Those non-inflation-adjusted amounts were: for a joint return or surviving spouse, 200% of the dollar amount in effect for an unmarried individual; for a head of household, $4,400; and for a single or married-filing-separate return, $3,000.This section increases the basic standard deduction statutory amounts for tax years beginning after 2025 (Act Sec. 70102(c)) to: $31,500 for joint filers and surviving spouses (computed as 200% of the single filers’ amount); $23,625 for heads of household; and $15,750 for singles and marrieds filing separately. (Act Secs. 70102(a), 70102(b)(1) and 7010(b)(2) amend Code Sec. 63(c)(7))
The section also modifies the inflation adjustment for the basic standard deduction for tax years beginning after 2025, to make the base tax year for measuring the prior year chained CPI, 2024 (instead of 2017). (Act Secs. 70102(b)(1), 70102(b)(2), 70102(b)(3) and 70102(b)(4) amends Code Sec. 63(c)(7)(B)(ii))
The section is effective for tax years beginning after December 31, 2024. (Act Sec. 70102(c))
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