Five key takeaways for individual taxpayers from the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA) (P.L. 119-21) made numerous changes to provisions for individual taxpayers. Some of these changes affect the 2025 tax year, so taxpayers should consider the following items immediately: 

1. TCJA rates and brackets preserved 

The OBBBA made permanent the tax cuts found in the 2017 Tax Cuts and Jobs Act (TCJA). Even though OBBBA maintains the status quo, taxpayers should still be apprised of this development. Absent Congressional intervention, tax rates and brackets were due to sunset and return to higher pre-TCJA levels. 

Planning consideration: It is likely that many advisers have suggested that their clients consider accelerating income into 2025 ahead of anticipated rate increases. Following the enactment of the OBBBA, income deferral instead of acceleration may be a better strategy for most taxpayers. 

2. SALT cap increased 

The OBBBA temporarily increased the deductible limit for state and local tax (SALT) deductions from $10,000 to $40,000 for tax year 2025 ($20,000 for married filing separately). However, the higher cap starts to phase down for taxpayers above $500,000 of adjusted gross income (AGI) ($250,000 for married filing separately), with a complete phase-down to the TCJA limit of $10,000 occurring at $600,000 of AGI ($300,000 for married filing separately). Both the cap and threshold increase by 1% annually through the 2029 tax year, before reverting to the TCJA $10,000 limit for the 2030 tax year. 

Planning consideration: The SALT cap increase raises many planning considerations: 

• The SALT cap increase takes effect for the 2025 tax year. Some taxpayers will need to revise 2025 tax estimates to account for this additional deduction. Some may want to consider prepaying fourth quarter 2025 estimates and January 2026 property tax bills by December 31, 2025, to accelerate deductions into the current year. 
• Pass-Through Entity Tax (PTET) regimes will continue to be important strategies for taxpayers, especially those with higher AGIs who are phased down to the $10,000 TCJA limit. Earlier versions of the OBBBA sought to limit PTET for some or all taxpayers, but the final bill contained no PTET limitations. Be aware of the status of your state, as some states implemented PTET on a temporary basis and some states still do not offer PTET.