Big Beautiful Bill, Part 1: Brackets, Deductions, and New Planning Opportunities

July 21st, 2025 by Blake Pinyan

Independence Day 2025 marked more than fireworks and festivities—it also marked the passing of a sweeping piece of tax legislation: the One Big Beautiful Bill (OBBA). Signed into law on July 4, OBBA arrived with urgency, aiming to address the expiration of the Tax Cuts and Jobs Act (TCJA) set for the end of 2025.

Originally passed in 2017 during President Trump’s first term, TCJA introduced major tax cuts and changes, many of which were temporary. OBBA seeks to make some of those changes permanent while introducing new provisions designed to reshape the tax landscape going forward.

In this first article of our OBBA series, we’re diving into what’s changing with:

• Tax brackets
• The standard deduction
• A new additional deduction for seniors
• Key updates to itemized deductions

Tax Brackets: Made Permanent

OBBA cements the marginal tax rates established under the TCJA—10%, 12%, 22%, 24%, 32%, 35%, and 37%—as permanent. These are the rates applied to each “layer” of your income. While your marginal rate is the rate at which your next dollar of income is taxed, your effective tax rate is the average rate you pay across all your income layers.

Looking ahead to 2026, we’ll see modest inflation adjustments to the 10% and 12% brackets—just a few hundred to a few thousand dollars, respectively. While not groundbreaking, these adjustments might keep some taxpayers in lower brackets who would have otherwise been bumped up.

Standard Deduction: Getting a Boost

Starting in 2025, the standard deduction is increasing:

Filing Status	2025 Before OBBA	2025 After OBBA
Single	$15,000	$15,750
Head of Household	$22,500	$23,625
Married Filing Jointly	$30,000	$31,500

 

Taxpayers always take the greater of the standard deduction or their total itemized deductions. This increase, while modest, will generate tax savings for those who don’t itemize, particularly those in higher marginal brackets, since a deduction’s value is tied to your tax rate. For instance, a taxpayer in the 24% bracket saves 24 cents for every $1 of deduction.

This updated standard deduction will be adjusted for inflation going forward and remain permanent.

New Additional Deduction for Seniors (2025–2028)

One of OBBA’s most impactful (and potentially overlooked) provisions is a new temporary additional deduction for seniors. From 2025 through 2028, individuals aged 65 or older can claim an additional:

• $6,000 per person ($12,000 per couple if both are 65+)

This is on top of the standard deduction and existing age-related add-ons. However, it begins to phase out once Modified Adjusted Gross Income (MAGI) exceeds:

• $75,000 for single filers
• $150,000 for married joint filers

It phases out at 6% of income above those thresholds and fully phases out at $175,000 (single) and $250,000 (married). This additional deduction for seniors is in addition to the supplemental standard deduction that those age 65+ get. Notably, those that are age 65+ get an additional $2,000 for individuals or $1,600 per person for married filters to their standard deduction level.

Here’s how the new standard deduction adds up for seniors:

Filing Status	2025 Standard Deduction (Age 65+)
Single	$23,750 ($15,750 + $2,000 + $6,000)
Married Filing Joint (One 65+)	$39,100 ($31,500 + $1,600 + $6,000)
Married Filing Joint (Both 65+)	$46,700 ($31,500 + $3,200 + $12,000)

 

Tax planning is critical, especially for households near the phaseout threshold. Strategies like managing portfolio withdrawals, retirement contributions, capital loss harvesting, or HSA funding may help preserve the full deduction.

Changes to Itemized Deductions

State and Local Tax (SALT) Deduction Cap Increased

OBBA makes a major temporary change to the SALT deduction cap. From 2025 to 2029, the cap rises to $40,000 (from $10,000), with a 1% annual increase through 2029. It reverts to $10,000 in 2030.

Tax Year	SALT Cap	Phaseout Range (MAGI)
2025	$40,000	$500,000 – $600,000
2026	$40,400	$505,000 – $606,333
2027	$40,804	$510,050 – $612,730
2028	$41,212	$515,151 – $619,191
2029	$41,624	$520,302 – $625,716
2030+	$10,000	N/A

 

Those with MAGI over $500,000 begin to see a 30% phaseout of the deduction, with a complete loss by $600,000 MAGI. Planning strategies to manage income in this range could help retain the benefit.

Note: The pass-through entity (PTE) SALT workaround is still available and unaffected.

Mortgage Insurance Premiums Deductible Again

Effective 2026, mortgage insurance premiums—typically required on FHA, VA, or low-down-payment loans—can once again be deducted as mortgage interest. The $750,000 cap on mortgage principal remains in place.

New Floor on Charitable Contribution Deductions

Starting in 2026, charitable contributions will be deductible only to the extent they exceed 0.5% of AGI. For example, if your AGI was $100,000, you’d only be able to deduct your charitable contributions that are above $500. This creates a planning opportunity for bunching charitable donations into 2025 when the floor does not apply.

Gambling and Casualty Loss Changes

• Gambling losses will only be deductible up to 90% of gambling gains starting in 2026. Such the case, someone with $10,000 of gains and $10,000 of gambling losses, could only deduct $9,000 of the losses and would have a $1,000 gambling gain
• Casualty losses now include state-declared disasters (not just federal), still subject to the 10% of AGI threshold and insurance reimbursement limits.

Educator Expenses Get a Boost

Previously capped at $300 per person regardless of filing method, educator expenses will become an itemized deduction starting in 2026 with no cap for unreimbursed out-of-pocket costs. Taxpayers who itemize can now benefit from both the $300 above-the-line deduction and this new category.

Itemized Deduction Limitation for High Earners

Starting in 2026, taxpayers in the top 37% bracket will face a new itemized deduction limitation:

• 2/37 of the lesser of:
  • Total itemized deductions, or
  • The amount their taxable income plus deductions exceeds the 37% threshold

This won’t affect QBI (Qualified Business Income) deductions but is a meaningful reduction for high-income households.

Final Thoughts

The OBBA marks the beginning of a new tax era—with big implications for deductions, brackets, and beyond. This article focused on foundational changes that affect nearly every taxpayer. Future articles in this series will explore updates to tax credits, business incentives, new deductions, and more.

At Anchor Bay, we believe proactive planning is key. When it comes to taxes, it’s not what you make—it’s what you keep that matters most.