We guarantee your individual income tax return will be impacted in significant ways this year forward by the sweeping tax law changes passed on July 4 as the “One Big Beautiful Bill Act” — And below we describe how.

For small business owners, also be sure to check out our companion blog post to see how the new law impacts small business taxes as well.

Tax Law Benefits for Individuals – Tax & Tax Credits

• Let’s start with Tax Brackets — The existing tax brackets were set to expire in 2025 and revert back up 1-2% to those from before 2018. But the existing brackets we’ve all gotten used to are now permanent.

• The increased ‘Child Tax Credit’ is now permanently higher, grows a smidge more to $2,200, and is now annually adjusted for inflation.

• A mixed bag exists for ‘Alternative Minimum Tax’: the higher exemption is now permanent (which has helped it apply to less people), but the exemption resets to 2018 levels for certain filers and the income-based phaseout of the exemption happens more rapidly.

• The estate tax exclusion is increased again to $15m starting in 2026, and adjusted for inflation thereafter.

• Starting in 2026, individuals can receive up to a $1,700 in a new tax credit (i.e., dollar-for-dollar reduction in tax) for contributing to a ‘Scholarship Granting Organizations’ in covered states (Virginia and Pennsylvania are currently covered, but Maryland and DC have yet to decide).

• For those claiming the Adoption Tax Credit, now up to $5,000 of the credit will be considered refundable (i.e., you can use the credit to offset your tax, and any remaining can generate a refund as well).

• And for those claiming the ‘childcare tax credit’, a slightly higher amount of the allowable childcare costs are able to be convert to a credit.

Tax Law Benefits for Individuals – Deductions

• Other 2018 tax saving provisions that are also now permanent: (a) the higher standard deduction, with an annual inflation adjustment (now at $31.5k for joint filers in 2025), and (b) resurrecting the deductibility of mortgage insurance premiums for 2025 forward.

• The controversial ‘state and local tax’ (SALT) itemized deduction cap of $10k is now $40k. But the catch is it reverts back to $10k in 2029.

• What about tips? Tips are still taxable, but up to $25k in qualified tips can be deducted from income, even if you don’t itemize. The deduction will phase out as income exceeds $150k (or $300k for joint filers), and is only available for tax years 2025 to 2028.

• A similar functioning deduction exists for overtime pay, except that it’s capped at $12.5k ($25k for joint filers), phases out in a similar income range, and is not available after 2028.

• A new deduction for educators is that unreimbursed educator expenses exceeding the $300 ‘above-the-line’ deduction will count as an itemized deduction starting in 2026.

• Seniors 65+ receive a new $6,000 deduction, effective for 2025 to 2028 tax years. But no changes were made to the taxability of Social Security income in the end.

• Something I never thought I’d see: A new deduction starting in 2025 for up to $10k in passenger new automobile loan interest, available even if you don’t itemize, but disappearing after 2028, and also for those with income over $100k ($200k for joint).

• There’s also a new $1,000 charitable contribution deduction ($2k for joint) even for those who don’t itemize. The caveat: There’s a new 0.5% of income floor you have to exceed before claiming charitable contributions, whether you itemize or not.

Tax Law Benefits for Individuals – Other

• Here’s an altogether new animal: ‘Trump Accounts’ for children. Starting in 2026, accounts can be setup for beneficiaries under 18 and funded with up to $5k/ year (no deduction), to grow tax deferred. The IRS will pilot funding $1k for those born after 2024 and has set aside $410 million to do so.

• The amount of childcare costs able to be excluded from wages increases from $5k to $7.5k starting in 2026.

• 529 plan uses are now also expanded further: including (a) the distribution limit for K-12 is increased from $10k to now $20k, and (b) qualifying costs are expanded to homeschool materials and post-secondary credentialing programs.

Tax Law Drawbacks for Individuals

• One of the tax saving items lost back in 2018 was the elimination of personal exemptions (you may remember you used to get around $4k per person). Unfortunately, personal exemptions are now permanently eliminated.

• Other deductions lost back in 2018 that are also now permanent: (a) the lower mortgage interest cap & general home equity limitation, (b) the elimination of ‘2% miscellaneous itemized deductions’ (like unreimbursed employee expenses and preparer fees), and (c) the limited ‘casualty loss’ deduction (essentially can’t be claimed unless you’re within a federally declared disaster zone).

• One of the biggest hits under the new law: electric vehicle and home energy efficiency credits essentially evaporate by the end 2025 (some even by Sep 30). So if you were planning to do something related to either of these, you may want to act sooner rather than later.

• The phase out of the personal itemized deduction total is back starting in 2026 for taxpayers in the 37% bracket (loosely $615k+).

• The deductibility of gambling losses take a hit under the new law — In a very odd tax provision, gamblers can only claim 90% of losses experienced during the year. This can ultimately result in someone paying tax on gambling winnings, even when they had a net gambling loss for the year.

• And lastly, if you received ‘advance premium payments’ through the health insurance marketplace and are later determined to not qualify, the limitations for the payback amount no longer exist.

More to Come

Believe it or not, this isn’t even everything in the 400-pages of the new tax law, but it is most of the major ones likely to impact folks.

Note that many of the technical details will continue to be ironed out in the coming months, and as usual, please reach out to our Tax Design Team before making any changes to be sure the particular provision will work for your situation as intended — the tax code is riddled with tripwires and caveats, so it’s important to navigate with care.

And be sure to also check out our companion summary of what key tax law changes specifically impacted small businesses.