President Donald Trump signed his so-called “One Big Beautiful Bill Act” into law on the Fourth of July, which means the provisions of the sweeping spending and tax legislation will soon take effect. But what exactly does it mean for your wallet?
The bill introduces new tax breaks, increases some existing deductions and exemptions, and puts an end to certain green energy provisions. Here is what to know.
1. The SALT deduction will increase
The state and local tax deduction (SALT) offers a federal deduction for state and local income taxes and property taxes for those who itemize their deductions. Under the new bill, the cap “would quadruple to $40,000 for five years,” said The Associated Press, which is especially “important to New York and other high tax states.”
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2. Standard deductions will go up, with a bonus for seniors
The new bill would make permanent the higher standard deduction, which “doubled in 2017,” said Fidelity. The standard deduction would also go “up from $15,000 to $15,750 (single) and $30,000 to $31,500 (married filing jointly) in 2025,” with amounts indexed for inflation thereafter, said CNBC.
Seniors get an extra bump — those who are eligible will see “a $6,000 boost to their standard deduction from 2025 through 2028,” said CNN Politics.
3. The child tax credit will get a bit higher
The legislation “would permanently beef up the child tax credit to $2,200 per kid,” up from the current $2,000,” CNN Politics said, giving “many parents” a “larger tax break.”
4. Overtime pay and tips will get a tax break
Under the new bill through 2028, there is an “above-the-line deduction for tips earned by workers in occupations that traditionally receive tips” and a deduction on overtime pay, said CNBC Make It. Caps and income limits apply.
5. New auto loans will get a new deduction opportunity
Another provision in the bill is a “deduction of up to $10,000 for new auto loans,” available if your loan was “taken out after Dec. 31, 2024 for a U.S.-assembled car, minivan, van, sport utility vehicle, pickup truck or motorcycle for personal use,” said CNBC Make It.
6. Green energy provisions will go away sooner
The tax and spending bill puts an early end to certain green energy provisions. “Taxpayers who want tax credits on new or previously owned ‘clean’ vehicles must now place them in service by Sept. 30, 2025 — not the end of 2032,” said The Wall Street Journal. Additionally, the “deadline for qualifying for the energy-efficient home improvement credit is now Dec. 31, 2025, not the end of 2032, and the deadline for qualifying for the residential clean energy credit is now Dec. 31, 2025, not the end of 2034.”
7. The estate and gift tax exemption will go up
The lifetime gift and estate tax exclusions have already “more than doubled since 2017,” said Fidelity. They will now further “increase to $15 million for single filers from $13.99 million and to $30 million from $27.98 million for those who are married filing jointly.”
8. There will be a charitable deduction for non-itemizers
Another addition is an “above-the-line deduction on charitable contributions,” which “allows taxpayers who don’t itemize to deduct up to $1,000 for single filers and $2,000 for married couples filing jointly,” said CNBC Make It.
