What’s Changing Under the One, Big, Beautiful Bill (OBBBA)
Recent IRS guidance outlines several tax law changes enacted by Public Law 119-21, known as the OBBBA. These updates include inflation adjustments and permanence for some provisions set to affect tax years beginning on or after January 1, 2025, with many items kicking in for 2026. (irs.gov)
Some of the key updates:
- The familiar individual income tax rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—remain in place, as do four rates for estates and trusts. (irs.gov)
- The Child Tax Credit’s maximum amount is now set at $2,200 for 2025 (with inflation adjustments thereafter) and has been made a permanent fixture of the tax code. (irs.gov)
- The basic standard deduction amounts have been increased and are now permanent. For example, for joint filers and surviving spouses, the deduction is $31,500; heads of household $23,625; single or married filing separately $15,750. These are also adjusted for inflation in future years. (irs.gov)
Implications for Your Planning
Individuals and Families
- Review eligibility for child tax credit. If you have children under the age threshold, you may receive more based on residency and income—make sure your filings reflect the updated $2,200 amount.
- With higher standard deduction thresholds, more income becomes non-taxable—plan deductions accordingly.
Estates & Trusts
- These entities should take note that the same tax rate structure applies, so set distributions and timing with the current rate schedule in mind.
Action Steps Before Year-End
- Estimate whether your taxable income or changes in household/filing status could push you into higher brackets; consider withholding adjustments or income timing.
- For retirees or recipients of Social Security, see how new deduction thresholds affect your projected taxable income.
- If you regularly pay estimated tax (farmers, gig-workers, small businesses), re-evaluate based on higher standard deductions and updated income thresholds.
Example Scenarios
| Scenario | Before OBBBA | After OBBBA (2026) | What this means |
|---|---|---|---|
| Married couple filing jointly, no kids, income: $90,000 | Standard deduction ~ $27,700 | Now $31,500 | More income shielded; potentially owe less tax |
| Family with two children, combined AGI $80,000 | $2,000 CTC (prior law) | $2,200 CTC per child | Extra ~$400 credit for two kids |
Bottom Line
The OBBBA has cemented key tax benefits—standard deductions, rate tables, child tax credit—and set many items to adjust with inflation. Individual taxpayers, families, trusts, and estates should reassess their income projections, withholding, and tax-saving strategies now to optimize under the new structure.