The One Big Beautiful Act or OBBA, the controversial budget reconciliation legislation that was promoted by the Republican Party and the second Trump administration, was enacted in the 119th United States Congress. This law includes a wide range of tax cuts not only for businesses but also for individuals and families by introducing new tax breaks and making permanent and expanding provisions from the 2017 Tax Cuts and Jobs Act.
Key Tax Cuts Under the One Big Beautiful Act for Individuals and Families
1. Permanent Extension of the TCJA Individual Tax Rates and Standard Deductions
The 2017 Tax Cuts and Jobs Act or TCJA introduced a new seven‑bracket structure with lower rates that were set to lapse at the end of 2025. The brackets include 10, 12, 22, 24, 32, 35, and 37 percent tax rates. However, because this is not permanent, the tax rates would revert to the previous structure which includes 10, 15, 25, 28, 35, and 39.6 percent in 2026.
Nevertheless, because OBBA amends TCJA, the seven‑bracket structure and low tax rates of TCJA remain effective indefinitely. Tax rate brackets in the lower and middle tiers, or rates from 10 percent to 35 percent, even get an extra year of one final inflation bump in 2026 to factor in changes in prices and keep pace with inflation. The 37 percent bracket is not included.
It is also worth noting that the standard tax deduction nearly doubled under TCJA. The standard tax deduction for individuals went from USD 6,500 to USD 12,000, while the tax deduction for married people who file their taxes jointly went from USD 13,000 to USD 24,000. OBBA makes these standard tax deductions permanent and with annual inflation adjustments.
The One Big Beautiful Act also introduced a temporary boost for 2025 to 2028. These include an additional USD 1000 for single filers, USD 1500 for heads of households, and USD 2000 for married filing jointly. Remember that these are temporary boosts. The standard tax deduction will revert to the permanent TCJA levels with annual adjustments for inflation.
2. Temporary Increase in the State and Local Tax or SALT Deduction Cap Until 2030
The State and Local Tax or SALT deduction allows taxpayers to deduct their state and local income, sales, and property taxes from federal taxable income. TCJA provided a USD 10,000 annual cap. This means that households, regardless of how much state or local tax they pay, can deduct up to USD 10,000 against their total federal income tax obligation.
OBBA raises the SALT deduction cap to USD 40,000 per household beginning in 2025. The cap also increases by 1 percent through 2029. This is applicable for households earning less than USD 500000. Households earning more than this remain limited to the USD 10,000 deduction cap. The OBBA deduction cap will also revert to USD 10,000 after five years.
Homeowners in higher-tax states like California, Mississippi, and New York, who often pay much more than USD 10,000 per year, would see much more of their local taxes reflected as deductions. The increased SALT deduction cap reduces their federal tax burden significantly. It is still important to underscore the fact that this is a temporary tax deduction boost.
3. Expanded Child Care Tax Credit, Adoption Tax Credit, and Paid Leave Tax Credit
The One Big Beautiful Act expands access to the child care tax credit and further locks in and boosts it to USD 2200 for more than 40 million American families. Only one parent needs a Social Security number to avail of the tax credit. This particular tax cut is intended as more direct support for working parents by enabling families to claim a larger share of child-care costs.
Moreover, aside from the child care tax credit, the law also enhances the so-called adoption tax credit to encourage more families to adopt children while also broadening eligibility criteria. Up to USD 5000 of qualified adoption expenses are refundable. Families can receive this credit even if they do not have tax obligations. This amount is also indexed each year for inflation.
Internal Revenue Code Section 45S, which was based on TCJA, offered a tax credit to employers who provide paid family and medical leave to encourage support for workers during significant life events like childbirth, illness, adoption, and caregiving. This provision was valid for wages paid in tax years beginning after 31 December 31 and before 1 January 2026.
OBBA makes the aforesaid tax credit permanent. It also expands it to include part-time workers and insurance premiums. The edibility is also shortened from 1 year to 6 months. Employers can also use the credit for insurance rather than direct wage payments. The changes make paid leave possible for more businesses. These include startups and smaller businesses.
4. Tax Exemptions from Tips and Overtime and Social Security Tax Cuts for Seniors
The law temporarily allows individuals in traditionally and customarily tipped industries to deduct up to USD. 25,000 in tip income from federal taxes. This provision is set to expire in 2028. It also temporarily allows deduction of up to USD 12,500 for individual and USD 25,000 for joint filers of the premium portion of overtime compensation for tax years 2025 to 2028.
OBBA also creates new above-the-line deductions. This allows individuals to take home more pay without complicated itemized deductions. There are limitations. The tax exemption on tips only applies to standard occupations like servers and bartenders. The particular exemption on overtime also only includes wages or overtime mandated by the Fair Labor Standards Act.
The law also removes or lowers federal taxes on Social Security benefits for seniors age 65 and older. Individuals can keep an extra USD 6000. Couples can keep USD 12,000. This lasts until 2028. The deduction starts phasing out for singles earning USD 75,000 and phases to zero at USD 1750,000, and couples earning USD 150,000 and phases to zero at USD 250,000.
Merits of the Individual and Family Tax Cuts Under the One Big Beautiful Act
Republicans have argued that the tax cuts and related privileges for individuals and families under the One Big Beautiful Act are designed to benefit lower-income and middle-income earners. This is evident from the permanent extension of tax brackets that were first introduced by the Tax Cuts and Jobs Act of 2017, and the temporary extension of some of its provisions.
Note that the Byrd Rule of the U.S. Senate and the Sunset Clause are the basis for making some of the tax cuts temporary. The former limits what can be included in a budget reconciliation bill, and the latter is added to OBBA to keep it practical and realistic. Note that the tax cuts affect the federal budget. These cuts are costs. Some of these cannot be made permanent.
What makes the One Big Beautiful Act controversial is its impact on the persistent U.S. budget deficit. Estimates from the Congressional Budget Office suggest it could result in USD 4 trillion to USD 4.5 trillion losses in federal revenue over 10 years. The specific estimated losses for individual and family tax cuts and privileges will be around USD 3.87 trillion.
Nevertheless, to offset some of the costs or losses, OBBA also includes several spending cuts in other areas like Medicaid and the Supplemental Nutrition Assistance Program. Specific tax credits for renewable energy technologies like wind, solar, and electric vehicles, which were adopted during the administration of former U.S. President Biden, have also been removed.