By Alexander J. Obie, Staff Accountant
While several tax provisions have been adjusted or expanded, many of the core elements introduced under the Tax Cut and Jobs Act of 2017 (TCJA) have now been made permanent by the One Big Beautiful Bill (OBBB). Below are some of those provisions:
Individual Income Tax Rates
The TCJA temporarily modified the number of income tax brackets and reduced income tax rates for individuals, trusts, and estates. These changes were set to expire after 2025 and have now been made permanent under the OBBB and will be indexed annually for inflation.
Personal Exemptions & Standard Deduction
Under the TCJA, personal exemption deductions were temporarily suspended from 2018 through 2025, while increasing the standard deduction amounts. Both were set to expire at the end of the year. The OBBB permanently eliminates the personal exemption deduction for most taxpayers and makes permanent the standard deduction increase.
Mortgage Interest Deduction
The mortgage interest deduction was limited to the first $750,000 of home mortgage acquisition debt under the TCJA and was set to increase back to $1 million after 2025. The bill makes this limitation permanent and now treats certain mortgage insurance premiums on acquisition indebtedness as qualified residence interest.
Home Equity Debt
Interest on home equity debt remains non-deductible, unless the funds are used to buy, build, or substantially improve the taxpayer’s primary residence that secures the loan. This limitation is now permanent.
Miscellaneous Itemized Deductions
Miscellaneous itemized deductions such as unreimbursed employee expenses and tax preparation fees have been permanently suspended. However, the bill adds an exception for unreimbursed employee expenses for eligible educators, which includes K-12 teachers, instructors, counselors, coaches, and aids meeting a minimum hour’s requirement which applies to tax years after 2025.
Moving Expenses
The moving expense deduction was permanently eliminated for most taxpayers, with the only exception being active-duty military members.
529 Education Savings Plans
While the structure of 529 plans remains the same, the bill allows tax-exempt distributions to be used for additional educational expenses in connection with enrollment or attendance at public, private or religious elementary and secondary schools, including homeschooling. The expanded list of eligible expenses includes tuition; curriculum materials; books; online educational materials; tutoring; standardized testing fees; advanced placement exams; college admission fees; fees for dual enrollment at higher education institutions; and educational therapies for students with disabilities.
The OBBB increases the annual withdrawal limit for K-12 expenses from $10,000 to $20,000 for 529 account distributions effective after 2025. The bill further allows tax-exempt distributions to apply to qualified postsecondary credentialing expenses.
Other Dependent Credit
The $500 non-refundable credit for other qualifying dependents such as elderly parents or children over the age of 17 remains unchanged and is now permanent. The IRS requires you to have the dependent’s SSN or ITIN to claim this deduction.
Child and Dependent Care Credit
While the maximum eligible expenses remain at $3,000 for one dependent and $6,000 for two or more, the rates at which the credit can be taken have changed. The credit rate varies by the taxpayer’s adjusted gross income (AGI), with a maximum credit rate of 35 percent that declines, as AGI increases, to 20 percent for taxpayers with AGI above $43,000. This provision is effective for tax years after 2025.
Earned Income Credit (EIC)
The EIC remains the same in structure. While the credit amount adjusts annually for inflation, the eligibility rules and core mechanics of the credit have not changed.
Estate and Gift Tax Exemption
The estate tax exemption and lifetime gift tax exemption amount permanently increased to $15 million per individual, indexed annually for inflation starting in 2026.