Effective January 1, 2026, the current tax rates and brackets established under the Tax Cuts and Jobs Act (TCJA), as adjusted for inflation, are made permanent under OBBBA. Thus, the top ordinary income tax bracket will continue to be at 37%.

Permanent Standard Deduction

The Act makes permanent the larger TCJA standard deduction and permanently eliminates personal exemptions.

Below are the standard deductions for tax year 2025 (will be adjusted annually for inflation)

• Single/MFS: $15,750
• MFJ: $31,500
• Head of Household: $23,625

Increase in State and Local Tax (SALT) cap

The Act increases the cap on the state and local tax (SALT) deduction from $10,000 to $40,000 for both single and married filing jointly (MFJ) taxpayers, effective through December 31, 2029.

The higher cap, which had originally been scheduled to expire on December 31, 2025, will be adjusted upward by 1% annually for tax years 2026 through 2029. The increase is temporary and will expire after five years, with the cap reverting to $10,000 beginning in tax year 2030.

The deduction amount phases down by 30% of modified adjusted gross income (AGI) in excess of $500,000, with each applicable threshold increasing by 1% annually through 2029; however, the allowable deduction cannot be reduced below $10,000.

Gambling Losses

Beginning in 2026, the Act limits the deduction for gambling losses to 90% of total losses incurred, and such losses remain deductible only to the extent of gambling winnings within the same taxable year. This means taxpayers—both casual and professional gamblers—may no longer fully offset gambling winnings with an equal amount of losses.

Termination of Energy Credits

The Act eliminates or shortens several existing energy-related tax credits, ending incentives earlier than previously scheduled.

• Clean Vehicle Credit (Sec. 30D) – Terminated for vehicles acquired after September 30, 2025 (previously set to expire December 31, 2032).
• Previously Owned Clean Vehicle Credit (Sec. 25E) – Terminated for vehicles acquired after September 30, 2025 (previously set to expire December 31, 2032).
• Qualified Commercial Clean Vehicle Credit (Sec. 45W) – Terminated for vehicles acquired after September 30, 2025.
• Energy Efficient Home Improvement Credit (Sec. 25C) – Terminated for property placed in service after December 31, 2025.
• Residential Clean Energy Credit (Sec. 25D) – Terminated for expenditures made after December 31, 2025.

These changes effectively phase out major federal tax incentives for clean vehicle purchases and residential energy efficiency improvements beginning in late 2025.

Effective for tax years 2025 through 2028, taxpayers who have attained age 65 before the close of the taxable year are eligible for an additional temporary deduction of $6,000 ($12,000 for married taxpayers filing jointly if both spouses have attained age 65 before the end of the taxable year).

This deduction is available in addition to the standard deduction or itemized deductions, as well as the existing age-65-and-older standard deduction increase.

The additional deduction is subject to a phase-out based on modified adjusted gross income (MAGI), beginning at $75,000 and fully phasing out at $175,000 for single filers, and beginning at $150,000 and fully phasing out at $250,000 for married taxpayers filing jointly.

Beginning in 2025 through 2028, a new above-the-line deduction is available for individuals who earn qualified tips/overtime income.

Tip Income Deduction

The deduction allows up to $25,000 per individual or $50,000 for joint filers, even if the taxpayer does not itemize. It phases out by $100 for every $1,000 that a taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 (single) or $300,000 (MFJ).

Overtime Income Deduction

The deduction allows up to $12,500 for single filers or $25,000 for married filing jointly (MFJ). It phases out by $100 for every $1,000 that a taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 (single) or $300,000 (MFJ).

Beginning in 2025, taxpayers may claim an above-the-line deduction of up to $10,000 for interest paid on a qualified passenger vehicle loan, available through 2028.

The loan must be secured by a first lien and used to purchase (not lease) a qualified vehicle after December 31, 2024. The deduction is available regardless of whether the taxpayer itemizes and phases out by 20% when modified adjusted gross income (MAGI) exceeds $100,000 for single filers or $200,000 for joint filers.

To qualify, the vehicle must have final assembly in the United States, a gross vehicle weight rating (GVWR) under 14,000 pounds, and be treated as a motor vehicle under Title II of the Clean Air Act. Original use must begin with the taxpayer, and the vehicle identification number (VIN) must be reported on the return.

The deduction applies only to personal-use vehicles, and interest reporting requirements apply to lenders receiving $600 or more in interest on qualifying loans.

Effective after December 31, 2025, taxpayers who do not itemize deductions may claim an above-the-line deduction of up to $1,000 for single filers or $2,000 for married filing jointly (MFJ) for cash contributions made to qualified U.S. charitable organizations.

This provision permanently extends the charitable deduction option to non-itemizers, allowing them to benefit from charitable giving without forgoing the standard deduction.

The Act increases the maximum Child Tax Credit to $2,200 per qualifying child beginning in tax year 2025 and indexes the maximum credit for inflation starting in 2026.

The phaseout thresholds—$200,000 for single/HOH and $400,000 for MFJ—are made permanent and are not indexed. The credit remains partially refundable, with the refundable portion up to $1,700 (adjusted for inflation)

The Act permanently sets the federal estate, gift, and generation-skipping transfer tax exemption at $15 million per individual ($30 million for married couples) starting January 1, 2026 (adjusted for inflation thereafter), eliminating the prior sunset that would have reduced it to about $7 million.