[This is part of a Special Series on the tax changes made by the One Big Beautiful Bill Act, which was enacted in July 2025. It includes a wide range of changes to individual and corporate taxes, deductions, credits, forms and other topics, that affect tax filing starting this year into the future.]
The One Big Beautiful Bill Act (OBBBA), which is the massive follow-up to the Tax Cut and Jobs Act (TCJA) passed during President Trump’s first term, extends many tax provisions for individuals in the TCJA that were scheduled to expire, with certain modifications. This includes increases in the standard deduction and tax bracket ranges for individuals.
Following is a summary of five major extensions addressed in the OBBBA that could be reflected on personal returns..
- State and local taxes: The TCJA capped the annual deduction for state and local tax (SALT) payments at $10,000 for 2018 through 2025. Now the OBBBA has quadrupled the annual limit to $40,000, beginning in 2025. Furthermore, for 2026 through 2029, the $40,000 cap is increased by 1% each year, until it reverts to $10,000 in 2030. Caveat: The new law also includes a phase-out provision reducing the deduction cap by 30% of the amount by which modified adjusted gross income (MAGI) exceeds $500,000. This phase-out threshold also increases by 1% each year through 2029.
- Mortgage interest: The TCJA reduced the threshold for deducting mortgage on interest paid on new “acquisition debt,” such as a loan to buy or build a home or make a substantial improvement, to interest paid on the first $750,000 of debt, down from $1 million. But prior loans were grandfathered under the old rules. In addition, the TCJA suspended the deduction for interest paid on up to $100,000 of home equity debt from 2018 through 2025. The OBBA permanently retains the TCJA rules for mortgage interest deductions, so no deduction for interest on home equity debt is allowed.
- Casualty losses: Previously, individuals could deduct losses attributable to casualties and thefts subject to an annual floor of 10% of adjusted gross income (AGI) and a reduction of $100 per event. The TCJA suspended the deduction for 2018 through 2025 except for losses suffered in federally-declared disaster areas. The OBBBA permanently extends the TCJA rules, subject to the usual limits, and allows deductions for casualties in state-declared disaster areas, beginning in 2026.
- Moving expenses: Prior to the TCJA, employees could deduct their out-of-pocket moving expenses for a new job if they passed a two-part test based on distance and time. The TCJA suspended this deduction for job-related moving expenses from 2018 through 2025, except for expenses incurred by active-duty miliary personnel. Now the OBBBA extends the TCJA crackdown and makes it a permanent part of the tax code.
- Pease rule: The so-called “Pease rule,” named for the Congressman who spearheaded its passage, reduced certain itemized deductions claimed by high-income taxpayers by 3% of the amount above an AGI threshold, up to a maximum 80% reduction. The TCJA suspended the Pease rule for 2018 through 2025 in conjunction with other tax changes for individuals. The OBBBA restores a modified Pease rule for 2026 and thereafter by capping deductions at 35 percent for taxpayers in the top 37 percent tax bracket.
On the other hand, the deduction for miscellaneous expenses—including unreimbursed employee business expenses and production-of-income expenses—was not revived. In addition, various other aspects affecting individuals—such as personal exemptions—have not been restored by the OBBBA.
Practical approach: Schedule meetings with your Individual clients well before tax return time to assess their situations.
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Tags: Income Taxes, Taxes
