Tax Brackets and the Standard Deduction

On July 4th, President Trump signed a major new tax law: the One Big Beautiful Bill Act (OBBBA). This new legislation builds upon the 2017 Tax Cuts and Jobs Act (TCJA) and brings several changes to the tax code.

How will this legislation impact your taxes? In this article, we will review changes to the individual tax brackets and standard deduction.

---

Tax Rates: Lower Tax Brackets Extended Permanently

Good news for taxpayers: the lower income tax rates introduced in 2017 are now here to stay.

What Changed? The 2017 Tax Cuts and Jobs Act (TCJA) reduced individual income tax rates, but those changes were only temporary and set to expire after 2025. The new law removes that expiration date, permanently locking in the current lower tax brackets.

The seven marginal tax rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—will now remain in effect beyond 2025, without reverting to the higher pre-2018 levels.

Why This Matters

• It avoids automatic tax increases that were scheduled for 2026.

• Individuals and families can continue to benefit from lower tax rates.

• The overall tax burden stays more manageable for a wider range of incomes.

• It helps with long-term planning, giving taxpayers more certainty about future rates.

✅ Bottom Line: By making these lower tax rates permanent, the new law ensures continued relief for individuals and families and helps avoid surprises in future tax years. It also supports a more stable and predictable tax environment—something we can all appreciate when planning ahead.

---

Standard Deduction: Bigger and Here to Stay

The new tax law makes two important changes to the standard deduction that could benefit many taxpayers.

1. The Higher Standard Deduction Is Now Permanent

The enhanced standard deduction amounts introduced by the 2017 Tax Cuts and Jobs Act (TCJA) were originally set to expire after 2025. The new legislation eliminates that expiration date, meaning the larger deduction amounts will remain in place going forward.

2. The Deduction Gets Even Bigger Starting in 2025

Beginning with the 2025 tax year, the base standard deduction will increase again. For married couples filing jointly, it will rise to $31,500. For single filers, it will increase to $15,750. These amounts are higher than previously scheduled and will continue to adjust for inflation in future years.

Why This Matters

• More taxpayers will benefit from not having to itemize their deductions.

• The larger standard deduction helps lower taxable income across the board.

• Low- and middle-income households are especially likely to see savings.

• It remains a useful alternative, particularly with the ongoing cap on state and local tax (SALT) deductions.

✅ Bottom Line: This change locks in and expands the simplified approach to filing introduced by the TCJA. Starting in 2025, most households will see increased tax savings thanks to a more generous standard deduction.

---

OBBBA offers New Temporary Deduction for Seniors

A helpful new tax break is on the way for older Americans. Beginning in tax year 2025, seniors may qualify for a brand-new deduction aimed at easing their tax burden during retirement.

Here’s What You Need to Know

If you're age 65 or older by the end of the year, you may be eligible to claim a $6,000 deduction on your tax return. For married couples filing jointly, if both spouses meet the age requirement, the deduction doubles—up to $12,000 total.

However, there are a few key rules:

• The deduction phases out gradually if your modified adjusted gross income (MAGI) is over $75,000 (single) or $150,000 (married filing jointly).

• To claim the deduction, you must have a valid Social Security number (SSN). If not, the IRS may adjust your return.

• Married couples must file jointly to be eligible—this deduction isn’t available to those filing separately.

This deduction is temporary and will be available for tax years 2025 through 2028.

A Note on Social Security

While this deduction offers meaningful relief, it stops short of exempting Social Security benefits from taxation—a campaign promise that wasn’t fully realized in this bill. Still, for many seniors, this new deduction could lower their taxable income and help stretch retirement dollars further.

✅ Bottom Line: If you or a loved one is 65 or older, this upcoming change could bring welcome tax savings starting in 2025.