The One Big Beautiful Bill: What you need to know

Published July 2025

This article is intended to provide perspective on how federal policy changes may impact your financial and tax strategy. These insights are not political statements from Ameriprise Financial.

The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces sweeping changes to the U.S. tax code that could impact how you plan for taxes and manage your finances.

Specifically, the new law permanently extends the lower income tax rates and other key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were originally set to expire at the end of 2025. It also includes changes to tax credits and deductions that are available for Americans to claim when they file their taxes.

We are here to help you make sense of how the new law may financially impact you. Here's an overview of the key One Big Beautiful Bill tax provisions:

In this article:

1. Key changes for all tax filers
2. Key changes for parents and families
3. Key changes for retirees
4. Key changes for tipped and overtime-eligible workers
5. Questions to discuss with us

Key changes for all tax filers

Here’s what to know about the One Big Beautiful Bill’s impact on tax filers:

• Lower tax rates extended: The modified federal income tax bracket schedule and lower tax rates created by the TCJA are now permanent. (The brackets were originally set to expire at the end of 2025.)
• Estate and gift tax exclusion extended: The increased estate and lifetime gift tax exclusion amounts, originally instated by the TCJA, are permanently extended. The estate and lifetime gift tax exclusion is the taxable amount you can transfer during your life and via your estate free from gift and estate taxes. Effective in 2026, the exclusion amount will be an inflation-adjusted $15 million per individual.
• Higher standard deduction amounts extended: The TCJA nearly doubled the standard deduction amount, which was originally set to expire at the end of 2025. These higher amounts will now be permanent and continue to adjust annually for inflation.
• SALT deduction cap temporarily increased: The state and local tax (SALT) deduction cap will temporarily rise from $10,000 to $40,000 for the 2025-2029 tax years, with a 1% annual increase over the five-year period. The new cap is also subject to an income phase-out beginning at $500,000. In 2030, the deduction will revert to $10,000 unless Congress acts.
• Charitable deduction for non-itemizers and floor for itemizers: Effective in 2026, taxpayers who take the standard deduction will be able to claim a deduction for charitable contributions (up to $1,000 for single filers and $2,000 for those married and filing jointly). Previously, only those who itemized their taxes could deduct charitable donations. For those who itemize deductions, this provision also establishes a new charitable deduction floor of 0.5% of adjusted gross income (AGI). Contributions below the floor are not deductible.
• Green energy tax credits eliminated: The $7,500 federal tax credit for clean vehicles will be phased out by Sept. 30, 2025. Similarly, the credits for energy-efficient home improvements and residential clean energy will no longer be available after 2025.

Key changes for parents and families

Parents and families may be impacted by the following policy changes:

• Increased child tax credit extended: The child tax credit of $2,000 per child and the refundable portion (adjusted for inflation, $1,700 in 2025) are permanently extended. Additionally, the nonrefundable portion of the child tax credit is permanently increased to $2,200 per child starting in tax year 2025, with inflation adjustments thereafter.
• Enhanced child and dependent care tax credit: Middle-income families will be able to access an enhanced tax credit to offset childcare costs, beginning in the 2026 tax year. The top credit rate increases from 35% to 50% for lower-income taxpayers, while middle-income families benefit from adjusted income thresholds.
• New savings account for children: This new account is designed as a “starter” IRA for children. At age 18, an account holder can access the funds subject to the same rules that apply to traditional IRAs and transfer the account to another qualified plan. Employers would also be allowed to contribute to these accounts, which are eligible for contributions up to $5,000 annually in after-tax dollars, with the limit adjusted annually for inflation. A federal pilot program would provide a one-time $1,000 contribution for each U.S. citizen born after 2024 and before 2029.
• More flexible uses for 529 plan funds: Withdrawals from 529 plans can now cover a wider range of educational expenses. This includes up to $20,000 per year for K-12 education, beginning in 2026, and educational therapies for students with disabilities. Effective immediately, a 529 plan can also cover costs associated with certifications, licensing programs and other recognized postsecondary credentials.
• SAVE program eliminated: The bill removes the Saving on Valuable Education (SAVE) program for student loans. Borrowers can select a new repayment plan starting July 2026. They must make a selection by July 1, 2028, or they will automatically be placed in the Standard Repayment Plan.

Key changes for retirees

Retirees and older adults should be aware of a new deduction that could affect their financial planning:

• Temporary tax break for filers ages 65+: A temporary $6,000 deduction will be available for taxpayers ages 65 or older ($12,000 deduction for married taxpayers if both spouses are ages 65+, if filing jointly) for the 2025-2028 tax years. The deduction begins to phase out for individuals with modified AGIs of more than $75,000 ($150,000 for joint filers). This new deduction is available to all taxpayers regardless of whether they itemize or take the standard deduction. 

Key changes for tipped and overtime-eligible workers

If you earn tipped income or are eligible for overtime pay, a new deduction may be available to you. These new deductions are available to all taxpayers regardless of whether you itemize or take the standard deduction.

• Tipped income deduction: The “No tax on tips” provision allows workers in tip-based occupations to deduct up to $25,000 in qualified tips from their taxable income for tax years 2025 through 2028, with phase-outs starting at $150,000 in modified AGI ($300,000 for joint filers).
•  Overtime pay deduction: Similarly, the “No tax on overtime” provision provides a deduction of up to $12,500 ($25,000 for joint filers) for overtime pay earned during tax years 2025 through 2028, with phase-outs starting at $150,000 in modified AGI ($300,000 for joint filers).
  Overtime pay must be reported separately on IRS Form W-2.

We’re here to help you make sense of the new law

We can work with your tax professional to help you understand the new law and identify potential adjustments to your financial strategy.