One Big Beautiful Bill Act: Part 3 Summary

• Income Tax Rates and Brackets: The current seven-bracket system becomes permanent.
• Standard Deduction: The doubled standard deduction amounts are now permanent.
• Alternative Minimum Tax (AMT): The TCJA increases AMT exemptions, which are made permanent with inflation adjustments.
• Mortgage Interest: The lower mortgage interest deduction cap of $750,000 (down from the previous $1 million) is made permanent.

 The bill also made changes to several key deductions available to taxpayers, including:

• State and Local Tax (SALT) Deductions: The current $10,000 cap on state and local tax deductions is raised temporarily to $40,000 with 1% annual increases through 2029. After that, it reverts to $10,000 in 2030.
• Charitable Deductions: Starting in 2026, taxpayers who don't itemize can claim an "above-the-line" deduction for charitable contributions up to $1,000 ($2,000 for married filing jointly).
• Child Tax Credit: The credit increases from $2,000 to $2,200 per child, with future inflation adjustments.

Several deductions are permanently eliminated, including personal exemptions (which remain at zero), miscellaneous itemized deductions subject to the 2% floor (unreimbursed employee expenses, tax preparation fees), and casualty and theft loss deductions except for federal disasters.

Finally, for individuals, there are several completely new provisions, including:

• Senior Deduction: Taxpayers over 65 can claim an additional $6,000 deduction, available whether they itemize or take the standard deduction.
• No Tax on Tips: Workers in traditionally tipped industries who don't itemize can deduct up to $25,000 of reported tips.
• No Tax on Overtime: A deduction for qualified overtime pay up to $12,500 ($25,000 for married filing jointly) is available for non-itemizers.
• Auto Loan Interest: Interest on loans for U.S.-assembled cars becomes deductible up to $10,000, but only for vehicles assembled domestically.

Businesses are also impacted, but to a lesser extent than individuals.  Several key business tax provisions that were set to expire are made permanent, ensuring continued tax relief for various business structures.

• Pass-Through Entities benefit significantly from the permanent extension of the Section 199A deduction, allowing LLCs, S corporations, and sole proprietorships to deduct 20% of business income.
• Depreciation - 100% bonus depreciation provision is now permanent.
• Research and Development expenses can now be fully expensed for domestic R&D activities, replacing the previous requirement to amortize costs.