Congress has introduced a sweeping tax reform package—unofficially dubbed the “One Big Beautiful Bill”—and the first chapter delivers major updates that could significantly impact many of our clients, particularly middle-income households and small business owners.
Here’s a breakdown of the key provisions in Chapter 1 and what they mean in practice:
Extension of Lower Individual Tax Rates
The tax brackets introduced in the 2017 Tax Cuts and Jobs Act were set to expire after 2025. This bill makes those reduced rates permanent. In addition, the inflation adjustments to bracket thresholds have been clarified to ensure gradual changes over time without pushing taxpayers into higher brackets too quickly.
What this means: You’ll continue to benefit from today’s lower tax rates beyond 2025—no sudden rate jumps are expected.
Increase in the Standard Deduction
Beginning in tax year 2025, the standard deduction will increase as follows:
Single filers: from $12,000 to $15,750
Married filing jointly: from $18,000 to $23,625
What this means: More of your income will be shielded from tax, reducing your overall tax liability—even if you don’t itemize deductions.
New Senior Deduction
The bill introduces a temporary additional deduction of $6,000 for taxpayers age 65 and older (up to $12,000 for couples filing jointly, if both are over 65). This provision is currently scheduled to expire after 2028.
However, this deduction phases out for individuals with adjusted gross income above $75,000 ($150,000 for joint filers) and requires valid Social Security numbers to claim.
What this means: Retirees with moderate incomes may see meaningful tax savings over the next few years.
Expansion of the Child Tax Credit
Starting in 2025, the Child Tax Credit will increase from $2,000 to $2,200 per qualifying child. The refundable portion of the credit (currently capped at $1,400) will be adjusted annually for inflation.
As before, taxpayers must include valid Social Security numbers for both the parent and the child to qualify.
What this means: Families with children will see modest but meaningful increases in tax credits—especially important given inflation pressures.
Enhancements to the Qualified Business Income (QBI) Deduction
Two key improvements have been made to the QBI deduction under Section 199A:
The phase-in thresholds for income limitations will increase from $100,000 to $150,000 for joint filers (and from $50,000 to $75,000 for others).
A new minimum deduction of $400 is introduced for active business owners with at least $1,000 in qualified business income, even if they wouldn’t otherwise qualify under the regular formula.
What this means: This is a win for small business owners, freelancers, and self-employed taxpayers. Even modest business income may now qualify for some level of deduction.
Final Thoughts
These changes reflect a continued focus on middle-income taxpayers, families with children, seniors, and small business owners. Many provisions previously scheduled to sunset are now being extended or expanded—and several take effect as early as the 2025 tax year.
If you’re wondering how these provisions might affect your individual or business tax situation, now is the time to start planning.