Effects of Big, Beautiful Bill on Income Tax Rates, Deductions
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Collapse ▲On July 4, 2025, Pres. Trump signed H.R.1, which is officially titled the “One Big, Beautiful Bill Act.” Under H.R.1, there are a variety of changes to the existing tax code, among other legislative changes.
Given that the text of the bill is 870 pages, it is best to provide a quick summary of each significant change to the income tax rates and standard deduction (including the bonus deduction for seniors) in this article and then to break down other changes (e.g., SALT cap, child tax credits, estate tax effects) in future articles. As always, readers are encouraged to subscribe via email to NCSU Farm Law & Tax to stay up to date with all of these changes as there will be quite a few articles in the coming months on this topic alone as well as other pertinent topics. Emails are only sent when new articles are posted, so this subscription will not be bombarding your email.
Onto the changes to the tax rates and standard deductions…
Decreases to Tax Rates Made Permanent (i.e., no longer expiring)
The 2017 Tax Cuts and Jobs Act reduced certain marginal income tax rates, but those reductions were only put in place temporarily and would have expired in 2026. In 2025 (i.e., the last year of the temporary tax cuts), the marginal income tax brackets look like this:
Tax Rates in 2025 (under 2017 Tax Cuts and Jobs Act’s last year before expiration)
- For an individual’s income at or below $11,925 (married: $23,850): 10%
- For an individual’s income over $11,925 (married: $23,850): 12%
- For an individual’s income over $48,475 (married: $96,950): 22%
- For an individual’s income over $103,350 (married: $206,750): 24%
- For an individual’s income over $197,300 (married: $394,600): 32%
- For an individual’s income over $250,525 (married: $501,050): 35%
- For an individual’s income over $626,350 (married: $751,600): 37%
Now, it’s important to note that the income figures adjust for inflation each year regardless of the 2017 Tax Cuts and Jobs Act – so the incomes in 2026 would not have looked the same, but for the sake of comparison, we will keep those numbers the same for the next list. The percentages have been bolded and underlined where a change would have occurred if not for the passage of the Big, Beautiful Bill.
Tax Rates in 2026 (if 2017 Tax Cuts and Jobs Act had expired)
- For an individual’s income at or below $11,925 (married: $23,850): 10%
- For an individual’s income over $11,925 (married: $23,850): 15% (3% increase)
- For an individual’s income over $48,475 (married: $96,950): 25% (3% increase)
- For an individual’s income over $103,350 (married: $206,750): 28% (4% increase)
- For an individual’s income over $197,300 (married: $394,600): 33% (1% increase)
- For an individual’s income over $250,525 (married: $501,050): 35%
- For an individual’s income over $626,350 (married: $751,600): 37% (2.6% increase)
With the Big, Beautiful Bill now making those reductions in the marginal tax rates permanent, the tax rates for 2025 and future years now look like this (again, with income levels being adjusted annually for inflation):
Effective Tax Rates for 2025 and Beyond Under Big, Beautiful Bill
- For an individual’s income at or below $11,925 (married: $23,850): 10%
- For an individual’s income over $11,925 (married: $23,850): 12%
- For an individual’s income over $48,475 (married: $96,950): 22%
- For an individual’s income over $103,350 (married: $206,750): 24%
- For an individual’s income over $197,300 (married: $394,600): 32%
- For an individual’s income over $250,525 (married: $501,050): 35%
- For an individual’s income over $626,350 (married: $751,600): 37%
Increases to the Standard Deduction
Prior to H.R.1’s passage, the standard deduction for the 2025 tax year was $15,000 for individuals and $30,000 for married couples who were filing jointly. The Big, Beautiful Bill increased the standard deduction for individuals by $750 and for married couples who file jointly by $1,500. As with the reductions to the marginal tax rates that were enacted temporarily under the 2017 Tax Cuts and Jobs Act but made permanent under the Big, Beautiful Bill, the increases to the standard deduction are now permanent and will be inflation adjusted.
As such, for the 2025 tax year, the standard deduction for individuals is $15,750. For married couples who file jointly, the standard deduction is now $31,500.
Of note, the standard deduction is relevant for taxpayers who do not itemize (i.e., deduct an itemized list of deductions such as those from mortgage interest and charitable contributions). After the 2017 Tax Cuts and Jobs Act that increased the standard deduction to its current levels, around 90% of taxpayers take the standard deduction. An article about changes to itemized deductions is forthcoming.
Increase in Bonus Deduction for Adults 65 Years or Older
Prior to the Big, Beautiful Bill, taxpayers who were 65 years or older qualified for an additional deduction on top of the standard deduction. For seniors who filed as individuals, the additional deduction was $2,000. For married seniors who filed jointly or separately, it was $1,600 per qualifying individual.
After the passage of the Big, Beautiful Bill, the senior bonus deduction is increased by up to $6,000 for individual taxpayers and $12,000 for married taxpayers who file jointly.
Importantly, this $6,000 (or $12,000) deduction is contingent on modified adjusted gross income (MAGI). As a refresher, modified adjusted gross income is a calculation of your adjusted gross income (total income minus above the line deductions) plus the applicable amount of the senior bonus deduction. For every dollar that an individual taxpayer’s MAGI exceeds $75,000 (or $150,000 for married taxpayers who file jointly), the increase in the bonus deduction shall decrease by 6%, though the penalty cannot be greater than $6,000. Of note, only the increase to the senior bonus deduction due to the Big, Beautiful Bill is affected by this penalty – the pre-existing deduction for seniors exists regardless of their MAGI.
This increase to the senior bonus deduction is effective for tax years 2025 through 2028, after which it is set to expire.