What are the new individual income tax brackets under the One Big Beautiful Bill?

by | Jul 16, 2025 | AI Tax Answer Library, Individual Tax Provisions

Here’s what HIVE AI had to say about “What are the new individual income tax brackets under the One Big Beautiful Bill?”:

Understanding the One Big Beautiful Bill’s Individual Income Tax Bracket Structure

The One Big Beautiful Bill represents a comprehensive tax reform proposal that fundamentally restructures the individual income tax system. Based on the available documentation, this legislation introduces significant changes to tax brackets, rates, and various deductions that would affect millions of American taxpayers.

Current Tax Rate Structure Under the Proposal

The Act changes the beginning and ending dollar amounts for the brackets, and replaces the existing tax rates with seven new rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This represents a continuation and modification of the tax structure that was temporarily implemented under previous tax reform legislation.

The proposal establishes a seven-bracket system that applies different rates based on income levels and filing status. Section 11001(a) of the Act amends § 1 to provide a temporary modification to the tax rate tables for taxable years beginning after December 31, 2017, and before January 1, 2026. However, the One Big Beautiful Bill seeks to make many of these provisions permanent while introducing additional modifications.

Permanency and Enhancement Provisions

A critical aspect of the One Big Beautiful Bill is its approach to making temporary tax provisions permanent. Make the expiring rate and bracket changes permanent and increase the inflation adjustment by an extra year for 10 percent, 12 percent, and 22 percent brackets. Tax Foundation Tax Foundation This provision ensures that taxpayers in lower and middle-income brackets will continue to benefit from reduced tax rates beyond the original expiration dates.

The legislation also addresses inflation adjustments in a more comprehensive manner. Section 11002 of the Act amends § 1f(3) to provide a permanent cost-of-living adjustment based on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). Any existing items that are not reset for 2018 will be adjusted for inflation after 2017 based on the C-CPI-U. Items that are reset for 2018 will be adjusted for inflation after 2018 based on the C-CPI-U.

Standard Deduction Enhancements

The One Big Beautiful Bill significantly enhances the standard deduction provisions. Make the standard deduction increase permanence with an enhancement, starting in 2025 at $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation adjusted thereafter. Tax Foundation These amounts represent substantial increases from current levels and would reduce the tax burden for millions of taxpayers who choose not to itemize their deductions.

The current temporary standard deduction amounts under existing law are considerably lower. Under § 63(c)(2), the basic standard deduction is: $12,000 for single individuals and married individuals filing separate returns; $18,000 for heads of households; and $24,000 for married individuals filing a joint return and surviving spouses. These amounts will be adjusted for inflation for taxable years beginning after December 31, 2018.

Personal Exemption Elimination

The legislation makes permanent the elimination of personal exemptions. Make the personal exemption elimination permanent. Tax Foundation This provision was originally implemented as a temporary measure, but the One Big Beautiful Bill codifies this change permanently. Section 11041 of the Act amends § 151(d) to provide a temporary set dollar amount of $0 for the personal exemption deduction, for taxable years beginning after December 31, 2017, and before January 1, 2026.

Alternative Minimum Tax Modifications

The proposal includes significant changes to the Alternative Minimum Tax (AMT) system. Section 55(d)(4) is amended— (1) in subparagraph (A), by striking ” , and before January 1, 2026 ” , and (2) by striking ” and before 2026 ” in the heading. One Big Beautiful Bill Act: Sec. 70107. Extension of increased alternative minimum tax exemption amounts and modification of phaseout thresholds This change makes permanent the increased AMT exemption amounts that were previously set to expire.

Additionally, the legislation modifies the AMT phaseout thresholds. Section 55(d)(4)(A)(ii) is amended by striking ” and ” at the end of subclause (II), and by adding at the end the following new subclause: “(IV) by substituting ‘ 50 percent ‘ for ‘ 25 percent ‘ , and “. One Big Beautiful Bill Act: Sec. 70107. Extension of increased alternative minimum tax exemption amounts and modification of phaseout thresholds This change reduces the rate at which the AMT exemption phases out for higher-income taxpayers, effectively providing relief to more middle and upper-middle-income families.

State and Local Tax Deduction Modifications

The One Big Beautiful Bill addresses the controversial limitation on state and local tax (SALT) deductions with a nuanced approach. For purposes of paragraph (6), the term ‘ applicable limitation amount ‘ means— “(i) in the case of any taxable year beginning in calendar year 2025, $40,000, “(ii) in the case of any taxable year beginning in calendar year 2026, $40,400, “(iii) in the case of any taxable year beginning after calendar year 2026 and before 2030, 101 percent of the dollar amount in effect under this subparagraph for taxable years beginning in the preceding calendar year, and “(iv) in the case of any taxable year beginning after calendar year 2029, $10,000. One Big Beautiful Bill Act: Sec. 70120. Limitation on individual deductions for certain state and local taxes, etc

The legislation includes a phase-down mechanism for higher-income taxpayers. In the case of any taxable year beginning before January 1, 2030, the applicable limitation amount shall be reduced by 30 percent of the excess (if any) of the taxpayer’s modified adjusted gross income over the threshold amount (half the threshold amount in the case of a married individual filing a separate return). One Big Beautiful Bill Act: Sec. 70120. Limitation on individual deductions for certain state and local taxes, etc

Economic Impact and Distributional Effects

The Tax Foundation’s analysis provides insight into the expected economic impact of the One Big Beautiful Bill. Preliminary Distributional Effects of Major Provisions in Senate Finance “One Big Beautiful Bill Act” Tax Plan Tax Foundation shows varying effects across income levels and time periods. The analysis indicates that most income groups would see increases in after-tax income, with the effects varying by year and income level.

The legislation’s approach to bracket structure and rate modifications reflects a comprehensive strategy to balance revenue needs with taxpayer relief. The seven-rate structure maintains progressivity while providing meaningful reductions for various income levels. The permanent nature of many provisions provides certainty for taxpayers and tax planning purposes.

Implementation Timeline and Effective Dates

Various provisions of the One Big Beautiful Bill have different effective dates, creating a phased implementation approach. The amendments made by this section shall apply to taxable years beginning after December 31, 2025. One Big Beautiful Bill Act: Sec. 70105. Extension and enhancement of deduction for qualified business income This staggered approach allows for systematic implementation while providing taxpayers and tax professionals time to adapt to the changes.

The legislation represents a significant restructuring of the individual income tax system, with implications for taxpayers across all income levels. The combination of permanent rate reductions, enhanced standard deductions, and modified alternative minimum tax provisions creates a comprehensive framework designed to provide long-term tax relief while maintaining the progressive nature of the federal income tax system.

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