One Big Beautiful Bill Explained (Part 1): Standard Deduction and Tax Brackets
The One Big Beautiful Bill Act, or OBBBA, was signed into law on July 4, 2025. The law includes many changes affecting individuals, families, workers, and businesses.
This five-part series explains the basics of the bill in plain language. Part 1 focuses on two changes that affect most federal income tax returns: the standard deduction and federal tax brackets.
For Washington individuals and families, these changes are important because Washington does not have a broad state personal income tax. However, Washington residents still pay federal income tax, and federal deductions and tax rates continue to affect their tax liability.
This article provides general tax information. Your result may depend on your filing status, income, credits, deductions, and other details.
The Standard Deduction Increased
The standard deduction reduces the amount of income subject to federal income tax. Taxpayers generally choose between:
- Taking the standard deduction, or
- Itemizing eligible deductions on Schedule A.
The standard deduction is simpler because it does not require taxpayers to list individual deductions. If your eligible itemized deductions are less than the standard deduction, taking the standard deduction is generally more beneficial.
For tax year 2025, the standard deduction amounts are:
| Filing status | 2025 standard deduction |
|---|---|
| Single or Married Filing Separately | $15,750 |
| Head of Household | $23,625 |
| Married Filing Jointly or Qualifying Surviving Spouse | $31,500 |
These amounts apply to federal income tax returns for the 2025 tax year, which are generally filed during the 2026 filing season.
What the Increase Means
The standard deduction does not provide a dollar-for-dollar tax refund. Instead, it reduces taxable income.
For example, assume a single taxpayer has $60,000 of income before deductions. If that taxpayer takes the $15,750 standard deduction, the amount remaining before other adjustments, deductions, or credits is reduced to $44,250.
The taxpayer is not automatically receiving $15,750. The deduction simply means less income is used to calculate federal income tax.
Your actual taxable income may also be affected by:
- Retirement contributions
- Health savings account contributions
- Business income or losses
- Student loan interest
- Dependent-related benefits
- Tax credits
- Other eligible adjustments
The Larger Deduction Is Permanent
Before OBBBA, the larger standard deduction created by the Tax Cuts and Jobs Act was scheduled to expire after 2025. Without a law change, the deduction would have been reduced under previous rules.
OBBBA makes the larger standard deduction permanent. The law also provides for inflation adjustments in future years.
This means taxpayers can continue to expect a larger standard deduction structure instead of an automatic return to the lower amounts that applied before the Tax Cuts and Jobs Act.
The exact dollar amounts may change from year to year. The IRS typically announces annual inflation-adjusted tax figures before the filing season.
You can review the IRS’s current information about the law through its Working Families Tax Cuts resource. The IRS also lists the 2025 standard deduction amounts in its VITA tax law training materials.
Additional Amounts for Older or Blind Taxpayers
The standard deduction may be higher for taxpayers who are age 65 or older or who are blind.
For 2025, the additional standard deduction amounts are generally:
- $2,000 for a single taxpayer or head-of-household taxpayer who qualifies
- $1,600 for a married taxpayer or qualifying surviving spouse who qualifies
A married couple may qualify for an additional amount for each eligible spouse.
OBBBA also created a separate temporary senior deduction for eligible taxpayers age 65 and older. That provision has different income limits and rules and applies for 2025 through 2028.
Because these provisions may overlap with other deductions, seniors should provide complete information when preparing their returns. This includes age, filing status, income, retirement distributions, Social Security benefits, and other relevant documents.
Federal Tax Rates and Brackets Remain in Place
Federal income tax uses a marginal tax rate system. This means your income is divided into portions, and different portions may be taxed at different rates.
You do not automatically pay one tax rate on every dollar you earn.
For example, a taxpayer may have some taxable income taxed at 10%, another portion taxed at 12%, and another portion taxed at 22%. The taxpayer’s highest applicable rate is called the marginal tax rate. It does not apply to all income.
OBBBA makes the current individual federal income tax rates and bracket structure permanent. The seven federal rates are:
- 10%
- 12%
- 22%
- 24%
- 32%
- 35%
- 37%
The top federal individual income tax rate remains 37%. The income thresholds for the brackets continue to be adjusted for inflation.
2025 Federal Tax Brackets
The following brackets apply to taxable income for 2025. Taxable income is generally calculated after eligible deductions, including the standard deduction.
Single Filers
| Tax rate | Taxable income |
|---|---|
| 10% | $0 to $11,925 |
| 12% | Over $11,925 to $48,475 |
| 22% | Over $48,475 to $103,350 |
| 24% | Over $103,350 to $197,300 |
| 32% | Over $197,300 to $250,525 |
| 35% | Over $250,525 to $626,350 |
| 37% | Over $626,350 |
Married Filing Jointly
| Tax rate | Taxable income |
|---|---|
| 10% | $0 to $23,850 |
| 12% | Over $23,850 to $96,950 |
| 22% | Over $96,950 to $206,700 |
| 24% | Over $206,700 to $394,600 |
| 32% | Over $394,600 to $501,050 |
| 35% | Over $501,050 to $751,600 |
| 37% | Over $751,600 |
Head of Household
| Tax rate | Taxable income |
|---|---|
| 10% | $0 to $17,000 |
| 12% | Over $17,000 to $64,850 |
| 22% | Over $64,850 to $103,350 |
| 24% | Over $103,350 to $197,300 |
| 32% | Over $197,300 to $250,500 |
| 35% | Over $250,500 to $626,350 |
| 37% | Over $626,350 |
These figures are for 2025 and may not apply to future tax years. The IRS provides current federal income tax rates and brackets.
How the Deduction and Brackets Work Together
The standard deduction and tax brackets work in sequence.
- Income is reported.
- Eligible adjustments are applied.
- The standard deduction or itemized deductions are subtracted.
- The remaining amount becomes taxable income.
- Taxable income is calculated using the applicable federal brackets.
- Eligible tax credits may then reduce the tax owed.
This is why a taxpayer’s total income is not the same as taxable income.
For example, a married couple filing jointly with $100,000 of income may claim the $31,500 standard deduction before other applicable adjustments. The resulting taxable income may be lower than $100,000, and the income may be taxed across more than one federal bracket.
The final result can also be affected by dependents, retirement income, self-employment income, investment income, credits, withholding, and estimated tax payments.
What Washington Taxpayers Should Review
Washington residents should pay attention to these changes when preparing their federal returns:
- Confirm the correct filing status.
- Compare the standard deduction with eligible itemized deductions.
- Review whether either spouse is age 65 or older or blind.
- Separate total income from taxable income.
- Review federal withholding and estimated payments.
- Include income from employment, self-employment, investments, retirement, and other sources.
- Check whether additional tax law changes apply to your situation.
A change in the standard deduction does not mean every taxpayer will receive the same tax benefit. The effect depends on income, filing status, deductions, credits, and the amount already paid through withholding or estimated payments.
Statewide Tax Services Can Help
Statewide Tax Services accepts individual and business tax clients for the 2025 tax year. We provide virtual tax preparation and can help review your filing status, deductions, taxable income, and applicable federal tax changes.
Our services include:
- Virtual tax preparation
- Accurate federal tax return preparation
- Electronic filing
- Tax and accounting consultations
- Accounting and bookkeeping support
If you are ready to begin, review our individual tax preparation services or schedule a consultation.
Please note that e-filing pauses on December 26 and is expected to resume in mid to late January. Tax preparation and planning services may still be available during this period.
Part 2 of this series will explain the changes to the state and local tax deduction, commonly called the SALT deduction.
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