Standard Deduction & Child Tax Credit Under the One Big Beautiful Bill Act

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, bringing some of the most taxpayer-friendly changes in recent years. Among its headline provisions are two that stand out for everyday taxpayers: a permanent increase in the standard deduction and a higher Child Tax Credit (CTC). Both will apply to 2025 returns filed in 2026.

For millions of households, this means lower taxable income and potentially larger refunds without the need for complicated tax maneuvers. According to the Tax Policy Center, about 90% of taxpayers claim the standard deduction, so these changes will impact nearly every filer in the country.

How the permanent standard deduction increase works

For tax year 2025, the One Big Beautiful Bill Act sets the standard deduction at $15,750 for single filers and $31,500 for married couples filing jointly. The head of household amount is calculated as midway between these amounts based on the formulas outlined in the legislation. These new levels represent a permanent change and will be indexed for inflation, so the actual dollar amounts will rise in future years to help offset the impact of higher living costs.

This change benefits a wide range of taxpayers. For example, a single filer who earned $65,000 in 2024 and took the standard deduction of $14,600 would have reduced their taxable income by that amount. In 2025, with the higher deduction of $15,750, that same filer will reduce their taxable income by an additional $1,150, resulting in real tax savings. Married couples will see an even greater dollar impact given the $31,500 threshold.

The standard deduction eliminates the need to itemize for many taxpayers, saving time and reducing the chance of missing deductions. However, those with significant deductible expenses such as mortgage interest or charitable contributions should still compare both methods to determine the best option. For a more detailed overview of how the standard deduction fits into a broader tax strategy, visit our individual tax services page.

Indexed child tax credit: More support for families

The OBBBA raises the Child Tax Credit from $2,000 to $2,200 per qualifying child starting in 2025. Just as importantly, it adds an annual inflation adjustment so the credit keeps pace with the cost of living. For many families, this change will add hundreds of dollars to their tax benefits each year, especially when combined with the higher standard deduction.

Consider a married couple with three qualifying children and taxable income within the credit’s full benefit range. In 2024, they would have received a $6,000 credit. In 2025, that same family will be eligible for $6,600, representing an additional $600 in tax savings. Over time, as the credit amount is indexed for inflation, the benefit will continue to grow.

It is important to understand how phaseout limits work. Higher-income taxpayers may see a reduced credit amount once income exceeds the established thresholds. Families should also ensure they meet all qualifying child requirements, which include age, residency and dependent status rules. The Tax Policy Center provides a thorough explanation of these eligibility factors and their interaction with other family-related tax provisions.

The CTC can also interact with other credits such as the Additional Child Tax Credit for those who owe little or no federal income tax. Maximizing these credits often requires careful coordination, particularly for families with fluctuating income levels from year to year.

Who benefits most, and how they can plan

The permanent increase in the standard deduction and the higher Child Tax Credit provide direct benefits to a wide range of taxpayers, but the impact is most significant for certain groups. Married couples with children stand to gain the most in absolute dollar terms because they can claim both the larger deduction and multiple credits. Single parents filing as head of household will also see meaningful benefits, particularly if their income falls within the full eligibility range for the Child Tax Credit.

High-income taxpayers who are near the phaseout threshold for the CTC should review their tax planning early in the year. Strategic timing of income and deductions can help them retain more of the credit. For example, deferring certain income into the following year or increasing deductible retirement contributions could preserve eligibility. Families with children close to the age limit for the credit may want to consider the timing of income recognition to ensure they capture the credit before it phases out for that child.

Those with more complex tax situations, such as small business owners or individuals with multiple sources of income, should coordinate the standard deduction increase with other planning opportunities. Combining the new amounts with existing credits and deductions can create significant tax savings.

Other One Big Beautiful Bill Act provisions worth noting

While the standard deduction and Child Tax Credit changes have drawn the most attention, the OBBBA includes other updates that could affect personal tax returns. Adjustments to the Alternative Minimum Tax (AMT) exemption amounts will help more taxpayers avoid being subject to the AMT. Expanded eligibility for certain education-related credits and deductions will provide relief to families paying for college or vocational training.

The law also refines inflation indexing for a variety of credits and deductions, which means more taxpayers will retain full benefits as thresholds adjust each year. Business owners who file individual returns may see changes in the way certain business deductions interact with personal income thresholds.

Staying informed about these provisions is critical because even smaller changes can have a cumulative effect on your overall tax picture. The Internal Revenue Service will publish updated figures each year, and the IRS Child Tax Credit page is a reliable resource for tracking annual amounts and eligibility requirements.

These updates, combined with the headline provisions of the OBBBA, make 2025 an important year for tax planning. Reviewing your situation early and adjusting withholding or estimated payments can help you take full advantage of the law’s benefits.

How to maximize your 2025 tax savings with the new standard deduction and Child Tax Credit

The One Big Beautiful Bill Act marks a turning point for taxpayers, providing a permanent increase in the standard deduction and a higher, inflation-indexed Child Tax Credit. These changes mean real, lasting savings for individuals and families across income levels. The key is to understand how the new amounts apply to your specific situation and to coordinate them with other credits, deductions, and income planning strategies.

At James Moore, we combine decades of tax experience with a commitment to understanding your unique goals. Whether you’re looking to maximize your refund, reduce your tax bill, or prepare for long-term financial success, our professionals can guide you through the changes brought by this new law and create a plan tailored to you.

Contact a James Moore professional today to review your 2025 tax strategy and ensure you are making the most of the new standard deduction and Child Tax Credit.

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