One Big Beautiful Bill Act of 2025: What Santa Monica Taxpayers Need to Know
Major federal tax changes took effect with the enactment of the One Big Beautiful Bill Act of 2025 (OBBBA). This legislation reshapes the individual tax landscape by making many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) permanent, introducing new deductions and credits, and modifying or eliminating others.
Below is a practical, plain-English overview of the most important individual tax changes under OBBBA, with specific considerations for Santa Monica taxpayers preparing for upcoming filing seasons.
Permanent Elimination of Personal Exemptions — With a New Senior Deduction
OBBBA permanently eliminates personal exemption deductions for most taxpayers. However, the law introduces a temporary enhanced deduction for seniors age 65 and older.
Key points include:
- A deduction of up to $6,000 per qualifying spouse
- Available for tax years 2025 through 2028
- Subject to income phase-outs
- Requires a valid Social Security number (ITINs do not qualify)
For retired and near-retirement taxpayers, especially married couples filing jointly, this provision may partially offset the permanent loss of personal exemptions.
Filing Deadline Confirmed: April 15, 2026
For the 2025 tax year:
- Federal individual income tax returns are due April 15, 2026
- California generally conforms to the same deadline
While disaster-related extensions may apply in limited circumstances, the standard filing deadline remains unchanged.
Capital Gains and Income Recognition Rules Remain in Place
OBBBA does not change the fundamental structure of capital gains taxation:
- Long-term capital gains continue to receive preferential tax rates
- Short-term gains remain taxed as ordinary income
Recent IRS guidance has clarified that income is taxable when it is credited and accessible, even if the taxpayer later loses access to the funds. This issue has become increasingly relevant for cryptocurrency holders and investment accounts subject to platform restrictions.
Unemployment Benefits Limited for High Earners
The new law restricts certain federally funded unemployment benefits for individuals whose prior-year wages exceed high-income thresholds.
This provision affects a narrow group of taxpayers and does not eliminate all unemployment benefits, but it does limit access to federally subsidized programs for higher-earning individuals.
Student Loan Forgiveness Rules Tightened After 2025
Temporary exclusions that allowed certain student loan forgiveness to be excluded from taxable income are scheduled to expire after 2025.
Beginning in 2026:
- Loan forgiveness due to death or permanent disability remains excluded
- Most other forgiveness events may generate taxable income
California does not fully conform to these federal rules, creating potential federal-state reporting differences.
Expanded Employer-Provided Benefits
OBBBA expands and modifies several employer-provided benefits, including:
- Increased exclusion limits for dependent care assistance beginning in 2026
- Permanent federal exclusion for employer-paid student loan assistance
California does not conform to all of these provisions, which may result in benefits being tax-free federally but taxable for California purposes.
Itemized Deductions and the Continued SALT Limitation
Key individual deduction rules remain restrictive:
- The state and local tax (SALT) deduction cap continues to limit itemized deductions
- Most miscellaneous itemized deductions remain permanently disallowed
- Attorneys’ fees are generally nondeductible at the individual level unless connected to business or rental activity
These rules increase the importance of proper income classification and entity-level planning.
Expanded Below-the-Line Deductions
OBBBA preserves and expands several deductions that apply even when taxpayers do not itemize, including deductions related to:
- Qualified tips
- Qualified overtime income
- Interest on certain auto loans
- Qualified business income (QBI)
These provisions may provide meaningful tax relief for certain individuals, depending on income and employment structure.
California Conformity Warning
California updated its general conformity date to January 1, 2025, but does not conform to many OBBBA provisions.
As a result:
- Federal and California taxable income may differ materially
- Additional adjustments may be required on California returns
- Planning must account for dual-system compliance
This is an area where professional guidance is particularly important.
Final Thoughts
The One Big Beautiful Bill Act of 2025 represents one of the most significant changes to individual tax law in recent years. While many provisions provide long-term certainty, others introduce new complexity—especially for seniors, higher-income taxpayers, and California residents.
For professional guidance on how these 2025 tax law changes may affect your specific situation, visit our
Tax Accountant in Santa Monica page.
Future posts will explore how OBBBA impacts business owners, California-specific compliance, and tax planning strategies in greater detail.