How New Tax Laws Affect Individuals: What Texas Taxpayers Should Know

The federal tax code has gone through more changes in the past eight years than most taxpayers can keep track of. Between the Tax Cuts and Jobs Act of 2017, subsequent adjustments, and the One Big Beautiful Bill Act signed on July 4, 2025, the rules governing your paycheck, your refund, and your long-term financial plan have shifted in meaningful ways. This article breaks down how new tax laws affect individuals across the most common life situations-whether you’re a salaried worker, a parent, a homeowner, an investor, or someone planning a legacy.

Quick Overview: What’s Changing for Individual Taxpayers

The 2025 tax season continued to follow the Tax Cuts and Jobs Act rules, which have governed individual income taxes since 2018. Many of those individual income tax provisions were scheduled to expire after December 31, 2025, meaning taxpayers faced a potential cliff of higher rates and lower deductions starting in 2026. The One Big Beautiful Bill Act (OBBBA) has since made many of those provisions permanent, but not all-and several new wrinkles have been added.

Here’s a snapshot of the biggest changes and impacts for individuals:

• 2024 income tax brackets still follow the TCJA’s seven-rate structure (10% through 37%), with thresholds indexed for inflation. The TCJA reduced individual income tax rates across all brackets, and those lower rates remain in effect.
• Standard deduction is historically high: $14,600 for single filers and $29,200 for married filing jointly in 2024, keeping most taxpayers from needing to itemize.
• Child tax credit stands at $2,000 per qualifying child under 17, with a refundable portion of $1,700 for 2024.
• Alternative minimum tax exemptions remain elevated ($85,700 single; $133,300 married filing jointly), shielding most households from this parallel tax system.
• Estate tax exemption is $13.61 million per individual in 2024-more than double the pre-TCJA level.

Without the OBBBA, taxpayers would have returned to higher pre-2018 tax rules in 2026, including a top individual income tax rate of 39.6%, a standard deduction roughly half the current level, lower child tax credits, greater AMT exposure, and a dramatically reduced estate tax exemption.

What this means for you in 2024: most of these benefits are still in full force. What may change after 2025: the OBBBA locked in many provisions permanently, but certain caps, phase-outs, and new deductions carry their own restrictions and timelines that deserve attention.

The TCJA is estimated to cost $1.9 trillion over ten years, a figure that has shaped the political debate around every extension and modification. Corporate tax cuts under the TCJA were permanent, reducing the corporate tax rate to 21%, but the individual side was always the more uncertain piece. The rest of this article focuses on how these rules play out for workers, parents, homeowners, investors, and those with larger estates.

Income Tax Brackets: 2024 Rules and the Scheduled 2026 Reversion

The cuts and jobs act lowered individual income tax rates and widened federal income tax brackets through 2025. These rules still determine 2024 federal tax bills, and they continue to shape withholding, estimated payments, and year-end planning for millions of Americans.

Here’s what the current landscape looks like and what was at stake:

• The seven 2024 tax brackets run from 10% to 37%. The top individual tax rate was lowered to 37% under TCJA, down from the pre-2018 rate of 39.6%. For single filers, the 37% bracket kicks in on taxable income above $609,350; for joint filers, above $731,200. The 24% bracket covers single filers from $100,526 to $191,950, meaning a broad swath of middle- and upper-middle-income earners pay a lower marginal rate than they would have under the old tax code.
• Tax brackets under TCJA are indexed to chained CPI for inflation, which grows slightly more slowly than the traditional CPI measure. This means income thresholds rise each year, but not quite as fast as under the previous method-an important detail for anyone tracking bracket creep.
• Many married couples currently benefit from reduced “marriage penalties” because several brackets are roughly double the single-filer thresholds. If the law had reverted, the top bracket for joint filers would have compressed relative to single filers, pushing more two-income households into higher statutory tax rates.
• In 2018, the top 5% received 40% of individual tax cuts, and the TCJA increased after tax incomes by 2.9% for the top 1% in 2025. These distributional effects have been central to the political debate, as critics point to the concentration of benefits while supporters argue the rate cuts drove broader economic activity.
• The TCJA’s corporate tax cuts aimed to boost economic growth and capital investment, and the lower corporate income tax rate of 21% was designed to make U.S. businesses more competitive globally. While corporate tax reform is distinct from individual rates, the two interact: higher corporate earnings can translate into dividends and capital gains for individual investors, affecting their individual income taxes.

Even with real salary income holding steady, more of your pay can fall into higher brackets over time if inflation adjustments don’t keep pace with wage growth. That’s bracket creep in action, and it’s a reason to revisit your withholding every year-regardless of whether the law changes.

The OBBBA made the current individual income tax rate structure permanent, so the feared reversion to 39.6% at the top is no longer on the immediate horizon. But permanent doesn’t mean unchangeable. Future congresses can always adjust tax rates, and high-income earners should keep an eye on proposals that could raise the top statutory tax rates or compress brackets for those above certain income thresholds.

Standard Deduction, Itemizing, and the Alternative Minimum Tax (AMT)

The TCJA nearly doubled the standard deduction, capped certain itemized deductions, and greatly reduced the number of people affected by the alternative minimum tax. These changes simplified tax filing for most households but created new pain points for taxpayers in high-tax states. Under original TCJA rules, all of these provisions were set to sunset after 2025.

• Standard deduction vs. itemizing: For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly. The standard deduction for married couples was $27,700 in 2023, reflecting the annual inflation adjustment. Because the standard deduction nearly doubled under the TCJA, the share of taxpayers who itemize dropped sharply-from about 30% to roughly 10%. For most households, claiming the standard deduction is faster and yields a better result than tallying mortgage interest, charitable gifts, and state and local taxes.
• The TCJA eliminated personal exemptions, previously $4,050 each. Before 2018, taxpayers could claim a personal and dependent exemption for themselves, their spouse, and each dependent, reducing taxable income by thousands. The trade-off was that the higher standard deduction and expanded credits were designed to more than offset the loss of personal exemptions for most filers-but not all, particularly large families.
• SALT cap: The TCJA capped the SALT deduction at $10,000. This ceiling on deductions for state and local taxes, including property taxes and sales taxes, hit taxpayers in high-tax states hardest. However, under the One Big Beautiful Bill Act, the SALT deduction cap has increased to $40,000 for certain filers-a significant change. Higher SALT deductions are a key change under the One Big Beautiful Bill Act, and expanded deductions include increased standard deductions and SALT cap relief for higher-income earners. Homeowners in high-tax areas may benefit from itemizing due to the raised SALT cap, particularly in states with steep property tax bills.
• Local property taxes in Texas can lead homeowners to prefer standard deductions over itemizing, especially since no state income tax in Texas protects residents from certain tax burdens that hit filers in states like New York or California. But with the SALT cap now at $40,000, some Texas homeowners with large property tax bills may find itemizing worthwhile again.
• Individuals can now deduct up to $2,000 in cash donations to charities without itemizing, a provision that helps taxpayers who take the standard deduction still get some benefit from their charitable giving.
• If the TCJA’s standard deduction had reverted, the deduction would have shrunk roughly by half and personal and dependent exemptions would have returned. This would have shifted the way taxable income is calculated, nudging millions of households back toward itemizing and complicating tax filing.

AMT exposure before and after 2025: The alternative minimum tax is a parallel federal tax system with its own exemption amounts and rates. It was originally designed to prevent high-income taxpayers from using excessive deductions and credits to eliminate their tax liability entirely. The TCJA raised the AMT exemption and phaseout thresholds, slashing the number of AMT filers from about 5 million to a few hundred thousand per year. For 2024, the AMT exemption is $85,700 for single filers and $133,300 for married filing jointly, with phase-outs starting at $609,350 and $1,218,700 respectively.

• Under the OBBBA, the elevated AMT exemptions are now permanent, but the base levels were reset to 2018 values with inflation indexing going forward. This means that while most households remain protected, AMT exposure may creep upward faster than expected as incomes grow-especially for higher-income taxpayers with significant itemized deductions.
• If you have substantial income from incentive stock options, large deductions, or live in a state with high local taxes, running an AMT projection is a worthwhile annual exercise.

Family Benefits: Child Tax Credit and Other Dependent Relief

The TCJA reshaped family taxation by eliminating personal exemptions, replacing them with higher credits, and adding a smaller credit for other dependents. These changes were among the most directly felt by households with children, and they remain a focal point of ongoing tax policy debates.

• The TCJA doubled the Child Tax Credit from $1,000 to $2,000 per qualifying child under age 17. For 2024, the refundable portion (the Additional Child Tax Credit) is $1,700. The refundable portion of the Child Tax Credit was $1,600 for 2023, reflecting the gradual annual increase. Eligibility for the Child Tax Credit phases out at $200,000 for singles and $400,000 for joint filers, which means the credit reaches well into the upper-middle-income range.
• The TCJA eliminated personal exemptions, replacing them with higher credits. For many middle-income families, the math worked out favorably: a $2,000-per-child credit more than compensated for the loss of a $4,050 personal exemption per family member. But for larger families or those with incomes too high to claim the full credit, the trade-off was less clear-cut.
• About 19 million children receive less than the full Child Tax Credit, often because their families’ earned income is too low to generate the full refundable amount. The earned income tax credit and the child tax credit together form the backbone of federal support for low- and moderate-income working families, but gaps remain.
• The $500 nonrefundable credit for other dependents-covering older children, elderly parents, and other qualifying dependents-provides some relief but may not fully replace the value of the old personal exemptions for households supporting multiple non-child dependents.
• The child tax credit is likely reverting to a lower amount in 2026 if additional legislative action is not taken, though the OBBBA’s permanent extension of TCJA provisions has reduced this risk significantly. Proposals debated in Congress have ranged from a larger fully refundable credit to more targeted, income-limited versions.

Worked example: Consider a married couple filing jointly with two children under 17 and a household income of $250,000. Under current 2024 rules, they claim the standard deduction of $29,200 and receive $4,000 in child tax credits ($2,000 per child). Their taxable income is $220,800, and their federal income tax falls in the 24% bracket for a significant portion of that amount. Under a hypothetical reversion to pre-TCJA rules, the standard deduction drops to roughly $13,000, but four personal exemptions ($4,050 each) return-$16,200 total. The net deduction difference is modest, but the child tax credit would drop back to $1,000 per child, and higher marginal rates would apply. The family’s after tax income would shrink by several thousand dollars.

Changes to the child tax credit affect more than just your April refund. They influence withholding throughout the year, changing your take-home pay on every paycheck.

Homeowners, Investors, and Retirement Savers Under New Tax Rules

The TCJA and subsequent adjustments altered deductions and rates affecting homeowners, investors, and savers. These changes interact with 2024 inflation-adjusted thresholds and the evolving legislative landscape after 2025.

Homeowners

• The $10,000 SALT cap (now increased under OBBBA) and the reduced mortgage interest deduction limit continue to shape the financial calculus for homeowners. Mortgage interest deduction limits were reduced to $750,000 for new loans originated after December 15, 2017-down from $1 million. In high-cost housing markets like San Francisco or the New York suburbs, this cap can meaningfully limit the tax benefit of a large mortgage.
• With the SALT cap raised to $40,000 under the OBBBA, homeowners in states with high property taxes and state income taxes may now find it worthwhile to revisit whether they should itemize rather than claim the standard deduction.

Investors

• Current long-term capital gains and qualified dividend rates remain at 0%, 15%, and 20%, tied to their own income thresholds indexed annually. For 2024, joint filers pay 0% on long-term capital gains up to roughly $94,050 of taxable income, 15% up to about $613,700, and 20% above that. These brackets create opportunities for tax-efficient strategies like harvesting gains in the 0% bracket or timing asset sales.
• The TCJA introduced a 20% deduction for pass-through income (the Qualified Business Income deduction), which benefits sole proprietors, S-corp owners, and partners. In 2019, the average pass-through deduction was $7,000, but taxpayers with incomes above $10 million averaged nearly $1 million in deductions. Pass-through income primarily benefits high-income households, and professional service businesses face income limits for the pass-through deduction, which phases out above certain thresholds for fields like law, medicine, and consulting.
• Business owners respond to these rules by structuring income and entity types to maximize the QBI deduction. Business profits flowing through pass-through entities are a growing share of individual income, and the scheduled expiration of this deduction (now made permanent under OBBBA) was a significant planning concern.
• While TCJA business expensing rules (including bonus depreciation and depreciation deductions) mostly affect companies, they indirectly impact investors through corporate earnings, dividends, and stock valuations. When businesses can expense capital investment immediately, it boosts business investment and can raise after tax incomes for shareholders through higher distributions and share price appreciation.

Retirement Savers

• Contributions to 401(k)s, IRAs, and Roth accounts are governed by existing rules, but changes in income tax brackets and AMT could make Roth conversions before 2026 more attractive for some savers. If you expect your tax bracket to be higher in the future-whether from income growth or legislative changes-converting traditional IRA assets to a Roth now locks in today’s lower rates.
• Individuals aged 60 to 63 can make larger catch-up contributions to 401(k) plans under recent rule changes, allowing them to accelerate retirement savings in the years just before they turn 64.
• New federal income tax deductions for individuals aged 65 and older may reach $6,000 or $12,000 depending on filing status, providing targeted relief for seniors on fixed incomes.
• Individuals may deduct up to $10,000 of interest paid in 2025 on loans for new vehicles, a temporary provision that can benefit those financing car purchases during that window.

Estate Tax Exemption and High-Net-Worth Planning

The TCJA more than doubled the federal estate tax exemption, dramatically reducing the number of estates subject to federal estate tax. This increase was scheduled to expire after December 31, 2025, but the OBBBA has now made the elevated exemption permanent and raised it further.

• The TCJA doubled the estate tax exemption to $11.2 million in 2018. The estate tax exemption is adjusted for inflation annually, and by 2024, the estate tax exemption will increase to $13.61 million per individual-about $27.22 million for a married couple with proper planning. Under the OBBBA, the exemption rises to $15 million per person in 2026, with continued inflation indexing.
• The top estate tax rate remains at 40% under the TCJA for amounts above the exemption. The gift tax exemption mirrors the estate tax exemption, meaning individuals can transfer wealth during their lifetime without triggering gift tax up to the same threshold.
• Without the OBBBA, the exemption was headed back to roughly $6–7 million per person (the pre-TCJA level plus inflation). That would have pulled thousands of additional families into the federal estate tax net.
• The IRS has confirmed there will be no “clawback” on gifts made while the higher exemption is in place, meaning high-net-worth individuals who made large lifetime gifts before any potential reduction won’t be penalized retroactively.

Concrete example: An estate valued at $20 million. Under the current OBBBA rules (2026 exemption of $15 million), the taxable estate is $5 million, generating a federal estate tax of roughly $2 million at the 40% rate. If the exemption had reverted to $6.5 million, the taxable portion would be $13.5 million, creating a tax bill of approximately $5.4 million-a difference of over $3 million. These estate tax provisions make the stakes of legislative changes extremely tangible for families with significant assets.

Planning tools affected by these rules include irrevocable trusts, family limited partnerships, and charitable planning strategies. Higher interest rates alter the attractiveness of certain techniques-grantor retained annuity trusts (GRATs), for example, become less efficient when rates rise because the IRS’s assumed rate of return is higher, leaving less “excess” growth to pass to heirs tax-free.

• State-level estate and inheritance taxes may apply at much lower thresholds than federal law. States like Massachusetts and Oregon impose estate taxes starting at $1 million, meaning residents of those states need to coordinate federal estate tax planning with their state’s rules. Even Texas, which has no state estate tax, presents planning considerations because beneficiaries may live in states that do.
• Federal revenues from the estate tax are a small share of the total tax revenue collected by the internal revenue service, but for individual families, the amounts at stake are life-changing. Reviewing beneficiary designations, trust structures, and lifetime gifting strategies remains essential, even with a $15 million exemption.

Planning Ahead: How Individuals Can Prepare for 2025–2026 Tax Shifts

While the OBBBA resolved many of the uncertainties around the TCJA sunset, the federal tax system remains a moving target. New provisions, temporary deductions, and evolving IRS guidance mean that proactive planning still pays dividends.

Here are the key planning themes for individuals heading into 2025 and 2026:

• Income timing: Evaluate whether to accelerate income-such as bonuses, Roth conversions, or business income-into lower-rate years. If you believe future tax reform could raise rates, pulling income forward makes sense. Conversely, if you expect your income to drop (retirement, sabbatical, career change), deferring deductions into higher-income years can lower your overall tax burden.
• Withholding and estimated payments: Review your W-4 and run multi-year projections using tax software or with a professional. Changes in your filing status, number of dependents, and expected income all affect how much tax you should pay throughout the year versus at filing time. Getting this wrong can result in underpayment penalties or an unnecessarily large interest-free loan to the government.
• AMT and phase-outs: Higher-income taxpayers should model their AMT exposure carefully. The reset of AMT exemption base levels to 2018 values under OBBBA, with inflation indexing, means that as individual income rises, more filers may find themselves subject to the alternative minimum tax in future years. Similarly, phase-outs of the child tax credit and other credits can create effective marginal rates higher than the statutory tax rates suggest.
• Business owners and self-employed: The 20% qualified business income deduction is now permanent under OBBBA, but business owners should still reassess entity choice (S-corp vs. C-corp) in light of the interaction between pass-through rates and the corporate tax rate. The expiration of special business deductions could lower take-home pay for entrepreneurs in 2026 if temporary provisions are not renewed.
• New deductions for workers: New deductions for tipped workers began impacting tax filings in 2026. Workers in service industries can benefit from temporary deductions for overtime pay and tips, though these deductions carry eligibility restrictions and documentation requirements. If you receive tip or overtime income, track your earnings carefully to claim the full benefit.
• ACA individual mandate: The TCJA set the ACA penalty tax to zero starting in 2019. Previously, the penalty was 2.5% of household income or $695 per adult. The penalty tax elimination reduced federal budget deficit impacts, and fewer people obtain subsidized coverage without the penalty tax. While this isn’t a direct income tax issue, it’s a reminder that the tax bill you owe is shaped by more than just rates and brackets-health coverage decisions interact with your overall tax picture.
• Estate and gift planning: Review estate plans, beneficiary designations, and lifetime gifting strategies to take advantage of the now-permanent $15 million exemption. Even if your estate is well below the federal threshold, state-level estate tax provisions may apply, and the Inflation Reduction Act’s energy-related credits can also factor into long-term financial planning for property owners.
• Charitable giving: The ability to deduct up to $2,000 in cash donations without itemizing remains a useful tool for standard-deduction filers who want to support causes and reduce their tax bill simultaneously.

The joint committee on taxation and the congressional budget office regularly publish updated projections on how tax law changes affect federal revenues and individual tax brackets. Checking these resources annually gives you a clearer picture of where the law is heading.

For anyone tracking how much tax they’ll owe, the interaction between tax cuts and tax credits, inflation adjustments, and new legislative provisions creates a landscape that rewards attention. Raising taxes is always politically contentious, and tax avoidance strategies that are legal today may not be available tomorrow. The tax foundation and other nonpartisan groups publish annual analyses that can help joint filers, single filers, and business owners respond to changes in real time.

Whether you’re a territorial tax system advocate, someone focused on depreciation deductions for your small business, or a parent calculating the impact of the child tax credit on your household income, the key is the same: don’t wait until April to think about your tax bracket. Run the numbers now, adjust your withholding, and revisit your plan every year.

Key Takeaways

• The TCJA’s lower individual income tax rates, higher standard deduction, and expanded child tax credit remain in effect for 2024 and have been made largely permanent by the OBBBA.
• The SALT deduction cap has been raised from $10,000 to $40,000 under the OBBBA, a major change for homeowners in high-tax states.
• The federal estate tax exemption is now $15 million per person (2026), locked in permanently with inflation indexing.
• New deductions for tip income, senior taxpayers, and auto loan interest provide targeted relief but carry restrictions.
• AMT exposure may increase gradually as incomes rise, even with permanent higher exemption levels.
• Future tax law changes are always possible-plan with flexibility in mind.

Tax policy is never truly static. The choices you make in 2024 and 2025-from Roth conversions to lifetime gifts to withholding adjustments-will echo through your finances for years. Whether Congress extends, modifies, or adds new provisions, informed taxpayers who plan ahead consistently come out ahead. Run a multi-year projection, consult a qualified tax professional, and revisit your plan every year as inflation adjustments and new guidance reshape the rules.