One Big Beautiful Bill’s Impact on Northeast Agriculture: Individual Tax Changes

President Trump signed the One Big Beautiful Bill (OBBB) into law over the July 4th holiday. The previous post explored relevant business changes for producers. In addition to the extension of the current individual tax rates, today’s blog will focus on some of the key individual provisions.

Standard deduction

For 2025, the standard deduction is increased to $15,750 for single taxpayers and $31,500 for taxpayers who are married filing jointly. The deduction has been made permanent and indexed for inflation.

Enhanced deduction for older adults

For 2025-2028, there is a new $6,000 deduction for taxpayers aged 65 and older that is meant to shelter some of the Social Security income received, fulfilling presidential campaign promises. There are taxable income limitations for single filers at the $75,000 level ($150,000 for married filing joint). This enhanced deduction is in addition to the $2,000 deduction that taxpayers are allowed to deduct if they are 65 and older ($3,200 for married filing joint if both spouses are 65 and older).

Planning Pointer: With the increased business expensing discussed in our last blog, ensuring taxpayers don’t over- or under-tax plan becomes that much more important. This is due to the fact that the $6,000 deduction is “use it or lose it,” thus taxpayers should plan at the business level to not have it phased out, if possible, while also ensuring enough income to fully take advantage of it.

Enhanced child tax credit

The increased child tax credit is made permanent and increased to $2,200 per child ($1,700 refundable) in 2025. There are phase-out limits beginning at $200,000 modified adjusted gross income for single filers ($400,000 married filing joint).

Planning Pointer: In loss years, farmers may be eligible to elect to use the optional self-employment method, which may increase the refundable earned income tax credit as well as the refundable child tax credit, in addition to earning Social Security coverage credits for the year.

Mortgage interest deduction

The mortgage interest deduction remains at the current $750,000 limit of acquisition debt.

State and local tax deduction (SALT)

The limit on deduction has been increased from $10,000 to $40,000, increased by 1% through 2029 for eligible taxpayers with income up to $500,000.

Planning Pointer: For eligible producers in New York, Maine and Connecticut¹, with each state’s respective refundable investment tax credit for farmers, these tax credits generally will mean that the standard deduction will be utilized, so the SALT increase may not be applicable. At the business level, the pass-through entity tax (PTET) should be revisited to determine how beneficial it is for certain taxpayers who can now take advantage of the higher limitations and also have state investment tax credits.

Deductibility of car interest

There is a new deduction for tax years 2025-2028 — up to $10,000 of loan interest for certain purchased vehicles who have final assembly in the U.S. There are phase-outs limitations when modified adjusted gross income is over $100,000 ($200,000 for married filing joint).

Trump Accounts

These new accounts function similarly to a non-deductible traditional Individual Retirement Account where there can be up to $5,000 in annual contributions that grow tax-free in select index-funds, such as the S&P 500. Contributions can be made until the age of 18, at which point the account essentially converts to a traditional IRA. For children born between 2025 and 2028, each account will be seeded with a one-time $1,000 contribution. Employers, with a properly written plan, may contribute up to $2,500 that will not be considered income to the employee.

Planning Pointer: It is important for taxpayers to determine how best to prioritize and fund accounts such as the new Trump accounts and 529 accounts. For taxpayers with a child born between 2025 and 2028, the $1,000 contribution has no income limitations and should be taken advantage of.

Charitable deductions

There will be a charitable deduction permitted for non-itemizers to the tune of $1,000 for single taxpayers ($2,000 for married filing joint) that begins in 2026. Other notable changes include the continued limitation on personal casualty losses, termination of miscellaneous itemized deductions with an exception for educator expenses, modified “Pease limitations” on itemized deductions for higher income taxpayers and moving expenses exceptions for armed services. There is also a limit for itemizers regarding charitable deductions that limit them to those contributions in excess of 0.5% of an individual’s taxable income. For corporations, the deduction is limited to contributions in excess of 1% of a corporation’s taxable income.

Planning Pointer: It will be important to provide charitable contributions to your tax professionals for 2025, since these provisions can benefit all taxpayers, regardless of itemizing or not. Additionally, due to the floor on itemizing charitable contributions, it may make sense to strategically “bunch” contributions. In other words, a taxpayer with proper planning may decide to front-load contributions in a year in which they know they’ll itemize and be over the floor limitations.

HSA, FSA and 529 expansion

529 plans have been enhanced by allowing up to $20,000 of annual contributions (an increase from the prior $10,000) to pay for K-12 tuition costs. The definition of qualified expenses has also been expanded. HSA access has been expanded by allowing all Bronze and Catastrophic level plans available on exchanges to qualify as a high-deductible health plan. There are also enhancements for first-dollar telehealth and remote care services that have been made permanent. For plan years beginning on or after January 1, 2026, the dependent care FSA limit has been increased to $7,500.

Planning Pointer: Certain states may not follow the federal distribution rules. For example, in New York, distributions from a 529 plan for K-12 tuition are not considered qualified withdrawals for state tax purposes.

Electric vehicles and residential energy credits

The electric vehicle tax credits will expire after September 30, 2025. Additionally, the credit for buying and installing a home charging station will end after June 30, 2026. The credits for residential clean energy property and Energy Efficient Home Improvement Credit under Sections 25(C) and 25(D) will expire after December 31, 2025.

Student loan repayment assistance

The ability for employers to offer tax-free student loan repayment assistance under a qualified educational assistance program has been made permanent and indexes the $5,250 qualified educational assistance limit.

Student aid eligibility

Starting with the 2026-2027 award years, the OBBB exempts certain assets under the Higher Education Act for student aid eligibility. Excluded assets include certain family-owned business assets, such as A) a family farm on which the family resides, B) a small business with no more than 100 full-time or full-time equivalents (or any part of such a small business) that is owned and controlled by the family or C) a commercial fishing business and related expensed, including fishing vessels and permits owned and controlled by the family.

Planning Pointer: These new rules are tremendously beneficial to farm families and should be explored by those who have children navigating student aid awards.

Many of the items listed above have income limitations associated with them. In most cases, agricultural producers have greater flexibility with managing their annual income through their business tax planning efforts. 2025 will be an important tax planning year to ensure that both business and individual objections line up from a tax standpoint to make sure all provisions in the OBBB can be optimized for you and your business.

 ¹Connecticut’s investment tax credit takes effect in 2026.