What the One Big Beautiful Bill Could Mean for Military Families

There’s been no shortage of news coverage or opinions about the One Big Beautiful Bill Act (OBBBA). Depending on who you ask, it’s either a step forward or two steps back. Now that it’s law, let’s break down what it means for your paycheck, benefits, and tax return.

Standard Deduction Gets a Small Bump

Starting in 2025, the standard deduction will increase modestly and continue adjusting for inflation through 2028. Since most military families take the standard deduction, this change will apply to the majority of filers.

New deduction amounts for 2025:

• Individual: $15,750 (up from $14,600 in 2024)
• Head of Household: $23,625 (up from $21,900)
• Married Filing Jointly: $31,500 (up from $29,900)

A slightly bigger standard deduction won’t dramatically change anyone’s financial situation, but it could help ease rising everyday costs. To learn more about getting the most out of your tax return, check out our Tax Basics Learning Guide.

New Deduction for Seniors Over 65

From 2025 through 2028, taxpayers over age 65 can claim an additional $6,000 deduction. This deduction can be beneficial for Veterans and is phased out for singles with $75,000 in modified adjusted gross income (MAGI) and $150,000 in MAGI for married filing jointly.

Potential Improvements to Housing Allowance and Barracks

Section 20001 of the One Big Beautiful Bill Act authorizes funding aimed at improving Service member quality of life. It includes:

• $2.9 billion for potential increases to Basic Allowance for Housing (BAH)
• $1 billion for unaccompanied housing upgrades
• Additional funds that could expand Temporary Lodging Allowance (TLA), childcare support, and healthcare programs

Higher SALT Deductions

One of the bill’s more high-profile changes is raising the cap on State and Local Tax (SALT) deductions from $10,000 to $40,000 for households reporting less than $500,000 MAGI.

While this might sound like a big change, it’s not likely to affect most currently serving military families, unless you’re paying a lot in property taxes and itemize your deductions. However, it could benefit some homeowners, especially those in states without property tax exemptions for veterans.

Child Tax Credit Gets a Modest Increase

The Child Tax Credit will rise to $2,200 per child in 2025 and adjust with inflation going forward.  However, the refundable portion does not increase, meaning lower income families may not see the full benefit. Still, for military families raising children, this change may help with child-related expenses.

Tax Breaks for Tips, Overtime, and Car Loans

The temporary tax exemptions on tips (up to $25,000), overtime pay (up to $12,500), and car loan interest (up to $10,000) could benefit some military families, depending on their circumstances. For example, military spouses working hourly jobs may see relief from the tip and overtime provision.

Service members with recent car loans might get a small break, too. These aren’t universal game-changers, but they may help some households. The provisions expire in 2028 and won’t apply to everyone, so it’s worth reviewing with a tax professional or visiting IRS.gov to learn more.

New Savings Program for Children

The bill introduces a new type of savings account for children born between 2025 and 2028. Nicknamed “Trump Accounts”, each eligible child would receive a $1,000 government-funded deposit, and families could contribute up to $5,000 annually, with tax advantages for qualifying uses like education, housing, or job training.

Cuts and Changes to SNAP, Medicaid, and Medicare

While the bill doesn’t affect TRICARE or active-duty health benefits, it includes cuts and new requirements to SNAP, Medicaid, and Medicare. These changes could impact low-income Guard or Reserve families, and Veterans under age 65, who rely on assistance. The bill’s Medicaid cuts could make it harder for military families with special needs to get care that TRICARE doesn’t cover.

Consumer Protection Takes a Funding Hit

The OBBBA also makes funding cuts to the Consumer Financial Protection Bureau (CFPB).  These cuts are likely to impact staffing, which handles complaints related to predatory lending, Servicemember Civil Relief Act (SCRA) enforcement, and credit disputes.

Final Thoughts

The One Big Beautiful Bill Act includes a mix of modest tax breaks and potential housing support, along with reductions to social programs. For many military and veteran families, the impact will depend on your income level, filing status, and specific circumstances.

Bottom line—stay informed. The headlines may be loud, but the fine print is where your finances are affected.

The USAA Educational Foundation is a nonprofit, tax-exempt IRS 501(c)(3) and cannot endorse or promote any commercial supplier, product, or service. The content of this blog is intended for information purposes only and does not constitute legal, tax, or financial advice.