What the New Tax Law Means for You: Highlights from the One Big Beautiful Bill Act
Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) is the most significant overhaul of individual tax law since the Tax Cuts and Jobs Act (TCJA) of 2017. While it preserves much of the original framework, it adds a fresh layer of complexity that makes proactive planning more important than ever. Below are the most relevant changes affecting individuals, families, and small business owners.
Key Provisions Made Permanent
OBBBA locks in many of the 2017 tax reforms, including:
The current seven tax brackets (10 percent through 37 percent)
The expanded standard deduction
The Section 199A Qualified Business Income deduction
The increased Child Tax Credit, now $2,200 per child and indexed for inflation
Beginning in 2025, the standard deduction increases slightly:
Single: $15,750
Head of Household: $23,625
Married Filing Jointly: $31,500
In addition, seniors age 65 and older receive a new temporary deduction of $6,000 per person through 2028. This is on top of the existing senior standard deduction.
Charitable Giving: A New Floor and Opportunity
Starting in 2026, charitable contributions will only be deductible to the extent they exceed 0.5 percent of adjusted gross income (AGI). Non-itemizers can deduct up to $1,000 (individuals) or $2,000 (couples) beginning in 2026.
SALT Deduction Expanded, But Temporarily
The cap on State and Local Tax (SALT) deductions rises from $10,000 to $40,000 beginning in 2025, but phases out for high earners and reverts to $10,000 in 2030.
Changes to Itemized Deductions
New limitations affect high earners in the 37 percent bracket, reduce mortgage insurance premium deductibility, and restore teacher expense deductions.
New Deductions for Middle-Income Earners
Five new deductions are introduced:
Senior deduction ($6,000)
Non-itemizer charitable deduction
Tip income (up to $25,000)
Overtime pay
Auto loan interest (up to $10,000)
Business Owners: Section 199A Lives On
The QBI deduction remains with expanded phaseout ranges and a $400 minimum deduction for active business income.
Alternative Minimum Tax (AMT): A Subtle Return
AMT exemption thresholds drop in 2026, and phaseouts accelerate. Planning is essential to avoid exposure, especially for those with stock options.
Gift and Estate Tax: Higher Thresholds Preserved
The exemption rises to $15 million per person in 2026, indexed for inflation. Couples can transfer $30 million tax free.
529 Plans Get Broader
Qualified expenses now include curriculum materials, standardized tests, therapies, and occupational credentials. The annual cap rises to $20,000 in 2026.
A New Account Type: Trump Accounts
Parents may now contribute $5,000 per year to a retirement account for children, with no earned income requirement and tax-deferred growth. These convert to IRAs at age 18.
Final Thought
These provisions present opportunities in areas such as tax-efficient income structuring, retirement income planning, education savings, and estate and legacy strategies. Please speak with your wealth advisor to determine if any changes should be made to your current financial plan to take advantage of some of these opportunities.