One Big Beautiful Bill Act Explaine.d
Congress recently passed the One Big Beautiful Bill Act (OBBBA). While the legislation is wide-ranging, we’re zeroing in on the provisions most relevant to investors and financial planning. Consider this a focused snapshot of what may impact your portfolio and long-term goals..
TCJA Tax Cuts Made Permanent
The lower tax rates from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent. Without this change, most Americans would have faced higher taxes starting in 2026. The Qualified Business Income (QBI) deduction and the higher estate tax exemption are also preserved.
Note: “Permanent” only means no built-in expiration. Congress can still revise these provisions in the future.
Higher Standard Deduction (2025)
$31,500 for joint filers
$23,625 for heads of household
$15,750 for single filers- (Inflation-adjusted annually)
Charitable Deductions (Starting 2026)
New deduction for standard filers: Up to $1,000 (individual) or $2,000 (joint)- For itemizers:
Deduction capped at 35% of donation
Only donations above 0.5% of AGI are deductible
Gifts to donor-advised funds or private foundations excluded
Higher Estate Tax Exemption (2026)
Rises to $15 million per individual, indexed for inflation, with no expiration.
Child Tax Credit Increase (2025)
The current $2,000 credit is increased to $2,200 and will now be indexed to inflation. Income phaseouts remain at $400,000 (joint) and $200,000 (single).
Green Energy Credit Reductions
$7,500 EV credit ends after Sept. 30, 2025
Solar and residential energy credits end Dec. 31, 2025
Major 529 Plan Expansion (Starting 2026)
Covers more K–12 expenses (testing, curriculum, tutoring, etc.)
Annual cap doubled to $20,000 per child
Funds can be used for licensing, credentialing, and trade programs
New or Temporary Provisions
1. SALT Deduction (2025–2029)
Cap increases from $10,000 to $40,000 for incomes under $500,000 (indexed annually).
Reverts to $10,000 in 2030.
2. No Tax on Tips (2025–2028)
Tip income is exempt for those under $150,000 ($300,000 joint). Eligible occupations list to come from the IRS in late 2025.
3. Overtime Pay Exemption (2025–2028)
Up to $12,500 ($25,000 for couples) of overtime income is tax-exempt. Phase-out begins at $150,000 AGI.
4. “Trump Accounts” for Children
-Children born 2025–2028 with eligible parents get a $1,000 federally funded savings account.
-Annual contributions up to $5,000
-Tax-deferred growth; withdrawals allowed at age 18
5. Extra Deduction for Seniors (2025–2028)
-$6,000 per person age 65+
-$12,000 for qualifying couples
-Available to standard and itemized filers
-Phases out at $75,000 AGI (individual) or $150,000 (joint)
6. Car Loan Interest Deduction (2025–2028)
Interest on personal-use vehicles (assembled in the U.S.) is deductible. Leases do not qualify.
As with any tax law, the impact of OBBBA will depend on your individual situation. If you’d like to discuss how these changes could influence you, I’d be glad to walk through it with you.