The One Big Beautiful Bill Act (OBBBA): What You Need to Know

Dustin Hall |
Categories
Tax Planning
Taxes
Financial Planning

Because this new law is broad and complex, we're focusing on the key tax changes that are

most likely to impact you. This isn’t a full summary, but rather a practical look at the updates that

may affect your financial picture.

Key Tax Changes:

1. TCJA Tax Cuts Made Permanent

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. “Permanent” simply means no built-in expiration. Congress can still revise these provisions in the future.

2. Higher Standard Deduction (2025)

  • $31,500 for joint filers
  • $23,625 for heads of household
  • $15,750 for single filers (Inflation-adjusted annually)

3. 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

4. Higher Estate Tax Exemption (2026)

Rises to $15 million per individual, indexed for inflation, with no expiration.

5. The current $2,000 child tax credit is increased to $2,200 (2025). It will now be indexed to inflation in future years. The income level at which the credit begins to phase out remains the same: $400,000 for couples filing jointly and $200,000 for single filers.

6. Green Energy Credit Reductions

  • $7,500 EV credit ends after Sept. 30, 2025●

Solar and residential energy credits end Dec. 31, 2025

7. 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 now 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 for joint filers). The occupations list to be released by IRS in late 2025.

3. Overtime Pay Exemption (2025–2028)

Up to $12,500 ($25,000 for couples) of overtime income is exempt from tax. Phase-out starts 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 65+
  • $12,000 for qualifying couples
  • Applies 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 always, if you have questions, we're here to help—and we encourage you to check in with your tax advisor for personalized guidance.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Original Source: Horsesmouth