The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces one of the most sweeping tax and economic reforms since the 2017 Tax Cuts and Jobs Act (TCJA). It extends, modifies, and introduces numerous provisions affecting individuals, families, businesses, and estates. More importantly, it creates new opportunities for individuals and families to preserve wealth, reduce taxes, and plan more strategically for the future.
Whether you are focused on optimizing retirement, managing a complex estate, or navigating business ownership, the provisions in this bill are designed to reward proactive planning. From expanded deductions and enhanced credits to new savings vehicles and investment incentives, the landscape has shifted – and those who adapt early will benefit most.
The bill made the tax rates and brackets implemented by the TCJA permanent.
The standard deduction has increased to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married couples filing jointly. This means that more of your income is shielded from taxation, especially for those who do not itemize. The deduction will be automatically adjusted for inflation each year beginning in 2025, helping preserve its value over time. For those who have previously itemized, comparing your deductions against the new standard will help determine which strategy offers greater tax savings.
| Filing Status | TCJA | New Under OBBBA (permanent) |
|---|---|---|
| Single | $15,000 | $15,750 |
| Married Filing Jointly | $30,000 | $31,500 |
| Married Filing Separately | $15,000 | $15,750 |
| Head of Household | $22,500 | $23,625 |
Seniors received an extra tax cushion for those with applicable income levels. Starting in 2025, individuals aged 65+ can deduct an extra $6,000 from their taxable income. This benefit begins to phase out at $75,000 (single) or $150,000 (joint) and goes away completely at $175,000 (single) or $250,000 (joint).
Available through 2028, this deduction offers a temporary window for older taxpayers to reduce taxable income. Carefully timing withdrawals and income to stay under the phaseout thresholds will maximize this benefit.
The much-maligned SALT deduction jumps from $10,000 to $40,000 in 2025. This limit will increase by 1% each year until 2029, however it reverts to $10,000 in 2030. For those who have a modified adjusted gross income (MAGI) over $500,000, the deduction will be reduced by 30% of the amount over that income level.
This threshold applies to both single and joint filers.
| Taxpayer MAGI | $550,000 | $700,000 |
|---|---|---|
| SALT Deduction Before Phaseout | $40,000 | $40,000 |
| Excess over $500,000 | $50,000 | $200,000 |
| Reduction (30% of excess) | $15,000 | $60,000 |
| Final Deduction Allowed | $25,000 | $10,000 |
Note: All taxpayers can still claim at least $10,000 regardless of MAGI.
The bill further incentivizes charitable giving. Since the TCJA was enacted in 2018, taxpayers using the enhanced standard deduction had limited ability to deduct charitable gifts. Beginning in 2026, the OBBBA increases the above-the-line charitable deduction to $1,000 for single filers and $2,000 for joint filers, up from the $300 cap under the CARES Act.
Beginning in 2025, the non-refundable Child Tax Credit increases to $2,200 per child and will be indexed for inflation. This is up from $2,000 under the TCJA. The refundable portion of $1,400 per child is made permanent and will also be adjusted annually for inflation. The credit phases out at $200,000 for single filers and $400,000 for joint filers. For families with dependent children, this credit offers modest but meaningful tax relief, especially when combined with other deductions.
Workers who regularly earn tips can deduct up to $25,000 in qualified tip income. This begins to phase out when MAGI is greater than $150,000 (single) and $300,000 (joint). This temporary deduction is available for the tax years 2025 to 2028 and will reduce taxable income for service or hospitality workers during peak earning years.
Those who earn qualified overtime compensation can deduct up to $12,500 (single) or $25,000 (joint). This provision shares the same phaseout levels as the tip deduction. The total amount of qualified overtime must be reported on Form W-2 to be deducted. This applies for tax years 2025 through 2028. If you or your spouse earns significant overtime, this deduction will allow you to work extra hours without pushing you into a higher tax bracket as quickly as before.
Up to $10,000 in interest on loans for U.S.-made vehicles is now deductible. The phase out limit is set at $100,000 (single) or $200,000 (joint). This also applies for tax years 2025 through 2028. While not a major deduction for most high-net-worth clients, this could benefit younger families or those financing fleet vehicles.
The bill makes permanent the higher AMT exemption amounts set by the TCJA and reintroduces the phase-out thresholds of $500,000 (single) and $1,000,000 (joint). In addition, the phase-out rate has doubled from 25% to 50% of the amount by which AMT income exceeds those thresholds.
For high-income taxpayers who were often disproportionately impacted by the AMT, these changes reduce the likelihood of being subject to the tax and help preserve deductions and credits that might otherwise have been lost.
The exemption increase was permanently extended to $15 million (single) and $30 million (joint) starting in 2026. For 2025, the exclusions remain at $13,990,000. This will be indexed for inflation starting in 2027. While this represents a significant planning opportunity for wealthy families, history has shown that estate tax rules are subject to frequent change. Flexibility in estate documents will be vital to adapt to any future legislative shifts.
Starting in 2026, families will have more flexibility in using 529 plans. The annual limit for K-12 expenses increases to $20,000, and qualified expenses now include tutoring, testing, dual-enrollment, and similar educational costs. In addition, the student loan repayment limit rises to $25,000 per beneficiary. These changes make 529s an even more powerful tool for covering education costs across multiple stages of learning.
Beginning in 2026, families will be able to open new Trump Accounts to help children build long-term savings. Parents, grandparents, and even employers can contribute up to $5,000 per year (with employer contributions up to $2,500 tax-free). Contributions must stop once the child turns 18, and the funds become accessible starting that year. Investments are limited to low-cost U.S. mutual funds or ETFs, and while withdrawals are taxable, the account is designed to encourage long-term growth. Families with children born between 2025 and 2028 also receive a one-time $1,000 tax credit for opening an account.
Because contributions are irrevocable gifts, the child will have full control of the funds at age 18. If maintaining control or preventing access to a lump sum at that age is a priority, these accounts may not be the right fit.
| Distributions – ages 18–31 | Treatment |
|---|---|
| Basis | Tax-free |
| Qualified Expenses (education, home, business start-up) | Capital Gains |
| Non-qualified expenses | Ordinary Income |
QOZs have been made permanent, offering long-term tax incentives for investing in economically distressed areas. Investors can defer capital gains by reinvesting them into QOZs, with new deferral windows opening every five years from 2027 to 2033. If the investment is held five years, the basis is increased by 10% of the original gain. For rural QOZs, the basis increase is 30%. Gains from investments held for 10 years or more are fully excluded from taxation, up to a 30-year holding limit. This provision will be valuable for those anticipating large gain events in 2025 or 2026.
For example, a person selling a business or property could significantly reduce their taxes through a step-up basis or complete disappearance of gain, given they are comfortable with long-term investment in these areas. These investments are long-term, illiquid, and may not be as transparent as other investments, so ensuring suitability will be crucial.
The bill significantly expands the ability to deduct business equipment and property. The Section 179 deduction limit increases to $2.5 million, with a phaseout beginning at $4 million in total equipment purchases. Additionally, 100% bonus depreciation is permanently reinstated, allowing businesses to fully expense the cost of qualified property in the year it’s placed in service.
This provides a powerful incentive for capital investment and equipment upgrades, while allowing businesses to accelerate deductions and reduce taxable income immediately. This provision is especially valuable for businesses with fluctuating income or growth plans.
Starting in 2025, businesses can now fully expense domestic research and experimental (R&E) costs, reversing the previous five-year amortization requirement. This change encourages innovation and product development, making investment in the US more attractive for these expenses. If your business invests in technology, product design, or process improvements, you may now deduct those costs upfront, improving cash flow and reducing taxable income.
Through 2030, businesses can fully expense US-based manufacturing and production property, including facilities and equipment used in production, refining, and processing. For businesses involved in manufacturing or industrial operations, this provision supports expansion and modernization while offering immediate tax relief.
For qualifying small business investments, the capital gains exclusion increases from $10 million to $15 million, and the gross asset test rises from $50 million to $75 million. A new tiered system for holding-period exclusions also applies for stock acquired after July 4, 2025, with amounts indexed for inflation starting in 2027.
For high-net-worth families, this provision significantly enhances the tax efficiency of investing in early-stage businesses. Properly structured QSBS can allow millions of dollars in gains to be realized tax-free — a powerful tool in planning for business exits or diversification.
However, QSBS rules are highly technical: the company must meet strict “qualified small business” requirements, stock must be held for at least five years, and investments carry the inherent risks of private companies. Careful planning and coordination with tax and legal advisors is essential to maximize this opportunity.
| Holding Period | Gain Exclusion |
|---|---|
| 3 Years | 50% |
| 4 Years | 75% |
| 5 Years | 100% |
The bill makes the 20% Qualified Business Income (QBI) deduction permanent for eligible pass-through entities, including sole proprietors, partnerships, S corporations, and certain LLCs. It also guarantees a minimum $400 deduction for taxpayers with at least $1,000 in QBI, ensuring broader access to this tax benefit. This deduction remains a cornerstone of tax planning for pass-through entities. If you own or invest in such businesses, you will keep more of your income. Given that your income qualifies, exploring strategies to optimize QBI will provide additional tax relief.
This bill represents one of the most comprehensive tax and economic overhauls in decades, with lasting implications for individuals, families, and businesses. From expanded deductions and new savings vehicles to permanent extensions of the TCJA, the provisions create a wide range of opportunities to protect wealth, reduce taxes, and fund future goals. For clients, the key takeaway is clear: proactive, informed tax and estate planning will be more important than ever. Those who take advantage of the new rules, whether through maximizing deductions, optimizing Roth conversions, or structuring more tax-efficient withdrawal strategies, will be better positioned to secure long-term financial success. Our team stands ready to help you navigate these changes, adjust your plan where needed, and ensure you and your family can benefit fully from the new opportunities this legislation provides.