One Big Beautiful Bill Act (OBBBA) and You

The recently enacted One Big Beautiful Bill Act (OBBBA), passed by Congress and signed into law, introduces changes that will affect many of you. I am optimistic that most of these updates will positively affect your tax situation. Below, I have detailed the key provisions, prioritized by their relevance to your tax planning

Tax Law Summary for Individuals

Broadly, the legislation makes President Trump’s 2017 tax cuts permanent, extending current income-tax rates. It also adds some new breaks while making cuts to federal healthcare coverage, food-aid and student loan programs. Here’s what it could mean for your finances:

If you’re over 65, the bill doesn’t eliminate taxes on Social Security, but it adds a new tax deduction for seniors for the 2025 to 2028 tax years. People over 65 can deduct up to $6,000 from their taxable income ($12,000 if married) if they make $75,000 or less, or $150,000 or less for married couples. The maximum deduction starts shrinking when income crosses that threshold, and winds down completely once income crosses $175,000 per person or $250,000 per couple. Seniors would still get the existing additional senior standard deduction tax break.

The bill would raise the maximum state-and-local-tax (SALT) deduction to $40,000—up from $10,000 now—and increase it by 1% annually through 2029. The cap then reverts to $10,000 in 2030. But the maximum deduction would begin phasing down once income crosses $500,000. The income threshold would also increase 1% every year through 2029.

Beginning with the 2025 tax year, the standard deduction, which was raised by the TCJA, increases further by $1,000 for single filers and $2,000 for married couples filing jointly. This brings the deduction to $15,750 for single filers and $31,500 for joint filers, with future amounts indexed for inflation.

If you’re a parent, the legislation would raise the child tax credit to $2,200 from $2,000 starting in 2026, index it for inflation, and extend it permanently.

The federal estate and gift tax exemption has been increased to $15 million for the 2026 tax year, with future adjustments for inflation. This means the majority of estates (more than 99%) will not be subject to federal estate taxes.

Beginning in the 2026 tax year, a new deduction allows non-itemizers to deduct charitable gifts, up to $1,000 for single filers or $2,000 for married couples filing jointly. This provision is not indexed for future inflation.

Establishes a savings account program for children born between 2025 and 2028. Under this program, each eligible child will receive a government-funded account with an initial $1,000 seed deposit. Parents can contribute up to $5,000 annually, and the accounts will be invested in a U.S. stock market index, operating similarly to IRAs. Withdrawals are permitted starting at age 18, with penalties for early withdrawals before age 59½, unless the funds are used for qualifying expenses. If you plan on having a child between 2025 and 2028, take advantage of the 1k; otherwise, a 529 plan may be best.

For the 2025 to 2028 tax years, the bill would enable taxpayers to deduct up to $10,000 in auto loan interest from their taxable income. This would only apply to U.S.-made cars. The maximum deduction phases down when income surpasses $100,000.

If you’re a tipped worker, For the 2025 to 2028 tax years, workers can deduct up to $25,000 of tips from their taxable income under the new plan. Note that this would only apply to federal income taxes, not state or payroll taxes. The maximum deduction begins shrinking once income surpasses $150,000. Only certain professions would qualify for the tips deduction—the Treasury is required to publish the list within 90 days of enactment.

If you work overtime, the bill adds a “no tax on overtime” deduction capped at $12,500 for individuals or $25,000 for married couples. Individuals making $150,000 or less would qualify for the maximum deductions. This will be in effect for the 2025 to 2028 tax years, and only applies to federal income taxes, not state or payroll taxes.

Tax Law Summary for Business Owners

The 20% Qualified Business Income (QBI) deduction is now permanent. If you are an SSTB, the phase-out range for joint returns expanded to $75,000–$150,000 (up from $50,000–$100,000), effective for tax years beginning after 2025. This offers small business owners with S-Corporations greater flexibility to optimize profits through W-2 wages versus K-1 distributions for added tax savings.

There are no changes to the Pass-Through Entity Tax (PTE), ensuring continuity for affected businesses.

Property acquired and placed in service after January 19, 2025, the Act permanently reinstates 100% bonus depreciation, previously set to decline to 40% in 2025, 20% in 2026, and 0% in 2027 onward.