On July 4, 2025, the President signed into law H.R. 1, known as the One Big Beautiful Bill Act (OBBBA), bringing significant changes to the U.S. tax code. Whether you’re an individual taxpayer, business owner, or estate planner, these updates have potential implications for your financial strategy. Below is a breakdown of the most notable provisions and planning opportunities.
Income Tax Planning
Permanent 2017 Tax Act Rates – The highest individual income tax rate remains 37%, extended indefinitely.
Higher Standard Deduction – $15,750 for single filers and $31,500 for joint filers in 2025, with annual inflation adjustments from 2026.
SALT Deduction Increase – Raised from $10,000 to $40,000 through 2029, with a phaseout for AGI over $500,000.
Itemized Deduction Cap – Limited to 35% of the taxpayer’s rate, reducing high-bracket savings.
AMT Changes – Permanently extends higher exemptions but phases them out faster.
New Above-the-Line Deductions – For overtime, tips, and auto loan interest on U.S.-made cars (phased out at certain income levels).
Child Tax Credit Increase – Rises to $2,200 in 2026.
Financial Planning
Dependent Care Contributions – Pre-tax limit rises from $5,000 to $7,500 (2026).
529 Plan Expansion – Higher K–12 withdrawal limits and broader qualified expenses.
ABLE Accounts – Permanently extended enhanced contribution rules.
New “Trump Accounts” for Minors – Up to $5,000 annual contributions plus a $1,000 government seed.
Senior Deduction – $6,000 deduction for taxpayers 65+ (2025–2028).
Estate Planning
Estate/Gift Exemption Increase – $15M individual ($30M couple) from 2026, indexed for inflation.
Step-Up in Basis – Remains unchanged.
Opportunities – High-net-worth families can make significant additional tax-free gifts.
Business Planning
199A Deduction Made Permanent – For pass-through businesses, with expanded income limits.
QSBS Gain Exclusion Increase – Up to $15M with shorter holding periods for partial exclusions.
100% Bonus Depreciation Permanent – Includes certain real estate through 2029.
Section 179 Cap Increase – From $1M to $2.5M.
Opportunity Zone Updates – New zones in 2027 with added rural benefits.
Nonprofit Executive Compensation Tax Expansion – Broader coverage for the 21% excise tax.
Charitable Planning
Above-the-Line Charitable Deduction – $1,000 ($2,000 joint) for non-itemizers starting 2026.
AGI Floor for Deductions – First 0.5% of AGI is not deductible.
Permanent 60% Cash Gift Limit – From the 2017 Act.
New Endowment Excise Tax Tiers – Higher rates for well-funded private universities.
Summary
The OBBBA introduces permanent rate extensions, higher deductions, targeted above-the-line benefits, and significant opportunities in estate and business planning. Key takeaways include:
SALT cap quadrupled temporarily.
Larger estate/gift tax exemptions with inflation indexing.
Permanent 199A deduction and enhanced QSBS benefits for business owners.
New tools for education and retirement savings, including special accounts for minors.
Expanded charitable giving rules, but with new deduction limits.
For individuals and businesses alike, these provisions create both opportunities and potential pitfalls. A proactive review with your financial or tax advisor can help you adjust your strategy to maximize benefits under the new law.
Disclaimer: This article is for informational purposes only and is not intended to be specific tax, legal, or financial advice. The information herein is based on sources believed to be accurate at the time of publication, but may change due to updates in legislation or IRS guidance. Always consult with a qualified tax or financial professional before making decisions based on this information.