Understanding the New "One Big Beautiful Bill Act" (OBBBA)

On July 4, 2025 major new federal tax legislation called the "One Big Beautiful Bill Act" (OBBBA) was officially signed into law. This legislation makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were previously set to expire. This brings greater clarity and stability to the tax code and introduces several significant changes as well.

For many, the most impactful outcome of the OBBBA is that it prevents a significant tax hike that would have occurred if the individual provisions of the TCJA had been allowed to expire after 2025.

Our goal with this summary is to highlight the key tax provisions of the OBBBA that we believe may be especially relevant to your financial planning.

Key Provisions in the OBBBA

The OBBBA introduces a range of tax changes for individuals and businesses, with some taking effect immediately or even retroactively to the start of 2025, while others will have delayed implementation dates. Here are some of the key highlights:

• Tax Brackets: The current seven-bracket system and lower rates introduced in 2017 are now permanent. This means the income tax rates you are currently accustomed to will largely remain in place, rather than reverting to higher pre-2018 levels
  
  
• Standard Deduction: Permanently increased to $31,500 (up from $30,000) for joint filers and $15,750 (up from $15,000) for single filers in 2025 , with inflation adjustments going forward. For many, this simplifies tax filing by reducing the need to itemize.
  
  
• SALT Deduction: The State and Local Tax (SALT) deduction allows taxpayers to deduct certain taxes paid to state and local governments—such as income, sales, and property taxes—from their federal taxable income. Under the OBBBA, the deduction cap is temporarily increased from $10,000 to $40,000, with incremental increases of 1% annually through 2029. However, the benefit begins to phase out for taxpayers with modified adjusted gross income (MAGI) above $500,000 and reverts to $10,000 in 2030.
  
  
• Charitable Contribution:
  For Non-Itemizers a new permanent charitable deduction of up to $1,000 for individual filers and $2,000 for joint filers is now allowed for those who do not itemize, starting in 2026.
  For Itemizers the new provision introduces a 0.5% floor on itemized deductions for charitable contributions, meaning only donations exceeding 0.5% of your AGI will be deductible.
  
  
• Gift and Estate Tax Exemption: The gift and estate tax exemption has been significantly increased to $15 million per taxpayer (or $30 million for joint filers), indexed to inflation, and is now permanent, starting in 2026.
  
  
• New Temporary Deductions (2025-2028): These deductions are a nice bonus because you can claim them whether you itemize or take the standard deduction. These include:
• Senior Deduction: The bill introduces an additional $6,000 deduction for seniors aged 65 and older. It phases out for single filers with income above $75,000 and for joint filers with income above $150,000. The deduction is completely phased out at the $175,000 and $250,000 income thresholds respectively.
• Tip Income Deduction: Up to $25,000 of tip income is deductible. This deduction phases out for incomes above $150,000 ($300,000 for joint filers) and terminates after 2028. The deduction is completely phased out at the $400,000 and $550,000 income thresholds respectively.
• Overtime Income Deduction: Up to $12,500 ($25,000 for joint filers) of overtime income is deductible. This also phases out for incomes above $150,000 ($300,000 for joint filers) and terminates after 2028. The deduction is completely phased out at the $275,000 and $550,000 income thresholds respectively.
• Automobile Loan Interest Deduction: You can deduct up to $10,000 of interest on an automobile loan for a U.S.-assembled personal-use vehicle. This phases out for incomes above $100,000 ($200,000 for joint filers) and applies for tax years 2025 through 2028. The deduction is completely phased out at the $150,000 and $250,000 income thresholds respectively.

• 529 Plan Expansion: The definition of qualified education expenses has been expanded, and the law expands the maximum tuition limit for K-12 from $10,000 per year to $20,000 per year. It should be noted, however, that not all states currently consider K-12 expenses as qualified, so new legislation may be required on a state-by-state basis.
  
  
• "Trump Accounts" for Newborns: The bill creates tax-favored savings accounts seeded with $1,000 for each newborn child, treated much like individual retirement accounts with the child as the beneficiary (although contributions are not tax deductible).
  
  
• Child Tax Credit: Starting in tax year 2025, the Child Tax Credit will permanently increase to $2,200 per child under 17, with annual adjustments for inflation every year.

A Final Word

The OBBBA is a large piece of legislation and there’s no way to cover every detail in a single summary. We’ve focused here on the provisions most likely to matter for your personal financial plan, but there are many other parts of the bill that could come into play depending on your situation.

Please note that this overview is provided for informational purposes only and is not intended as tax advice. We strongly encourage you to review this information with your qualified tax professional to determine how they may affect your individual tax circumstances. This material is based on sources deemed to be reliable but is not guaranteed.

Sources:
www.congress.gov/bill/119th-congress/house-bill/1/text/enr
www.bipartisanpolicy.org/explainer/whats-in-the-senate-republican-tax-bill/