Jul 12, 2025 | Articles, Estate Planning, Financial Planning, Wealth Management

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What the New Tax Legislation Could Mean for You

One Big Beautiful Bill Act (OBBBA)

Last week, Congress passed a comprehensive piece of tax legislation, referred to as the One Big Beautiful Bill Act (OBBBA). The following is a high-level overview of the bill’s key provisions, including updates to income thresholds, deductions, estate tax exemptions, and business tax incentives.

Key Highlights of the Legislation

Permanent Individual Updates

  • Current Tax Rates – The individual income tax brackets established under the 2017 Tax Cuts and Jobs Act are now permanent, including the top marginal rate of 37%.
  • Standard Deduction – Increased to $31,500 (joint) and $15,750 (single), and these amounts will be indexed for inflation going forward.
  • Child Tax Credit – Raised to $2,200 per child, and this amount will be indexed for inflation.
  • Charitable Deductions for Individuals who Itemize Deductions – Introduces a 0.5% of adjusted gross income (AGI) floor on deductions for charitable contributions.
  • SALT (State and Local Tax) Deduction Cap – Temporarily increased to $40,000 (joint), increasing annually through 2029. Phase-out begins at $500,000 (joint) and $200,000 (single). Beginning in 2030, the deduction will be $10,000 for all filers.
  • Itemized Deduction Phase-outs – High earners in the 37% bracket will see reduced deductions.
  • Clean Energy Tax Credits – The legislation ends several consumer tax credits tied to clean energy.

Temporary Individual Updates (through 2028)

  • Additional Senior Deduction – Seniors 65+ can receive an additional deduction of $6,000 (single) or $12,000 (joint) through 2028. Phaseout begins at income levels of $75,000 (single) and $150,000 (joint).
  • Auto Loan Interest – Up to $10,000 deductible for U.S. built car loans; phaseout begins at $200,000 (joint) and $100,000 (single).
  • Overtime Pay – Up to $25,000 (joint) or $12,500 (single) of qualified overtime pay can be deducted from reported income through 2028. Phase-out begins at $300,000 (joint) and $150,000 (single).
  • Tip Income – Up to $25,000 in qualified tip income can be deducted from reported income through 2028. Phase-out begins at $300,000 (joint) and $150,000 (single).

Estate and Wealth Transfer Planning

  • Estate Tax Exemption – Permanently increased to $15 million per person starting in 2026, indexed for inflation.

Newly Enacted Provisions

  • 529 Plans – Expanded to cover additional educational expenses, including elementary, secondary, and homeschooling, including curriculum and online materials. It also allows funds to be used for qualified post-secondary credentialing expenses.
  • Trump Accounts (Child Savings Accounts) – U.S. citizen children born between January 1, 2025, and December 31, 2028, will receive a $1,000 federal deposit as seed money. Parents or other individuals can contribute up to $5,000 annually to the account, which is treated similarly to traditional IRAs for tax purposes.

Business and Entrepreneurial Incentives

  • Qualified Business Income (QBI) Deduction – Made permanent at 20%.
  • Bonus Depreciation – 100% first-year bonus depreciation for qualified assets has been reinstated and made permanent.
  • Qualified Opportunity Zones (QOZ) – Made permanent with added flexibility for investors.
  • Qualified Small Business Stock (QSBS) – Capital gain exclusion increased to $15 million; holding period reduced to 3 years. These changes only apply to stock issued after the enactment of the OBBBA. Earlier stock issuances will be subject to prior rules.
  • Increased threshold for 1099 reporting — Increases the threshold to $2,000 for payments made in 2026 and indexes the amounts for inflation beginning in 2027.

Tax Disclosure

For complete information on your tax situation, you should always consult with a qualified tax advisor. Disclosure: Any tax-related material contained within this article is subject to the following disclaimer required pursuant to IRS Circular 230: Any tax information contained in this communication (including any attachments) is not intended to be used and cannot be used for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting marketing or recommending to another person any tax-related matter.