With the One Big Beautiful Bill now officially signed into law, several important provisions are set to take effect, some of which may directly impact your financial planning and strategy. As always, our goal is to keep you informed and empowered. We've outlined key highlights below to helpyou navigate these changes with clarity and confidence.
Income Tax & Standard Deduction Updates
· The Act permanently extends the current tax brackets—10%, 12%, 22%, 24%, 32%, 35%, and 37%—which were initially scheduled to sunset at the end of 2025.
· This removes a significant source of planning uncertainty, particularly for those with concentrated stock positions, those planning to perform large Roth conversions, or those with significant deferred income. Lower Tax Brackets Made Permanent: The top individual tax rate remains at 37%.
· Higher Standard Deduction - permanently increases the standard deduction beginning in 2025 to $31,500 for joint filers, $23,625 for head of household, and $15,750 for single filers (indexed for inflation).
· Temporary Deduction for Seniors: Older taxpayers may be eligible for a new temporary additional deduction enhancement.
· Individuals aged 65 or older receive an additional $6,000 deduction through 2028, available whether they itemize or take the standard deduction.
· This phase-out occurs at a rate of 6% for individual incomes exceeding $75,000 or joint incomes exceeding $150,000, and is fully eliminated at incomes of $ 175,000 or $250,000. Respectively.
· For example, a married couple both aged 65 or older with an income under $150,000 could claim a total standard deduction of $46,700 ($31,500 base + $3,200 existing senior addition + $12,000 new senior enhancement), effectively eliminating taxes on most Social Security benefits.
Click Here for the New Age 65+ Standard Deduction Amounts
State & Local Tax (SALT) Deduction Changes
- SALT Cap Raised Temporarily: The deduction cap increases to $40,000 for certain taxpayers, but will revert to $10,000 in 2030
Clean Energy Incentives: Expiration Deadlines: The Act accelerates the rollback of several energy-related tax credits:
- Electric Vehicle (EV) Credits: Up to $7,500 (new) and $4,000 (used) for qualifying vehicles—ends after September 30, 2025
- Residential Clean Energy (Solar) Credit: Ends after December 31, 2025
- Energy-Efficient Home Improvements: Windows, HVAC systems, insulation—credits expire after December 31, 2025
- EV Charging Infrastructure: Credit repealed for installations after June 30, 2026
Child Tax Credit Increased:
- The maximum credit rises to $2,200 per child, indexed for inflation. Phase-outs remain at $200,000 (single) and $400,000 (joint). While helpful, the change is modest compared to earlier expansions.
Permanent Charitable Deduction Enhancement:
- Beginning in 2026, the Act establishes a permanent above-the-line charitable deduction for non-itemizers, allowing up to $1,000 (single) or $2,000 (joint) annually. For itemizers, a new 0.5% AGI floor applies, meaning only charitable gifts exceeding 0.5% of AGI are deductible.
Estate and Gift Tax Exclusion Permanently Increased:
- The Act permanently increases the estate and lifetime gift tax exemption to $15 million (single) and $30 million (joint), indexed for inflation, effective January 1, 2026. This represents a significant increase from the previously scheduled 2026 reduction to approximately $7 million.
"Trump Accounts" for Children:
- This new vehicle functions similarly to a custodial Roth IRA with features of a
529, Coverdell ESA, and taxable trust: - $1,000 federal seed contribution for eligible children born between 2025 and 2028
- Up to $5,000/year in contributions (indexed) by parents, relatives, or corporations
- Tax-deferred growth, with withdrawals available for college, small business creation, or first-time home purchase
- Full access at age 25; mandatory withdrawal (and income taxation) at age 31
- Employers may also contribute up to $2,500 annually, tax-free, with a written plan in place.
Temporary Deductions for Workers (2025–2028):
- Tips: Deduction up to $25,000 if AGI is below $150,000 ($300,000 joint)
- Overtime Pay: Deduction up to $12,500 (single) or $25,000 (joint)
- These deductions are temporary and set to expire in 2028.
Temporary Auto Loan Interest Deduction:
- Up to $10,000 per year for U.S.-assembled vehicles; phased out over $100,000 AGI for Single filers / $200,000 AGI for Joint filers. This provision is in effect for vehicles purchased between 2025 and 2028.
Enhanced Qualified Business Income (QBI) Deduction Pass-through:
- Business owners (sole proprietorships, partnerships, and S corporations) will benefit from a permanent QBI deduction of 20% beginning in 2026. The phase-in thresholds are also raised to $75,000 (single) and $175,000 (joint), expanding access to the full deduction for more business owners.
- Additionally, the legislation introduces a $400 minimum deduction for taxpayers with at least $1,000 in active QBI, and modifies wage/investment thresholds to favor growing businesses.
Permanent Business Investment Incentives:
- The Act makes three critical business incentives permanent:
Research & Development Expense Deduction:
- Beginning in 2026, businesses can immediately deduct R&D expenses (reversing the 2022 amortization requirement). This provides significant cash flow benefits for technology, biotech, and manufacturing businesses.
- 100% Bonus Depreciation: Restored for qualifying assets placed in service between January 19, 2025, and December 31, 2029. Businesses can fully expense eligible property (machinery, vehicles, computer systems, leasehold improvements) rather than depreciating over time.
Expanded Interest Expense Deduction:
- Businesses can permanently include depreciation and amortization when calculating interest expense limitations, effectively restoring pre-2022 definitions and benefiting capital-intensive businesses.
Other Key Provisions:
- New 1% Tax on Money Transfers (Remittances)
- Applies to cross-border transfers beginning in 2026.
- Medicaid & Supplemental Nutrition Assistance Program (SNAP) Cuts
- The Act reduces federal Medicaid and Children's Health Insurance Program (CHIP) spending by $1.02 trillion over the next decade. The CBO estimates that these changes could lead to at least 10.5 million people losing health insurance coverage by 2034.
- Additionally, work requirements have been expanded for recipients of Supplemental Nutrition Assistance Program (SNAP) benefits, which is likely to affect access to these benefits.
National Debt and Long-Term Fiscal Policy:
- The One Big Beautiful Bill Act raises the national debt ceiling by $5 trillion, while the Congressional Budget Office projects:
- $3.94 trillion in new deficits by 2034
- Public debt to rise to 124% of GDP, with the potential to reach 130% if temporary provisions become permanent
What Does This Mean for You?
While some provisions offer real planning opportunities, others come with tight deadlines or income restrictions. We encourage you to reach out if you would like to review your tax strategy or better understand how these changes may impact your long-term goals. As always, we are here to provide you with guidance.