Well, after months of delays and debate, Congress finally got around to actually getting something done. The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, represents a significant overhaul of the U.S. tax code, making permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) while introducing new deductions, credits, and incentives. This comprehensive legislation impacts income tax, financial planning, estate planning, business planning, and charitable planning, creating a range of opportunities for taxpayers. Below, we explore the key provisions and their implications across these areas, providing actionable insights for individuals, business owners, and high-net-worth families.
Income Tax:
Income Tax Rates: The OBBBA permanently extends the TCJA’s individual income tax rates and brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%), preventing a scheduled increase that would have raised rates by 1–4% across most income levels after 2025. This stability allows taxpayers to plan with greater certainty, particularly for high-income earners who benefit from the 37% top marginal rate. The standard deduction is also made permanent at $15,750 for single filers and $31,500 for married filing jointly, with inflation adjustments starting in 2026. This increase encourages taxpayers to evaluate whether itemizing deductions remains advantageous or if the standard deduction optimizes their tax liability.
State and Local Tax (SALT) Deduction: The SALT deduction cap is temporarily raised from $10,000 to $40,000 (2025–2029), with a 1% annual increase after 2025. Phaseout: AGI above $500,000 regardless of filing status.
Individual itemized deductions are capped at 35%: A taxpayer in the 37% tax bracket is limited to a deduction of 35%. For example, if a taxpayer made a $10,000 charitable donation, their tax savings would be limited to $3,500 (instead of $3,700). Thankfully, for owners of pass-through organizations, the cap does not apply to deductions for IRC Sec. 199A qualified business income deduction.
Alternative Minimum Tax (AMT): OBBBA permanently extends the increased exemption amounts provided for in the 2017 Tax Act. Phaseout: $500,000 single/$1M joint.
Child Tax Credit (CTC): The CTC is permanently increased to $2,200 per child (from $2,000) starting in 2025, with inflation adjustments. All families can leverage this credit to offset tax liabilities, and low-income filers can receive up to $1700 in refunds. Phaseout: $200,000 single/$400,000 joint.
Car Loan Interest Deduction: Interest on loans for U.S.-assembled passenger vehicles purchased between 2025 and 2028 is deductible up to $10,000, encouraging domestic vehicle purchases. Phaseout: $100,000 single/$200,000 joint.
Tip and Overtime Deductions: For tax years 2025–2028, up to $25,000 of tip income and $12,500 single/$25,000 for joint filers of overtime compensation is deductible. This benefits workers in tipped industries (e.g., hospitality) and those earning overtime, reducing taxable income for middle-class families. Phaseout: $150,000 single/$300,000 joint.
Senior Deduction: Taxpayers aged 65 and older can claim an additional $6,000 deduction from 2025 through 2028. This partially fulfills campaign promises to reduce taxes on Social Security benefits, offering relief for retirees. Phaseout: $75,000 single/$150,000 joint.
Able Accounts (Achieving a Better Life Experience): Extends and makes permanent several expiring provisions including higher contribution levels for individuals with disabilities who are employed.
Tax Planning Opportunities given these new tax rules:
Deduction Bunching: Taxpayers near the SALT cap or itemizing thresholds can bunch deductions (e.g., property taxes, charitable contributions) into a single year to exceed the standard deduction and maximize tax savings.
Targeted Deductions: Workers in tipped or overtime-heavy industries should track eligible income to claim the temporary deductions, while seniors should assess income levels to ensure eligibility for the additional $6,000 deduction.
New Financial Planning Opportunities:
529 plans: OBBBA expands permissible tax-exempt distributions from Sec. 529 education savings plans to educational expenses in connection with enrollment or attendance at an elementary or secondary school (k-12). It also increases the amount that may be contributed to a 529 plan from $10,000 to $20,000. Also broadens qualified expenses for post-secondary education. Be sure to check your state’s conformity with these new federal rules. Some states may not adopt the federal rules.
Trump Accounts: A new savings vehicle for children born between 2025 and 2028 provides a $1,000 federal contribution and allows up to $5,000 in pre-tax annual parental contributions. These accounts function like traditional IRAs until the child turns 18, offering tax-deferred growth for education or home purchases.
Health Savings Accounts (HSAs): HSAs are expanded to cover direct primary care arrangements ($150/month for individuals, $300 for families) and made permanent for telehealth services, enhancing tax-free savings for medical expenses.
Families should maximize contributions to 529 plans and Trump Accounts to benefit from tax-free growth, especially for K–12 and higher education expenses. Parents of newborns should ensure accounts are opened to receive the $1,000 federal seed money.
Estate Planning:
The OBBBA significantly enhances estate planning by permanently increasing the lifetime gift, estate, and generation-skipping transfer (GST) tax exemption to $15 million per individual ($30 million for couples), indexed for inflation, starting in 2026. This prevents the Tax Cuts and Jobs Act’s (TCJA) scheduled reduction to approximately $7 million in 2026, offering substantial wealth transfer opportunities for high-net-worth families.
Estate Planning Opportunities:
Wealth Transfer: High-net-worth families should consider gifting assets up to the $15 million exemption, as future administrations may reverse these changes. Gifting appreciating assets (e.g., QSBS, real estate) to trusts can lock in exemptions and reduce future estate tax liability. Even families that have used up all their exemption will have a substantial amount of new exemption they could use to make premium payments to an irrevocable life insurance trust free of gift taxes.
Business Planning:
Qualified Small Business Stock (QSBS): OBBBA allows owners of qualified small business stock (QSBS) to avoid paying capital gains when their stock is sold. Previously the maximum capital gain that could be excluded was $10 million. That cap has been increased to $15 million. The maximum gross assets a business may have to be considered a “qualified small business” has increased from $50 million to $75 million. In addition, instead of requiring QSBS be held for at least 5 years the new legislation allows stock held for at least 3 years to qualify for a 50% exclusion of capital gain, stock held for 4 years qualified for a 75% exclusion, and stock held for 5 years may exclude 100%.
Qualified Business Income (QBI) Deduction: The 20% QBI deduction for pass-through entities (e.g., S corporations, partnerships) is made permanent, providing long-term tax savings.
Bonus Depreciation: The OBBBA restores 100% bonus depreciation for qualified property placed in service after January 19, 2025, including nonresidential real property used in manufacturing or refining. This incentivizes capital investments in equipment and real estate.
Research and Development (R&D) Expensing: Domestic R&D expenditures are immediately deductible, while foreign R&D must be amortized over 15 years. Small businesses (gross receipts ≤ $31 million) can retroactively apply this for 2022–2024 tax years.
Qualified Opportunity Zones (QOZs): The QOZ program is made permanent, with rolling 10-year designations starting in 2027, encouraging investments in low-income communities.
Business Interest Deduction: The OBBBA reinstates the EBITDA-based limitation under Section 163(j), increasing allowable interest deductions by excluding depreciation, amortization, and depletion from adjusted taxable income calculations.
The cap on section 179 business deductions has increased from $1m to $2.5 million. The phase-out threshold also rises to $4 million, enabling more businesses to take full advantage of these deductions.
Business Planning Opportunities:
Qualified Business Income (QBI) Deduction: The 20% QBI deduction for pass-through entities (e.g., S corporations, partnerships) is made permanent, providing long-term tax savings. For 2025, taxpayers with taxable income (before the QBI deduction) at or below $203,360 single/ $406,720 joint can claim the full 20% QBI deduction without limitations, regardless of whether the business is a Specified Service Trade or Business (SSTB). SSTBs include law, accounting, consulting, financial services, health, or businesses relying on the reputation/skill of employees) are subject to limitations for high-income filers.
For taxable income between $203,360 and $253,360 single/ $406,720 and $506,720 joint, the deduction for SSTBs and the W-2 wage/capital limitation phase in gradually.
For taxable income above $253,360 single/ $506,720 joint:
SSTB filers receive no QBI deduction.
Non-SSTB filers are subject to the W-2 wage/capital limitation, where the deduction is limited to the lesser of:
20% of QBI, or
The greater of:
50% of W-2 wages paid by the business, or
25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property (e.g., depreciable assets).
Entity Restructuring: Pass-through business owners should review entity structures to maximize QBI deductions, considering wage and service business limitations.
Capital Investments: Businesses should accelerate qualifying asset purchases to leverage 100% bonus depreciation before the 2030 sunset, particularly for real estate and manufacturing.
R&D Strategies: Companies with domestic R&D should elect immediate expensing, while small businesses can amend prior returns to claim retroactive deductions, improving cash flow.
QOZ Investments: Real estate and private equity firms can invest in QOZs for tax deferrals and exclusions, aligning with long-term growth strategies in designated areas.
Charitable Planning:
Non-Itemizer Deduction: Starting in 2026, taxpayers taking the standard deduction can claim a charitable deduction of up to $1,000 single/ $2,000 joint for cash contributions to public charities, excluding private foundations and donor-advised funds.
Itemizer Floor: For itemizers, when calculating a taxpayer’s charitable income tax deduction, an amount equal to .5% of their AGI will not be deductible. Only amounts above that floor will be eligible for a charitable deduction. Any charitable deductions disallowed due to this floor may be carried forward 5 years.
Scholarship Credit: A $1,700 tax credit is available starting in 2027 for cash contributions to scholarship-granting organizations, but amounts claimed cannot also be deducted.
The 2017 TCJA increased the percentage of a charitable gift of cash that could be deducted in any tax year from 50% to 60%. That increase was set to expire in 2026 but has now been permanently extended.
Charitable Planning Opportunities:
Timing Contributions: High-income itemizers should make large charitable contributions in 2025 before the 0.5% AGI floor takes effect in 2026.
Non-Itemizer Giving: Middle-income taxpayers can leverage the $1,000/$2,000 deduction to support charities while taking the standard deduction, encouraging broader giving.
Scholarship Contributions: Donors supporting K–12 education can claim the $1,700 credit starting in 2027, prioritizing contributions to qualifying organizations for maximum tax benefits.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, offers a wealth of opportunities for taxpayers to optimize their financial strategies. By making TCJA provisions permanent, increasing exemptions, and introducing new deductions and credits, the OBBBA creates a predictable tax environment for income, estate, and business planning. Individuals can benefit from temporary deductions (e.g., tips, overtime, car loans) and enhanced credits (e.g., CTC, scholarship contributions), while high-net-worth families can leverage the $15 million estate tax exemption and QSBS exclusions for wealth transfers. Businesses gain from permanent QBI deductions, bonus depreciation, and R&D expensing, while charitable planning is reshaped by new deductions and floors. Taxpayers should consult with financial and tax advisors to tailor strategies, time income and deductions, and maximize benefits before temporary provisions expire (e.g., 2028–2030). The OBBBA’s complexity underscores the need for proactive planning to navigate its opportunities and limitations effectively.
Ken Armstrong, CFP®, RICP®, ChFC®, CLU®, CASL®, CLTC
CEO & Senior Wealth Management Advisor
Elevate Capital Advisors
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