facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
The One Big Beautiful Bill Act and Your Taxes - Key Takeaways Thumbnail

The One Big Beautiful Bill Act and Your Taxes - Key Takeaways

In the News Tax

Andrea McClelland, CFP®

The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025. As we head into the final months of 2025, here are top takeaways we think are likely to matter most to our clients, plus key points to keep in mind for year‑end tax planning.

What Didn’t Change

  • Tax rates and brackets remain: OBBBA makes permanent the Tax Cuts and Jobs Act of 2017 (TCJA) bracket schedule (10%–37%) – no reversion to a 39.6% top rate.
  • Higher standard deduction amounts remain, slightly increased: The Married Filing Jointly standard deduction rises to $31,500 for 2025; Single is $15,750; Head of Household is $23,625; all continue to be indexed annually for inflation.
  • Qualified Business Income (199A) deduction remains: Starting in 2026, phase-out ranges increase, and a minimum $400 deduction is available for qualifying active QBI.
  • Child Tax Credit: Increases from $2,000 to $2,200 beginning in 2025 (not sunsetting to pre-TCJA $1,000 level); indexed for inflation going forward.
  • Federal Estate & Gift Tax Exemption rises to $15 million per person ($30 million per couple) in 2026 (from $13.99MM in 2025, not sunsetting to pre-TCJA levels), indexed annually thereafter1.
  • Social Security reminder: OBBBA did not change Federal taxation of Social Security benefits. For most moderate‑ to higher‑income households, 85% of benefits remain taxable.

A New Deduction for Seniors

  • Enhanced Senior Deduction (2025-2028): An additional $6,000 per person deduction for age 65+ ($12,000 for a 65+ couple) is available for 2025-2028 only. This is on top of the usual age 65+ add‑on to the standard deduction.
  • Deduction phase‑out: The senior deduction phases out at 6% of modified AGI above $75,000 (Single)/$150,000 (MFJ) and is fully phased out at $175,000 (Single)/ $250,000 (MFJ).
    • Planning considerations: Taxpayers with income near the phase‑out range may want to be mindful of AGI‑increasing moves (e.g., extra IRA withdrawals, sizeable capital gains, Roth conversions). For IRA owners age 70½+, Qualified Charitable Distributions (QCDs) can reduce AGI and may help preserve this deduction.

SALT Cap Increases Significantly

  • The itemized‑deduction cap for State and Local Taxes (SALT) increases from $10,000 to $40,000 in 2025 for all filing statuses except MFS ($20,000 cap), with a 1% annual bump through 2029 and scheduled reversion to $10,000 in 2030. This may benefit taxpayers in high‑tax states who have been unable to deduct most of these expenses post‑TCJA.
  • Beware the steep phase‑out: Between $500,000 and $600,000 of modified AGI ($250,000-$300,000 for MFS), the allowable SALT cap phases out, landing back at the $10,000 cap at $600,000 MAGI. 
    • Planning considerations: Some taxpayers may benefit from timing 2025 SALT payments (e.g., fourth‑quarter state estimates, property taxes) by year‑end to make full use of the $40,000 cap (subject to individual circumstances). If income is near the phase‑out range, taxpayers may want to balance any income‑recognition decisions (e.g., Roth conversions, capital gain realization) with overall tax goals. Above‑the‑line deductions such as HSA and deductible IRA contributions, where eligible, or QCDs, may reduce MAGI.

Charitable Giving: A New Freebie and a New Hurdle

  • For non-itemizers (starting 2026): Up to $1,000 (Single)/$2,000 (MFJ) may be deducted for cash gifts to qualifying charities - allowing for a limited charitable write-off for those taking the standard deduction. (Note: Donor‑advised funds and private non‑operating foundations do not qualify here.)
  • Itemizers face a new 0.5% hurdle (starting 2026): A new 0.5% of AGI floor applies before charitable gifts are deductible. Above that floor, 60%/30%/20% AGI limits continue to apply by gift type.
    • Planning Considerations: Those planning substantial giving might consider front‑loading gifts into 2025 (or funding a donor‑advised fund in 2025) to avoid the 0.5% AGI floor. The cap on itemized deductions starting in 2026 for those in the 37% bracket may come into play as well (see "Other Notables," below). Qualified Charitable Distributions (QCDs - age 70½+, up to $108,000 in 2025, indexed annually) remain a powerful tool to lower AGI and potentially sidestep the 0.5% floor in 2026 and beyond.

Expanded Options for Kids & Grandkids

529 plans

  • K–12 annual cap rises: Limit on the amount that may be used for K-12 education expenses increases from $10,000 to $20,000 (per beneficiary, per calendar year, in aggregate across all 529s for that beneficiary), starting in 2026.
  • Expanded eligible expenses: For distributions made after July 4, 2025, K-12 qualified expenses expand beyond tuition to include books/curriculum materials, tutoring, standardized test fees, dual‑enrollment and certain educational therapies; postsecondary credential expenses are also eligible.
    • State rules may differ: Until updated, withdrawals for expanded K-12 items or amounts over $10,000 for K-12 may be taxable at the state level and could trigger recapture of prior state 529 deductions/credits. Check state rules first.

“Trump Accounts” (new, IRA‑like savings for children, starting July 2026)

  • No earned income required; $5,000/year contribution limit (indexed for inflation after 2027), $1,000 Federal seed money available for those born 2025–2028; investments limited to low‑cost U.S. equity index funds.
  • Appears to function more like a traditional IRA once the child reaches the year they turn 18 (pre/post‑tax components; early‑withdrawal penalties before 59½ with limited exceptions).
  • May co‑exist with a child’s Roth IRA (if the child has earned income).
    • Note: Specifics here are murky, and several mechanics (e.g., how to open these accounts, rollovers, Roth conversions) await further guidance.

Other Notables

  • Itemized deduction value cap: For taxpayers in the 37% bracket, the value of itemized deductions is capped at 35% beginning in 2026.
  • Alternative Minimum Tax (AMT): TCJA-era rules continue, with updates. Starting with 2026 returns, the phase-out thresholds for the AMT exemption amounts2 reset lower - to $500,000 Alternative Minimum Taxable Income, or AMTI (Single/HOH) and $1,000,000 AMTI (MFJ) (indexed) - and the phase-out rate doubles from 25% to 50% (reduction of $0.50 of exemption for each $1 over the threshold).
  • ACA Premium Tax Credits: The temporary “enhanced” subsidies - capping the benchmark (Silver plan) premium at 8.5% of household income - end after 2025. Starting 2026, the original ACA rules return: no premium tax credit above 400% of the federal poverty level (FPL). Also beginning with 2026 tax filings, any excess advance credit must be repaid in full, regardless of income (the prior repayment caps for those under 400% FPL are eliminated).
  • New temporary below-the-line deductions (2025–2028): Below‑the‑line deductions for tips, overtime, and auto‑loan interest are available but modest and do not reduce AGI. Applicability varies by situation.
  • Clean‑energy credits end: Several credits end on specific dates - for example, the Clean Vehicle Credit ends for vehicles acquired after September 30, 2025; the EV charging equipment credit ends for property placed in service after June 30, 2026; the Energy Efficient Home Improvement and Residential Clean Energy credits end for qualifying expenditures after December 31, 2025.

As the year winds down, OBBBA changes create both planning opportunities and potential pitfalls. A discussion with your tax advisor can help you plan for year-end and beyond.

  1. State‑level estate/inheritance taxes still apply.
  2. Current AMT exemption amounts - $88,100 (Single/HOH) and $137,000 (MFJ) for 2025 - remain in place, indexed annually.

This article is intended for educational and informational purposes only and does not constitute specific tax, legal, investment, or financial advice. The information provided is derived from sources believed to be reliable and is based on current tax laws and regulations as of the date of publication, which are subject to change. Aegis Wealth Management, LLC is not a law firm or accounting firm and does not give legal, accounting, or tax advice. Readers should consult with a qualified legal and/or tax professional to understand how these laws and regulations may apply to their unique circumstances. This material is not intended to be relied upon to avoid tax penalties under U.S. federal tax law. Past performance does not guarantee future results. All investing involves risk, including risk of loss.