The One Big Beautiful Bill Just Passed — Here’s What It Could Mean for Your Finances
/The One Big Beautiful Bill (OBBB) Act was recently passed, and it brings meaningful changes to tax rules that affect many of you, whether it be as business owners, families, or retirees to name a few. It’s important to note that this legislation is relatively new, and we’ll learn more about the full implications of the over 900-page document as time passes.
Here’s what we know so far about how the One Big Beautiful Bill Act and a few key highlights that may impact you:
Federal Income Tax Brackets & the Standard Deduction:
All tax brackets will continue to exist as they do today. We currently have a 7-bracket income tax system (ranging from 10%-37%). The OBBB makes these brackets permanent, with some inflation adjustments.
The standard deduction increases slightly to $15,750 single/$31,500 joint filers, with future inflation adjustments. Most taxpayers use the standard deduction (in lieu of itemizing), and most people will continue to use the standard deduction.
Enhanced Senior Deduction. Some seniors (65+) will get an extra deduction — $6,000 per person, on top of the existing senior deduction. This can mean up to $46,700 for a married senior couple — a help in reducing taxation for middle-income retirees. Income for low-income retirees (such as those whose only source of income is social security) is generally already not taxed, and there is an income phase out beginning at $75,000 individual/$150,000 for joint filers so this doesn’t really impact high-income retirees, which is why the enhanced senior deduction only applies to some seniors. To clarify the commonly misconstrued statement, ‘no tax on social security,’ social security will continue to be taxed, it’s just that an enhanced senior deduction allows for less income to be taxed.
Itemizers: State and Local Taxes (SALT) Deduction Expanded
The State and Local Tax (commonly referred to as ‘SALT’) cap has increased from $10,000 to $40,000 and will rise slightly each year through 2029 (then reset), which benefits people that itemize their deductions in high-tax states like California, New York and New Jersey. The SALT deduction is a federal tax break that allows taxpayers who itemize their deductions to deduct a portion of the state and local income taxes and property taxes they paid from their federally taxable income. The SALT deduction is only beneficial if you itemize your deductions and your combined itemized deductions (including SALT) exceed the standard deduction. The increased cap to the SALT deduction may change whether it makes sense for you to itemize deductions vs. claiming the standard deduction when you go to file. The increased cap begins to phase out for taxpayers with a Modified Adjusted Gross Income (MAGI) exceeding $500,000 and completely phases out at $600,000. For those over $600,000, the deduction drops back to $10,000.
For Families & Young Children
If you're raising kids or planning to soon:
Babies born 2025–2028 get a free $1,000 retirement-style account. Families can add up to $5,000/year up until the child is 18 years of age, with tax-free employer contributions (up to $2,500). If the government puts in $1,000 for a child born within the applicable time frame and no other money is contributed, assuming an 8% rate of return in the "eligible investments" such as a mutual fund or exchange-traded fund (ETF) that tracks an index like the S&P 500, that's going to yield approximately $4,000 for when that child is 18. However, for families that can contribute the maximum $5,000 each year, at the same 8% rate, maxed-out accounts would be worth more than $190,000 after 18 years of contributions. How does this Trump Savings Account compare to existing programs for child savings such as 529s, UTMAs, and Roth IRAs? That will be something that we will need to discuss based on your specific situation.
Child Tax Credit increases from $2,000 to $2,200 per qualifying child under the age of 17 in 2026.
Dependent Care FSA limits rise to $7,500, which is the first increase since 1986!
529 Plans can now be used for K-12 tuition (from the current $10,000 to $20,000), as well as trade certifications (ie. HVAC certification), and licenses (ie. Electricians) — broadening education choices away from the traditional college use. For those who are taking a withdrawal from a 529 Plan or considering starting a plan, you now have more options for what qualifies as a non-tuition qualified eligible expenses including tutoring, books, and online learning materials as well as other non-traditional schooling.
Contributions to Scholarship Granting Organizations: a tax credit of $1,700 is available for contributions to scholarship-granting organizations (501(c)(3) public charities that meet specific criteria). This provision is seen as a way to potentially increase funding for private and independent schools, offering a tax incentive for those that contribute.
Student Loan Borrowing Rules: Big Changes Coming
This may affect families with kids pursuing advanced degrees and make private loans more likely instead of through the government — an important consideration in college planning discussions.
Starting in 2026, student borrowing is being capped:
Grad students: $100K max for master’s, $200K for professional degrees
Parents: Parents can borrow under the Parent PLUS program a maximum of $20,000 per year per child. The total amount a parent can borrow for the education of a single child is capped at $65,000. These new limits are a shift from past legislation where parents could borrow up to the full cost of attendance at the child's institution, minus any other financial aid received. Graduate PLUS loans are eliminated.
For Business Owners and Self-Employed Clients
There are several wins for you:
The 20% QBI (Qualified Business Income) deduction is now permanent, with expanded income phaseouts — up to $75,000 single/$150,000 joint filers. The QBID is a benefit to business owners by providing tax relief for owners of "pass-through" businesses such as sole proprietorships, partnerships, and S corporations.
Section 179 expensing limit doubled to $2.5 million, with phaseouts starting at $4 million — ideal for equipment-heavy businesses. Section 179 expensing allows businesses to deduct the full cost of qualifying equipment or property in the year it's placed in service, instead of depreciating it over multiple years – providing an immediate tax benefit and allowing for more cash flow to businesses.
No income tax on tips. Individuals in eligible occupations (still being sorted out) can deduct up to $25,000 in tips from their federal taxable income. This deduction begins to phase out for individuals with a modified adjusted gross income (MAGI) exceeding $150,000 single/$300,000 filing jointly. The deduction does not affect Social Security or Medicare taxes (FICA), only federal income tax.
No tax on overtime. Eligible individuals can deduct the portion of their overtime compensation that exceeds their regular rate of pay when calculating their federal income tax liability. The deduction is capped at $12,500 single/$25,000 filing jointly for. It phases out for individuals with adjusted gross income (AGI) exceeding $150,000 single/$300,000 for joint filers.
Upcoming Car Purchases
Buying a new car soon? This new tax deduction may impact you. Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. Lease payments do not qualify. The maximum annual deduction is $10,000, and the deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
The bill permanently eliminates the following clean vehicle credits for vehicles acquired after September 30, 2025:
New Clean Vehicle Credit
Used Clean Vehicle Credit
Qualified Commercial Clean Vehicle Credit (for businesses)
The residential energy credits are generally terminated and will not be available for energy-efficient home improvements after 2025. This includes the Energy Efficiency Home Improvement Credit and the Residential Clean Energy Credit.
Charitable Givers Take Note
Starting in 2026, itemizers will see a 0.5% AGI floor for deductible charitable contributions based on income. Planning strategically here will be more important than ever. If you are deciding whether or not to make a one-time donation this year or next and are planning to itemize, let’s discuss the timing of this donation between this year and next as this 0.5% AGI floor can make a difference however small.
For those that take the Standard Deduction, there is a new $1,000 single/$2,000 joint filer deduction allowed for charitable giving for non-itemizers. This means that it is very important for you to keep receipts and track your charitable donations, as you can take a deduction even if you take the standard deduction.
Healthcare
The OBBB expands HSA eligibility to those enrolled in Bronze and Catastrophic level plans offered through the ACA marketplace. On the flip side, the OBBB makes changes to Affordable Care Act (ACA) marketplaces by not continuing subsidies. Marketplace subsidies are changing by reverting to how they worked before COVID relief acts. Eligibility for tax credits is resettling to 400% of the Federal Poverty Line in 2026.
Estate & Gift Taxes: A Golden Window
Great news for high-net-worth households: the estate and lifetime gift tax exemption is now $15 million per person ($30 million per couple), permanently.
Final Thoughts
The One Big Beautiful Bill Act reshapes many areas of tax law — from how we save and gift to how we care for children and prepare for retirement. As always, the impact will vary depending on your individual goals and income.
We'll be working these updates into your personalized financial plan. If any of the provisions here apply to your life today — or you think they might in the near future — don’t hesitate to reach out.
This article is presented for education purposes only. Do not interpret this information as direct tax advice. Please seek the help of a tax professional in order to determine the direct impacts of this new tax law to your own personal circumstances. Tax laws can change at any time, so bear in mind, this information is relevant as of August 6th, 2025.
