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Big and Beautiful?

Tax Planning

President Trump signed the “One Big Beautiful Bill” (OBBB) into law on July 4, 2025. The new law is massive, with over 600 sections in its 900+ pages. Planning gets more complex with the additional tax provisions and complicated phase-outs. The law rolls out in two waves: changes that hit your 2025 taxes (the return you’ll file in early 2026) and other shifts that start in 2026. 

Here is a “highlights tour” of the parts of OBBB that most households will notice:

What changes first (applies to 2025 income)

  • The 2017 tax law becomes “permanent.” The standard deduction amounts get a slight bump and are now locked in: $15,750 (single), $23,625 (head of household), $31,500 (married filing jointly) for 2025. Personal exemptions remain eliminated, and the seven tax brackets (10%–37%) stay in place. 
  • Lower-income seniors see a new deduction (2025–2028). If you’re 65+, there’s a new extra $6,000 deduction on top of your standard (or itemized) deduction. It phases out for “higher” incomes. This is separate from - and in addition to - the regular senior deduction bump. 
  • There is some relief for many paying big state taxes (2025–2029). The state and local tax (SALT) deduction cap rises to $40,000 (from $10,000) for many filers (with phaseouts starting above $500,000 income). I expect more clients will benefit from itemizing their deductions for the next five years.
  • Hourly and tipped workers get limited tax breaks (2025–2028). Two temporary write‑offs arrive: one for overtime pay (up to $12,500 single/$25,000 joint, with income phaseouts) and one for tips (up to $25,000, also with phaseouts). 
  • Families see a few meaningful tweaks. The Child Tax Credit rises to $2,200 per child and is inflation‑adjusted going forward; the Other Dependent Credit stays $500 permanently. 529 plans get more flexible: up to $20,000 to pay for K-12 expenses, and better coverage for K-12 and post‑secondary costs. 
  • Buying a car or improving your home? For new car loans, you may deduct interest up to $10,000 if the vehicle’s final assembly is in the US (with income‑based phaseouts). Meanwhile, the law ends federal electric vehicle credits for vehicles acquired after Sept. 30, 2025, and winds down most residential energy credits after 2025. If you’re considering an electric vehicle purchase or energy-related home upgrade, get these going immediately.

The next wave (starting in 2026)

  • New Trump Savings Accounts (2026–2028). New tax‑deferred accounts for minors (contribute up to $5,000/year, employers up to $2,500). Babies born over the next four years may get $1,000 in federal seed money. Contributions aren’t deductible until age 18; withdrawals are restricted until then. 
  • Giving to charity is easier for some and harder for others. Non‑itemizers can finally deduct some cash gifts to charity: up to $1,000 (single) or $2,000 (married filing jointly). Itemizers face a small haircut as they must reduce their deduction by 0.5% of their gross income. 
  • Itemized deductions are capped for very high earners. Itemized deductions will be limited to a tax benefit of 35 cents for every dollar.
  • Estate tax exemptions stay large. The estate and lifetime gift tax exemption moves to $15 million for single filers and $30 million for joint filers beginning in 2026.

If you want some additional insight, the Bradford Tax Institute put together a more detailed summary (click here to review).

Good in the near-term, worrisome in the long-term

I’m always happy when taxpayers get to keep more of their hard-earned money, but there are two main things I do not like about this new law:

  • Severe cuts are coming to “safety net” programs. OBBB includes around $1 trillion in spending cuts, a large share of which comes from Medicaid (around $800 billion in program cuts) and SNAP (around $180 billion cut) programs; more than 10 million people are expected to lose these benefits. Although most of us will not directly use these programs, coverage losses can result in financial stress for hospitals and nursing homes, pressure on state budgets, and fewer services available in poorer areas.
  • The law adds a lot to the national debt. Independent scorekeepers say the tax package raises federal deficits by about $3.4 trillion over the next 10 years. When the extra interest the government must pay on that borrowing is included, analysts peg the effect at roughly $4.1 trillion. Assuming the “temporary” provisions become permanent before sunsetting (as we have seen repeatedly), we’re looking at over $5 trillion in added debt. An additional $5,000,000,000,000 is going to have a real impact on our kids and grandkids.

Projecting the 2025 tax impact 

My tax software has already been updated to incorporate OBBB’s changes. I’ve compared tax projections before and after OBBB for several clients and see a basic trend:

  • Most clients will see a 1% to 2% reduction in their 2025 taxes. (For example, someone with $100,000 in gross income will see a reduction in the $1,000 to $2,000 range.) Of course, every tax return is different, so your situation will vary.
  • Most higher-income taxpayers ($500,000+) will see very little change to their 2025 tax bills, as many of the new tax benefits are phased out at higher income levels. The good news is that I do not see anyone paying more tax under the new law. 

Remember that these are preliminary calculations and experts are still digesting the finer points of OBBB, so we’ll know more as the year progresses. For clients where I’m running tax projections, we’ll work together to adjust your tax withholding where necessary and look for planning opportunities.