One Big Beautiful Blog

A brief overview of the nearly 900-page bill and how it may impact your planning for the future.

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBA) into law and with it came a long list of implications for taxpayers, businesses, and various Federal programs.  It included direct changes to taxes, federal spending, administration funding, as well as a debt-ceiling increase. While each element is important, here at LIS we are focused on the spectrum of items that will impact planning for our clients.  Legislation and law-changes are always an unknown when planning for long-term goals. Below are summaries of several items that may have an impact on your current financial plan:

• These items were set to expire in 2025, but are now a permanent part of the tax code:
  • Adjusted tax brackets from 10%, 15%, 25%, … 39.6% to 10%, 12%, 22%, … 37%
  • Increased the Standard deduction – effective for 2025
    • $15,750 for individual, $23,625 for heads of household, and $31,500 for joint filers in 2025
  • Increased the Estate & Lifetime Gift Tax Exemption – effective for 2025
    • $15 Million for individuals and $30 Million for joint filers
  • Enhanced a charitable deduction for non-itemizing filers – effective for 2026
    • $1,000 for single and $2,000 for joint taxpayers (not including gifts to DAFs)
  • Increased Child Tax Credit to $2,200 per child – effective for 2025
    • Phases out at $200,000 for single filers and $400,000 for joint
  • Expanded use of 529 accounts – parts in 2025 and part in 2026
    • Distributions of up to $20,000 for eligible K-12 expenses
    • Distributions allowed for post-secondary credentials and related expenses

• Some changes were implemented and are temporary – starting in 2025 through 2028
  • Filers 65 and over will receive an additional $6,000 deduction ($12,000 joint).  This begins to phase out at $75,000 for individuals ($150K joint)
    • This deduction is where many have begun to say that “Social Security is no longer taxed”.  While Social Security is still a part of your taxable income, the new legislation will result in many filers within the income limits effectively off-setting the taxes due from their Social Security income
  • State & Local Income Tax (SALT) deduction increase – previously capped at $10,000, this has now increased to $40,000 (phased out for joint income earners over $500K)
    • Note that this adjustment was expanded through 2030
    • For planning purposes, this could encourage many filers to itemize again, depending their current SALT deductions and charitable giving
  • Reductions on overtime and tip income – added deductions for those specific income types for those with $150,000 or less of income (individual) and $300,000 (joint) – specifically it lays out:
    • Up to $25,000 tipped wages
    • Up to $12,500 for individual and $25,000 joint for qualified overtime compensation
  • Allows for deduction on certain auto loan interest
    • Up to $10,000 of interest is deductible on new vehicle purchases if final assembly is done in the US
• Miscellaneous other highlights that may impact you:
  • Electric Vehicle and clean energy home improvement credits end on September 30
  • Cap on itemized deductions for the top tax bracket starting in 2026
  • Maintains and made permanent the 20% Qualified Business Income Pass-Through deduction
  • Included Federal spending cuts to Medicaid – adding work reporting requirements for certain beneficiaries, adjustment to state budgets for healthcare, and other adjustments
  • Tax credits for business expanding manufacturing and research in the US
  • Increased defense spending and immigration enforcement

While we are still waiting for more information and clarification on several elements, this outline provides insights and updates on what we are seeing applicable so far.  In many ways, the biggest update from this bill is that it made many tax cuts from 2017 permanent and allows for more accurate long-term planning for years to come. Many other elements either bring minimal impact or are temporary additions for the next 3-5 years.  As always, we encourage additional conversation and planning to be done on your personal situation and how these elements apply as well as to work with your accountant as to how and where these tax changes apply to your financial situation.