By Derrick Schuler, CFP®

Now that the dust has cleared and we’re getting more guidance on what is in the One Big Beautiful Bill Act (OBBBA) we felt it was appropriate to highlight some of the most important aspects of it and provide some of our own insights. While the OBBBA covered a lot of areas and made many changes, the bill doesn’t fundamentally change personal tax rules in a way that requires drastic new tax planning strategies, as has been the case with past legislation. However, there are important new rules or adjustments to current tax provisions that are worth highlighting. 

We believe it’s important to stay informed about these updates, even if they don’t require an immediate review of your financial or tax planning strategies. Keep them in mind as you set goals and make plans, and be sure to discuss them with your financial or tax advisor during your next meeting to identify the most appropriate strategies moving forward. Below are some of the primary changes introduced by the bill. While this list doesn’t cover every change, we’ve highlighted the ones we believe will have the greatest impact on our clients.

Tax Brackets

• Individual income tax rates remain unchanged and are now permanent at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. 
• Rates for trusts and estates were also made permanent at 10%, 24%, 35%, and 37%. 
• Tax bracket thresholds are adjusted for inflation, with the 10% and 12% brackets receiving an extra inflation adjustment bump in 2026. 
• Start Date: January 1, 2025 – Permanent 
• Who’s impacted: Every Taxpayer
  
  

Standard Deduction

• Standard deductions from the Tax Cuts and Jobs Act (TCJA) have been extended and enhanced. The standard deduction has increased to:
  • $15,750 (from $15,000) for single filers
  • $23,625 (from $22,500) for head of household
  • $31,500 (from $30,000) for Married Filing Jointly
• Start Date: January 1, 2025 – Permanent 
• Who’s impacted: Taxpayers using the standard deduction.
  
  

State and Local Tax (SALT) Limitation

• SALT limitation for itemized deductions increased from $10,000 to $40,000 per household. 
• The $40,000 cap will increase by 1% each year from 2026 – 2029.
• The increased cap is phased out for taxpayers with Modified Adjusted Gross Incomes (MAGI) exceeding $500,000 (increasing annually by 1% through 2029). Income above this threshold is reduced by 30% but never falls below $10,000. As a result, households with MAGI above $600,000 in 2025 are limited to a $10,000 SALT deduction. 
• Start Date: January 1, 2025 – Temporary. The deduction amount will increase 1% annually through 2029 and return to $10,000 in 2030. 
• Who’s impacted: Taxpayers who itemize in high income tax states.
  
  

Senior (65+) Deductions

• Temporary additional $6,000 deduction for seniors (or $12,000 for joint filers where both spouses are 65+).
• This deduction is on top of the additional standard deduction given to individuals who are either age 65+ or blind, which adds an extra $2,000 to the standard deduction for single filers or $1,600 for each eligible married filer. 
• Allowable under standard or itemized deductions.  
• MAGI phaseout beginning at $75,000 for single filers and $150,000 for married filing jointly filers. Reduced by 6% over the limit. In effect, households with over $175,000 (single) and $250,000 (joint) will be fully phased out of the additional senior deduction.  
• Examples of total potential deductions for 65+ filers:
  • Single Filer Total Deductions could equal $23,750 
    • $15,750 standard deduction + $2,000 senior deduction + $6,000 new temporary deduction
  • Married Filing Jointly with one 65+ spouse could equal $39,100
    • $31,500 standard deduction + $1,600 senior deduction + $6,000 new temporary deduction
  • Married Filing Jointly with both spouses 65+ could equal $46,700
    • $31,500 standard deduction + $3,200 senior deduction + $12,000 new temporary deduction
• Note: Standard rules for the taxation of Social Security benefits still apply. 
• Starting Date: January 1, 2025 – 2028 – Temporary  
• Who’s impacted: Seniors 65+

• Who’s impacted: Taxpayers with children under 17

No Tax on Tips

• No tax on tips with a $25,000 limit. 
• Subject to certain industries where tips are common.  
• The deduction phases out at MAGI of $300,000 for MFJ and $150,000 for single filers. The phaseout occurs at a rate of $100 per $1,000 of income over the threshold. 
• Start Date: January 1, 2025 – 2028 – Temporary 
• Who’s impacted: All taxpayers in tipping industries.

No Tax on Overtime

• No tax on overtime with a limit of $25,000 MFJ and $12,500 for single filers.
• Phase out begins at MAGI of $300,000 for MFJ and $150,000 for single filers. 
• Applies only to the premium portion of overtime pay, meaning the extra half-time paid in a time-and-a-half scenario. The regular rate of pay earned during overtime hours remains subject to federal income tax. 
• Only applies to federal income tax and does not affect other taxes such as Social Security, Medicare, or state and local taxes. 
• Start Date: January 1, 2025 – 2028 – Temporary 
• Who’s impacted: Non-exempt employees receiving overtime pay.  

Child Tax Credit

• Child Tax Credit increased to $2,200 (from $2,000) per child
• The credit will be indexed for inflation beginning in 2026
• Expanded phaseout threshold to $400,000 for MFJ and $200,000 for single filers.
• The credit is phased out by $50 for every $1,000 of AGI above those limits.
• Start Date: January 1, 2025 – Permanent

Dependent Care Assistance

• Increase contribution limits to Dependent Care Flexible Spending Accounts (FSAs) from $5,000 to $7,500 for individuals or MFJ.
• Not indexed for inflation
• Start Date: January 1, 2026 – Permanent 

Trump Accounts for New Children

• New Trump Accounts established for those under 18 years old are subject to an annual contribution cap of $5,000. 
• Employers can contribute up to $2,500 to an employee’s account, which wouldn’t be counted as income to the recipient. 
• Caps are indexed for inflation.
• Establishes a “Pilot Program” which will fund those with children born from 2025 – 2028 with $1,000 initial deposit. 
• No income requirements. 
• Start Date: July 2026
• Who’s impacted: 
  • Parents with children under 18
  • Those planning for children. 
  • Employers (tax credit opportunities)
  • Children born from 2025 – 2028 

529 Plans

• Expansion of K-12 qualified expenses.
  • Increases the annual limit on tax-exempt withdrawals for K-12 expenses from $10,000 to $20,0000.
  • K-12 tax exempt withdrawals used to be limited to tuition but can now be used for expenses such as books, online education materials, testing fees (e.g., SAT/ACT), dual enrollment fees, and tutoring fees.  
• In addition to traditional college expenses, funds can now be used for credentialing programs, such as professional licenses, certificates, registered apprenticeships, and continuing education courses.  
• Start Date: January 1, 2026
• Who’s impacted: Parents using 529 plans to help pay for K-12 expenses, students, adult learners, and career changers. 

Auto Interest

• Deduction of auto loan interest for personal cars loans, with final assembly in US, taken out after December 31, 2024. 
• If an existing loan is refinanced in 2025 or later, without increasing the balance of the original loan, the interest on the refinanced loan qualifies. 
• Credit cap of $10,000.
• MAGI phaseout begins at $200,000 MFJ / $100,000 single filers at a rate of $200 for every $1,000 over the MAGI thresholds. 
• Start Date: 2025 – 2028 – Temporary 
• Who’s impacted: All taxpayers financing new cars 

Estate and Gift Tax Exemption

• Estate and Gift Tax Exemption amount made permanent at $15 million per individual. Will be adjusted annually for inflation.
• Start date: 2026 – Permanent 
• Who’s impacted: Individuals with large estates. 

Ending of Residential Clean Energy Provisions

• Ending Date: December 31, 2025
• Who’s impacted: Those considering energy upgrades
• Potential Planning Strategies: Take advantage of credits while still available.

Ending of the New and Used Electric Vehicle Credits

• Ending Date: September 30, 2025
• Who’s impacted: Those considering EV purchases
• Potential Planning Strategies: Consider making a purchase now to take advantage of the credit. 
  
  

Mortgage Insurance Premiums

• Mortgage Insurance Premiums to be treated as mortgage interest for itemization purposes. This is a continuation of the expanded TCJA rules.
• Start Date: January 1, 2025 – Permanent  
• Who’s impacted: Homeowners who itemize deductions

Limitation on Itemized Deductions for Taxpayers in the 37% Marginal Bracket.

• Important Dates: Permanent beginning in 2026
• Who’s impacted: High-Income itemizers
• Potential Planning Strategies: Accelerate charitable giving and medical expenses in 2025 where possible to maximize the tax benefit of itemizations. 

Qualified Business Income Deduction (QBI)

• The QBI was extended to 20%.  
• New $400 credit minimum added for active businesses with a net income above $1,000 for the year. 
• Bonus Depreciation reinstated at 100% for assets put in service after 1/19/25. 
• Important Dates: Permanent
• Who’s impacted: Business Owners

Alternative Minimum Tax

• Makes permanent the increased AMT exemption amounts ($500,000 for single filers and $1,000,000 for joint filers) and modifies the related phaseout amount (increased to 50% from 25%). 

 

Although this list is extensive, it is not all-inclusive. If you have specific questions about your situation, please reach out to one of us at Schuler Wealth Planning or contact your tax advisor. 

Sources: https://www.congress.gov/bill/119th-congress/house-bill/1/text 

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