As the Tax Cuts and Jobs Act (TCJA) nears expiration, the newly passed One Big Beautiful Bill Act (OBBBA) brings sweeping tax reforms that demand immediate attention and planning. This legislation introduces a mix of extensions, new deductions, and sunsetting credits—all of which can significantly impact your personal and business tax strategy starting in 2025 and beyond. Below, we break down key provisions and forward-looking planning opportunities to help you maximize savings and minimize surprises in the coming years.
Key Tax Changes Starting in 2025
- State and Local Tax (SALT) Deduction Cap Increased
● New cap: $40,000 (2025) with gradual increases through 2029.
● Phases out between $500,000–$600,000 MAGI; capped at $10,000 above that.
● Planning tip: Defer income, qualified charitable distributions and/or loss harvesting, and max out retirement/HSA contributions to stay under phase-out limits. - Standard Deduction Boost
● New standard deductions:
○ Single: $15,570
○ Head of Household: $23,625
○ Married Filing Jointly: $31,500
● Strategy: Use charitable and medical deduction “bunching” to optimize between itemizing and standard deduction years. - Energy Credits Expire
● Energy-efficient home and clean energy credits (e.g., heat pumps, windows, solar
panels) end December 31, 2025.
● Clean vehicle credit ends after Sept. 30, 2025.
Tip: Consider accelerating energy-efficient purchases to this year.
- New Senior Deduction
● Taxpayers age 65+ receive a $6,000 deduction (2025–2028).
● Couples both over 65 may claim up to $12,000.
● Begins phasing out at $150,000 MAGI ($75,000 single).
● Note: Must file jointly to qualify as a couple.
- 529 Plan Enhancements
● After July 4, 2025, qualified expenses expand to include K-12 books, tutoring, testing fees, and postsecondary credentialing.
● Annual K–12 cap increases to $20,000 for the year 2026. - Qualified Small Business Stock (QSBS) Incentives
● For QSBS acquired after July 4, 2025:
○ 3 years: 50% exclusion
○ 4 years: 75%
○ 5+ years: 100%
● Per-issuer cap raised to $15M; asset ceiling increased to $75M. - New Car Loan Interest Deduction
● Deduct up to $10,000 of interest on post-2024 new U.S.-assembled vehicle loans (2025–2028).
● Begins phasing out at $200,000 MAGI ($100,000 single). - Bonus Depreciation Reinstated
● 100% bonus depreciation available for qualified property placed in service after January 19, 2025. - Child Tax Credit Expansion
● Increases to $2,200 per qualifying child.
● Indexed for inflation. - Tax Breaks for Tips and Overtime
● Deduct up to $25,000 for qualified tips and $12,500 for qualified overtime (2025–2028).
● Phases out at $300,000 MAGI ($150,000 single).
Changes Starting in 2026
- Estate Tax Exemption
● Increased to $15M per individual / $30M per couple.
● Adjusted for inflation annually.
● Planning tip: Now is a critical time to revisit estate and gifting strategies. - Charitable Giving Limits
● New 0.5% floor for itemizers.
● Above-the-line charitable deduction returns: $1,000 ($2,000 married) for non-itemizers.
● Tip: Accelerate donations into 2025 to avoid the 0.5% reduction in 2026. - New Itemized Deduction Limitation (Replacing Pease)
● Affects high earners in the 37% tax bracket.
● Deductions reduced by 2/37 of the lesser of itemized deductions or taxable income above the threshold (taxable income exceeding the start of the 37% tax bracket). - Qualified Opportunity Zones (QOZs)
● OBBBA extends the QOZ benefit permanently.
● 10-year rolling deferral window begins Jan. 1, 2027. - Introduction of “Trump Accounts”
● Treasury-funded savings accounts for children born 2025–2029.
● $1,000 seed contribution; family can contribute up to $5,000 annually until age 18.
Strategic Takeaways
● Tax Planning is No Longer Optional: Multi-year tax planning is critical to manage shifting brackets, phaseouts, and deduction limitations.
● Act Now: 2025 is a pivotal year to lock in benefits before some provisions vanish or shrink.
● Watch Your Income Levels: Many deductions and credits phase out based on MAGI. Proper structuring of income and expenses is key.
● Get Professional Guidance: The complexity of OBBBA requires personalized strategies to make the most of what’s available to you.
Ready to Strategize?
Whether you’re an individual, small business owner, or planning for estate transfer, we’re here to help. Our team can model the impact of OBBBA on your specific situation and guide you in taking full advantage of the opportunities ahead. What sets us apart is our deep tax expertise and tax-centric approach to every facet of wealth management—from investment strategy and comprehensive planning to estate design and strategic tax planning. This integrated approach ensures every financial decision aligns with your long-term tax and wealth goals.
Call us today to schedule your consultation.
