Key Aspects of The One Big Beautiful Bill

Overview

The One Big Beautiful Bill Act (OBBBA) was passed in July of 2025 and encompasses many areas of the tax code. Some of the components of the bill that will impact the personal financial landscape for investors are highlighted below; however, this is not a comprehensive overview. Perhaps the most meaningful impact of the bill is not what was added – it is what the bill extends.  The Tax Cuts and Jobs Act (TCJA) of 2017 was a comprehensive tax reform that lowered most individual tax rates, increased standard deductions, and raised the lifetime exemption amount on gift and estate taxes (to name a few).  The TCJA tax cuts were initially scheduled to expire at the end of 2025, but the passing of the One Big Beautiful Bill extends or expands many of the original provisions of TCJA.  This component of the OBBBA will have far-reaching implications for tax planning and estate planning.

Key Aspects of The One Big Beautiful Bill Act

Estate Tax Lifetime Exemption

The lifetime exemption, which had been increased through the Tax Cuts and Jobs Act (TCJA) of 2017, was scheduled to sunset and revert to its pre-TCJA amount (indexed for inflation) at the end of 2025.  With the passage of the OBBBA, it has been expanded to $15 million per person in 2026, or $30 million for a married couple electing portability.  

Alternative Minimum Tax (AMT)

OBBBA extends the AMT exemptions established by the TCJA in 2017 but reduces the exemption phase-outs to $500,000 (single filers) and $1,000,000 (joint filers).  The bill also increases the phaseout rate by 25% (up to 50%) of the dollar amount that exceeds the threshold.  

State and Local Tax (SALT) Deduction

The OBBBA increases the limit on SALT deductions from $10,000 to $40,000, albeit temporarily (it is scheduled to increase at a rate of 1% per year and then revert to $10,000 in 2030).  There also exists a phase-out for SALT deductions if income exceeds $500,000.   

Tax on Social Security

The OBBBA does not entirely exclude social security income from taxation. Still, it does provide for an additional standard deduction for seniors (65+) of $6,000 per person, which is subject to income limitations (the deduction crosses a phase-out threshold if income exceeds $75,000 (individual) or $150,000 (married couples). Taxpayers will be completely phased out if income exceeds $175,000 (individually) or $250,000 (married).

Charitable Contributions

Historically, the deductibility of charitable contributions has been limited (most recently to 60% of adjusted gross income (AGI) for cash donations to public charities or 30% of in-kind contributions (commonly appreciated stock) if using the fair market value of the asset for calculating the deduction.  The OBBBA introduces a floor in terms of what is deductible to charity, which is pegged at 0.50% of adjusted gross income (AGI) beginning next year (2026).   Essentially, charitable giving will only be deductible to the extent that it exceeds 0.50% of AGI, and deductibility will continue to be subject to the existing upper-limit thresholds outlined above.  At the same time that this provision of OBBBA appears to limit the benefit of charitable contributions, the act comes back to restore a charitable deduction for donors who do not itemize.  Although the law has changed significantly over the last five years, there have been times when taxpayers had to decide between itemizing their deductions or taking the standard deduction.   The OBBBA allows charitable gifts to be taken as a deduction in addition to the standard deduction, up to a limit of $1,000 (single) or $2,000 (joint), and it does not subject these deductions to the new 0.50% floor described above. 

Tips and Overtime Income

Service industry employees will receive a boost as the bill allows a deduction for tip income, which is capped at $25,000 for an individual.  While the bill creates some concessions for taxes on tips, it does not exclude tip income from payroll tax, and it is only applicable to qualified occupations.  Phase-outs start at $150,000 (single filers) and $300,000 (joint filers).  The bill also provides a deduction for overtime hours, which is limited to $12,500 per person or $25,000 for a married couple (with the same beginning phase-outs (MAGI) as those for tip income listed above).     

Deductibility of Auto Loan Interest

Similar to the changes to the SALT deductions (above), the deductibility of interest on auto loans is temporary, unless changed by future legislation.  This deduction will be in effect through 2028 and allows for the interest (up to $10,000 per year) on qualifying vehicle loans to be deducted.  There are quite a few qualifications for the interest to be deducted (some of which are that the vehicle must have been assembled in the U.S., it must be a new vehicle, and the earliest that the loan could have been taken out for the purchase is 1/1/2025.  Like many of the provisions of the OBBBA, there are phase-outs for deductibility (beginning at $100,000 (single filers) and $200,000 (joint filers)).    

529 Plans

Recent legislation (before the OBBBA) enabled 529 owners to distribute from those accounts without penalty for qualified educational expenses before college.  The OBBBA broadens the scope of the types of costs that would qualify (including but not limited to: materials, books, exam expenses, dual credit classes, and qualified tutoring expenses), and also lifts the annual limit for these expenses from $10,000 to $20,000.   

Child Tax Credit

The child tax credit is set to increase to $2,200 and remain at that level (indexed to inflation).

Trump Accounts

One of the major differentiators between what has been termed the “Trump Account” and an IRA for a minor is that contributions to an IRA can only be made if the individual has earned income.  These newly minted accounts lack the exact requirement that would create an opportunity to start a child on their own retirement goals before they are old enough to get a job.  There is no deduction for contributions, and contributions are subject to various annual limitations (a maximum of $5,000 per year).  Distributions may not be made before the child attains the age of 18.  Some of the specific functional aspects of these accounts are still to be determined (i.e., how similar the rules are when compared to an IRA).  

The items highlighted above were selectively chosen for their relevance to personal financial planning, but do not exclusively represent all items in the bill that could be relevant to financial planning.  There were also several notable items included in the bill, such as military spending, immigration, clean energy, and changes to Medicaid, which are not addressed in this summary.  These items and other provisions of the bill may need to be considered.  Any decisions related to tax planning or estate planning should be made only after consultation with a qualified attorney and CPA.   

 Information obtained from the Wall Street Journal and Kitces.com