The One Big Beautiful Bill Act and Your Financial Plan
The One Big Beautiful Bill Act and Your Financial Plan
30% written by AI, reviewed and approved by Michael Carson, Chief Compliance Officer
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), introducing major tax and retirement planning changes.
This legislation represents a sweeping update to tax and retirement policy. After covering other policy areas, the OBBA's Title VII, ‘Finance,’ introduces key changes to the tax code. The following sections explain how your financial plan may be affected.
Income Tax Brackets
OBBBA permanently establishes the 2017 Tax Cuts and Jobs Act (TCJA) tax provisions, removing uncertainty in retirement planning.
The seven-bracket federal income tax structure (10% to 37%) is now permanent, with annual inflation adjustments. The 10% and 12% brackets get an extra adjustment starting in 2026.
The standard deduction increases for 2025 and becomes permanent:
- $15,750 for individuals (up from $15,000)
- $31,500 for married couples filing jointly (up from $30,000)
- $23,625 for heads of household
For retirement savers, this creates a stable tax environment for making long-term decisions about contribution strategies, Roth conversions, and withdrawal plans.
Roth IRA Conversions
Roth conversions may be more attractive now that tax brackets are permanent, making it easier to plan conversions.
However, if you are a retiree planning on a large conversion for 2025 and beyond, you'll want to watch your income closely income so you don't exceed the new Senior Bonus Deduction thresholds. For example, a married couple whose income rises from $150,000 to $250,000 could lose the $12,000 Senior Bonus Deduction.
Deductions on Individual Deductions for State and Local Tax (SALT)
OBBBA raises the SALT cap for taxpayers who itemize their deductions. This provision allows you to deduct more state and local taxes from your federal taxable income including property tax, and sales or income tax (not both). The deduction, previously $10,000, was increased to $40,000 for married couples earning up to $500,000 through 2029, with a 30% phase-down for income exceeding $500,000.
Tax Benefits For Workers
Do you work for tips or receive overtime pay? If so, OBBBA offers some significant deductions for you:
- Tip Income Deduction: Workers in tipped occupations can deduct up to $25,000 in annual tip income.
- Overtime Deduction: Up to $12,500 ($25,000 for joint filers) in overtime compensation can be deducted each year.
These deductions phase out for higher-income taxpayers, so careful planning is essential to maximize your benefits.
Charitable Giving Tax Deductions
Beginning in 2026, OBBBA will change the charitable deduction rules for both standard and itemized filers.
A new universal charitable deduction allows up to $1,000 ($2,000 for married couples filing jointly) for standard deduction filers.
For those who itemize, there’s a new 0.5% AGI floor on charitable deductions, effective as of 2026. In practice, this means itemizers can only deduct charitable contributions that exceed 0.5% of their AGI. For instance, a couple with $250,000 AGI would need donations exceeding $1,250 before claiming any charitable deduction.
For high earners, the tax benefit of deductions is capped at 35%.
Estate Tax Exemptions
The OBBBA brings significant changes to estate planning, offering new ways to preserve wealth for future generations. Starting in 2026, the estate and gift tax exemption increases permanently to $15 million per person ($30 million per couple), up from $13.99 million. From 2027, exemptions—including the GST exemption—will be indexed for inflation. The top estate tax rate remains 40%.
With these permanent exemptions, there is less urgency to make gifts during your lifetime, making estate planning more flexible. Estates below $15 million ($30 million for couples) will likely avoid federal estate tax, though state-level taxes may still apply. Be sure to review your estate documents to ensure they reflect your wishes under the new exemption amounts.
Trump Accounts: A New Legacy Planning Tool for Families
OBBBA introduces “Trump accounts,” tax-advantaged savings for children under 18. Like IRAs, these accounts enable tax-deferred investment growth, allowing up to $5,000 in after-tax annual contributions (indexed for inflation) from parents, relatives, or others until the child turns 18. Withdrawals are only allowed after age 18.
Investments must be in qualified U.S. stock index funds with fees under 0.1% to ensure low costs and broad market exposure.
From January 2026, U.S. citizen children born between 2025 and 2028 are automatically enrolled, receiving a one-time $1,000 federal contribution. Employers may also contribute up to $2,500 annually (indexed from 2027) to an employee’s child’s account, tax-free and not counted as employee income.
Other Important Provisions
Auto Loan Interest Deduction: Up to $10,000 in new vehicle loan interest is deductible for U.S.-assembled, personal use vehicles for purchases made between 2025 and 2028.
Child Tax Credit: Increases to $2,200 per child, with inflation adjustments beginning in 2026.
Scholarship Credit: Beginning in 2027, you can claim a non-refundable credit of up to $1,700 per year for cash donations to approved Scholarship Granting Organizations (SGOs).
For Business Owners
Qualified Business Income (Section 199A): Permanent 20% deduction with enhanced benefits:
- $400 minimum deduction (inflation-adjusted)
- Increased phase-in range: $75,000 single / $150,000 married (up from $50,000/$100,000)
Research and Development: Immediate expensing restored for domestic R&D costs for tax years beginning after December 31, 2024.
What This Means for Your Financial Plan
Your financial advisor should adjust your financial plan in light of these new provisions. If you are retired and planning on your own without an advisor, you may want to consider the following strategies:
- Reassess your retirement income strategy in light of the permanent tax brackets.
- Evaluate whether you qualify for the new deductions for working retirees.
- Review your charitable giving approach to maximize tax benefits.
- Update your estate plan to account for the higher exemption amounts.
- Utilize Trump accounts for intergenerational wealth transfer.
Need guidance on these changes? Schedule a call with a fiduciary advisor at Hurlow Wealth Management Group today by CLICKING HERE or calling 812-333-4726.