Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) brings sweeping tax changes with some significant implications for taxpayers (particularly those in or near retirement).
Standing at over 1,000 pages, the bill permanently extends many provisions originally introduced in the 2017 Tax Cuts and Jobs Act (TCJA), while enacting changes across many facets of the federal government and tax code. Below, we’ve zeroed in on a few of the most prominent and impactful changes likely to make a difference in your tax bill over the coming years.
#1. Permanent TCJA Tax Cuts and Deductions
The OBBBA has permanently extended the TCJA-era tax brackets and standard deductions. Without this legislation, these benefits were set to expire in 2026. The top tax rate remains at 37%, and the standard deduction gets a small bump: $15,750 for single filers and $31,500 for married couples in 2025. For many of you, taking the standard deduction replaced itemizing deductions with the TCJA changes. We’ll want to revisit this based on the changes to the SALT deduction (see below).
#2. New “Super Deduction” for Seniors
Starting in 2025, taxpayers 65 and older with income under $75,000 (or $150,000 for couples) can claim an additional $6,000 deduction, or $12,000 if both spouses are over 65. This benefit phases out for incomes above $175,000 for single filers and $250,000 for joint filers. For now, the super deduction will only be available through the 2028 tax year.
#3. Estate Tax Exemption Limit Remains High
Originally introduced in the TCJA, the elevated federal estate tax exemption will no longer sunset in 2026. In 2025, the estate tax and lifetime gift tax exemption limit is $13.99 million per person or $27.98 million per couple. Considering the TCJA doubled the pre-2018 estate tax exemption limit, this continuation can offer families with significant assets and estates more flexibility with their wealth transfer strategies.
#4. State and Local Taxes (SALT) Itemized Deduction Increase
We see this as the biggest impact for most of our clients. The state and local tax (SALT) deduction limit increases from $10,000 to $40,000 in 2025, with gradual increases through 2029. High-income households will face some phaseouts, but the exemption limit will never drop below $10,000. This increase in SALT deductions is significant, as it could make itemizing more worthwhile (despite the elevated standard deduction), especially in states with higher state and local taxes like New York or California.
#5. Changes to Charitable Deductions
Taxpayers will have the option to take above-the-line charitable deductions of up to $1,000 per person ($2,000 for couples) starting in 2026. If you do plan on itemizing, however, you’ll only be allowed to deduct donations that exceed 0.5% of your adjusted gross income (AGI). You will have the option to carry forward unclaimed charitable donations to deduct in future tax years. When it comes to choosing to bunch charitable giving, we would suggest reaching out to us or your CPA for guidance here.
#6. Tax Benefits for Parents and Families
The Child Tax Credit (CTC) is now permanent and currently $2,200/qualified child. This amount will increase for inflation, but there are still phase-outs. For families with dependents who don’t qualify for the CTC, there is a now permanent $500 credit/dependent. There are some good changes to 529 accounts.
The definition of a Qualified Expense has increased to include up to $20,000 for K-12 expenses, as well as continuing education and credentialed programs. You may have heard of the Trump accounts-they are a new type of savings account for children under 18 beginning in 2026.
They are tax deferred accounts and no withdrawals can be made until the child reaches age 18. Think of these as similar to IRAs. If withdrawals are made before age 59 ½, there is a 10% penalty unless the money is used for higher education or up to $10k for a first time home purchase. The federal government will contribute $1000 automatically for children born between 2025-2028.
Parents can contribute up to $5000/tax year adjusted for inflation, and employers can contribute as well. We think these could be an option for additional savings once a family has contributed the maximum to their child’s 529 account but a 529 has much more flexibility and better tax advantages for parents’ contributions.
What Should Taxpayers Focus On Moving Forward?
While some provisions are permanent, others are set to expire in 2028, including the senior super deduction, tip and overtime deductions, and the extra Child Tax Credit. As you and your tax professional or advisor plan ahead, be mindful of these timelines. For example, with higher SALT caps and new available deductions, some taxpayers may benefit from temporarily itemizing instead of taking the standard deduction.
We’ll be addressing how these changes affect you personally when we meet but wanted to make sure you are aware of some of the key changes. If you have any questions or would like to review these changes together in more detail now, don’t hesitate to reach out today.
