As you’ve likely heard, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4th, 2025. While the bill primary extends key provisions from the 2017 Tax Cuts and Jobs Act (TCJA), it also introduces several new measures that will impact millions of taxpayers and business owners and are sure to keep professionals in the financial services industry very busy, particularly from 2025-2028.
This summary isn’t intended to be a comprehensive breakdown of the nearly 900-page bill. Instead, we’ve highlighted 19 policy changes we believe are most relevant to you, particularly those planning for retirement, running their own business or planning for a business exit.
1. Personal Federal Income Tax Brackets Made Permanent
The OBBBA permanently extends the 10%, 12%, 22%, 24%, 32%, 35%, and 37% tax brackets that have been in place since 2018 via the TCJA:
The rates were set to revert to 10%, 15%, 25%, 28%, 33%, 35% and 39.6% starting in 2026:
This one is relatively straightforward. Taxpayers can expect a reduced effective tax rate on their ordinary income (W-2, interest income, non-qualified dividends, short term capital gains, K-1 business distributions, etc.), compared to what they would have faced in the absence of legislation.
2. Federal Estate and Gift Tax Exemption Increased and Extended
The TCJA initially increased the estate and gift tax exemption from $5.49 million to $11.18 million per person in 2018. Since then, the exemption has grown to $13.99 million per person (or $27.98 million per married couple) in 2025. The exemption amount was set to be effectively cut in half in 2026, but the OBBBA increases the exemption to $15 million per person ($30 million per married couple) starting in 2026 and will continue adjusting for inflation annually:
This is a huge win for individuals with sizable estates who have been preparing for a potential reduction in the federal exemption. Individuals whose estates may still exceed the exemption limit should consider lifetime gifting strategies while the limits remain elevated.
3. Standard Deduction Permanently Increased
The OBBBA upholds the elevated standard deduction amount introduced by the TCJA, increases it modestly for the 2025 tax year, and will continue adjusting for inflation annually:
Since the standard deduction remains high, most taxpayers are likely to continue forgoing itemizing their deductions. This is important for individuals weighing financial decisions, such as making charitable contributions with after-tax dollars or prepaying their mortgage on a primary residence or second home.
4. Temporary Enhanced Deduction for Seniors Aged 65 and Older (“No Tax on Social Security”)
Despite what you may have heard from news outlets or directly from the Social Security Administration (SSA), the OBBBA did not eliminate taxes on Social Security benefits. Instead, the bill created a temporary enhanced deduction for seniors.
For the years 2025-2028, taxpayers aged 65 and older may be eligible for an additional deduction up to $6,000 per person or $12,000 for a married couple if both spouses qualify, regardless of whether they have claimed Social Security benefits.
The deduction begins to phase out at modified adjusted gross income (MAGI) of $75,000 for single filers, and $150,000 for joint filers, reducing by $60 for every $1,000 of MAGI above the thresholds:
Taxpayers can claim this deduction regardless of whether they itemize or take the standard deduction.
Notably, this enhanced deduction is in addition to the existing $2,000 standard deduction increase for single filers and the $1,600 increase per eligible spouse for joint filers who are aged 65 and older or blind.
5. State and Local Tax (SALT) Deduction Temporarily Increased
This is a big one for individuals residing in high income tax states. Under the TCJA, taxpayers were limited to deducting $10,000 of SALT from their federal income. Under the OBBBA, starting in 2025, the SALT deduction limit increases to $40,000, will increase by 1% through tax year 2029, and revert to $10,000 in 2030.
The increased SALT limit begins to phase out when single and joint tax filers modified adjusted gross income (MAGI) reaches $500,000 ($250,000 for those married filing separately), reducing by $0.30 for every $1 of MAGI above the $500,000 threshold:
Notably, taxpayers with MAGI between $500,000 to $600,000 will face an “income tax torpedo”. Within this range, for every additional $1 of MAGI above $500,000, taxable income increases by $1.30.
This can be seen in the chart above where a taxpayer with $500,000 of MAGI, and $40,000 of SALT deductions would have $460,000 of taxable income (excluding other deductions for simplicity). While a taxpayer with $600,000 of MAGI would see their SALT deduction reduced to $10,000, resulting in $590,000 of taxable income. A $130,000 increase in taxable income with only a $100,000 increase in MAGI.
6. Pass-Through Entity Tax (PTET) Survives
The final version of the OBBBA maintains the Pass-Through Entity tax election, without any restrictions. This enables owners of pass-through businesses (Partnerships and S-corps) to continue bypassing the SALT deduction cap by paying these taxes at the entity level, where they remain a deductible business expense.
This is a huge win for business owners considering the original House bill proposed eliminating the Pass-Through Entity tax election altogether.
7. Qualified Business Income (QBI) Deduction Made Permanent
Aside from two changes, the OBBBA largely preserves the 20% qualified business income (QBI) deduction for pass-through entities that was initially established under the TCJA.
The first change widens the taxable income phaseout range. Starting in 2026, the phaseout range for single filers will widen from $50,000 to $75,000, and from $100,000 to $150,000 for joint filers:
The second change introduces a guaranteed minimum QBI deduction of $400, starting in 2026, for taxpayers with at least $1,000 of qualified business income. Under current law, a $400 deduction would require $2,000 of nonpassive qualified business income (20% x $2,000). This provision guarantees taxpayers with business activity a minimum tax deduction.
8. 100% Bonus Depreciation Made Permanent
Under the OBBBA, 100% bonus depreciation becomes permanent for qualified property acquired and placed into service after January 19, 2025. Under prior law, bonus depreciation was capped at 40% in 2025, 20% in 2026 and set to completely phase out by 2027.
This is a huge win for business owners that may be phased out of taking section 179 deductions or for those looking to accelerate depreciation on real property through cost segregation studies.
9. Section 179 Deduction Limits Permanently Increased
The OBBBA increased the Section 179 deduction limit for eligible property purchased after December 31st, 2024, and placed into service during its first year:
Business owners can now immediately expense up to $2.5 million of eligible property placed into service during its first year, doubling the previous limit of $1.25 million.
The phaseout limit also increased. The deduction now begins to phase out once more than $4 million of qualifying property is placed into service, is reduced $1 for $1 above that amount, and is fully phased out at $6.5 million.
Larger businesses that exceed these limits can still consider 100% bonus depreciation, which does not have phaseouts.
10. Qualified Small Business Stock (QSBS) Exclusions Permanently Increased
The OBBBA addressed Section 1202 of the internal revenue code, originally enacted in 1993, by enhancing benefits for qualified small business stock (QSBS) acquired after July 4th, 2025:
Taxpayers may now exclude up to $15 million in capital gains on the sale or exchange of QSBS.
Additionally, the holding period requirements were shortened. Now, gains are 50% excludable after 3 years and 75% excludable after 4 years, compared to the previous 5 year minimum for any exclusion.
Lastly, the aggregate gross asset limit for qualifying businesses was increased to $75 million, with annual adjustments for inflation.
These changes offer founders and investors greater flexibility with startups and eventual exits and are likely to make the C-Corp structure more attractive for small businesses, an area largely dominated by pass-through entities (Partnerships and S-corps).
11. Child Tax Credit (CTC) Permanently Increased
Without legislative action, the Child Tax Credit was set to drop from $2,000 to $1,000 per qualifying child in 2026. However, the OBBBA increases the credit to $2,200 per qualifying child starting in 2025, with annual adjustments for inflation starting in 2026.
The refundable portion of the Child Tax Credit remains at $1,700 and the income phaseout thresholds are unchanged: $200,000 for single filers, and $400,000 for joint filers. The credit is reduced by $50 for every $1,000 of AGI above those thresholds:
12. Temporary Auto Loan Interest Deduction
The OBBBA creates a temporary income tax deduction for interest paid on auto loans, available for vehicles purchased after December 31st, 2024, and in effect from 2025-2028. To qualify, the vehicle must be new (not used), intended for personal use, weigh less than 14,000 pounds (no RVs, trailers, etc.) and assembled in the United States.
The deduction is capped at $10,000 per year and begins to phase out at modified adjusted gross income (MAGI) of $100,000 for single filers and $200,000 for joint filers, reducing by $200 for every $1,000 above those thresholds:
Taxpayers can claim this deduction regardless of whether they itemize or take the standard deduction.
13. Temporary Qualified Tips Deduction (“No Tax on Tips”)
The OBBBA does not actually eliminate taxes on tip income, as they remain subject to payroll taxes (Medicare and Social Security) and may be subject to state income taxes, depending on your location. However, from 2025-2028, this provision creates a deduction for up to $25,000 of qualified tip income.
The deduction begins to phase out at modified adjusted gross income (MAGI) of $150,000 for single and head of household filers, and $300,000 for joint filers, reducing by $100 for every $1,000 above those thresholds:
Taxpayers can claim this deduction regardless of whether they itemize or take the standard deduction.
14. Temporary Qualified Overtime Compensation Deduction (“No Tax on Overtime”)
Similar to the “No Tax on Tips” provision, overtime compensation is not exempt from federal payroll taxes, but the OBBBA creates a deduction for qualified overtime compensation earned between 2025-2028. Under this provision, single filers can deduct up to $12,500, while joint filers can deduct up to $25,000 of qualified overtime compensation.
The deduction begins to phase out at modified adjusted gross income (MAGI) of $150,000 for single filers and $300,000 for joint filers, reducing by $100 for every $1,000 above those thresholds:
Taxpayers can claim this deduction regardless of whether they itemize or take the standard deduction.
15. Below the Line Charitable Contribution Deduction Permanently Restored
Starting in 2026, single filers can claim a $1,000 deduction, and joint filers a $2,000 deduction for cash contributions to qualified charities, regardless of whether they itemize or take the standard deduction.
Importantly, this deduction is not subject to the 0.5% adjusted gross income (AGI) floor mentioned next.
16. Itemized Charitable Deductions Subject to 0.5% AGI Floor
Starting in 2026, the OBBBA introduces a 0.5% AGI floor for itemized deductions related to charitable contributions. This means that only the portion of charitable contributions that exceed 0.5% of a taxpayer’s AGI will be deductible as an itemized deduction.
For example, a taxpayer with $100,000 of AGI who donates $10,000 to charity would only be able to claim $9,500 as an itemized deduction. The first $500 ($100,000 x 0.5%) would not be deductible.
17. “Trump Accounts” For Minors
Starting in July 2026, contributions up to $5,000 per year can be made to a Trump account on behalf of a beneficiary under the age of 18. Employers may also contribute up to $2,500 per year to the account and the federal government will make a $1,000 contribution for children born between 2025-2027.
Unlike retirement accounts (IRAs, 401(k)s, etc.), the child is not required to have earned income. Distributions are restricted until the child turns 18, at which point they become the account owner, and the account would then resemble a Traditional IRA.
This provision could be great for kickstarting children’s retirement savings, though further guidance is expected on how the accounts will function once the child reaches adulthood.
18. Dependent Care Flexible Spending Account (FSA) Contribution Limits Permanently Increased
Starting in 2026, dependent care FSA contribution limits will increase from $5,000 per year to $7,500 ($3,750 for married couples filing separately). This limit will not be adjusted for inflation.
19. Clean Energy Credits Repealed
The $7,500 credit for new electric vehicles and $4,000 for used electric vehicles will not be available for vehicles acquired after September 30th, 2025.
The $1,000 credit for installing an electric vehicle charger at your personal residence will not be available for property placed into service after June 30th, 2025.
The up to $1,200 credit towards energy efficient home improvements (windows, doors, insulation, etc.) will not be available for property placed into service starting in 2026.
The credit for up to 30% of the cost for installing clean energy (solar panels, wind panels, heat pumps, etc.) at your primary residence will not be available for expenditures made starting in 2026.
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Unlike the TCJA, which was signed into law December 2017 just weeks before taking effect, many of the key OBBBA provisions are not implemented immediately. Which is great news for taxpayers and advisors, as it provides necessary time to prepare and plan strategically.
While the OBBBA is expected to deliver meaningful federal tax savings for individuals and businesses, it further complicates an already complex tax code. Now, proactive tax planning, particularly through 2028, will be even more valuable.
So, if you’re wondering how these provisions may affect your financial plans, please reach out. We’re happy to help you plan ahead and navigate these changes with confidence.