Signed into regulation on July 4, 2025, the One Huge Stunning Invoice Act (OBBBA) brings sweeping tax modifications with some vital implications for taxpayers (notably these in or close to retirement).
Standing at over 1,000 pages, the invoice completely extends many provisions initially launched within the 2017 Tax Cuts and Jobs Act (TCJA), whereas enacting modifications throughout many sides of the federal authorities and tax code. Beneath, we’ve zeroed in on a number of of probably the most outstanding and impactful modifications prone to make a distinction in your tax invoice over the approaching years.
#1. Everlasting TCJA Tax Cuts and Deductions
The OBBBA has completely prolonged the TCJA-era tax brackets and commonplace deductions. With out this laws, these advantages have been set to run out in 2026. The highest tax price stays at 37%, and the usual deduction will get a small bump: $15,750 for single filers and $31,500 for married {couples} in 2025. For a lot of of you, taking the usual deduction changed itemizing deductions with the TCJA modifications. We’ll wish to revisit this based mostly on the modifications to the SALT deduction (see beneath).
#2. New “Tremendous Deduction” for Seniors
Beginning in 2025, taxpayers 65 and older with revenue below $75,000 (or $150,000 for {couples}) can declare a further $6,000 deduction, or $12,000 if each spouses are over 65. This profit phases out for incomes above $175,000 for single filers and $250,000 for joint filers. For now, the tremendous deduction will solely be obtainable by way of the 2028 tax 12 months.
#3. Property Tax Exemption Restrict Stays Excessive
Initially launched within the TCJA, the elevated federal property tax exemption will now not sundown in 2026. In 2025, the property tax and lifelong present tax exemption restrict is $13.99 million per individual or $27.98 million per couple. Contemplating the TCJA doubled the pre-2018 property tax exemption restrict, this continuation can supply households with vital property and estates extra flexibility with their wealth switch methods.
#4. State and Native Taxes (SALT) Itemized Deduction Improve
We see this as the most important impression for many of our purchasers. The state and native tax (SALT) deduction restrict will increase from $10,000 to $40,000 in 2025, with gradual will increase by way of 2029. Excessive-income households will face some phaseouts, however the exemption restrict won’t ever drop beneath $10,000. This improve in SALT deductions is critical, because it may make itemizing extra worthwhile (regardless of the elevated commonplace deduction), particularly in states with increased state and native taxes like New York or California.
#5. Modifications to Charitable Deductions
Taxpayers may have the choice to take above-the-line charitable deductions of as much as $1,000 per individual ($2,000 for {couples}) beginning in 2026. In case you do plan on itemizing, nonetheless, you’ll solely be allowed to deduct donations that exceed 0.5% of your adjusted gross revenue (AGI). You should have the choice to hold ahead unclaimed charitable donations to deduct in future tax years. In terms of selecting to bunch charitable giving, we’d counsel reaching out to us or your CPA for steerage right here.
#6. Tax Advantages for Mother and father and Households
The Youngster Tax Credit score (CTC) is now everlasting and presently $2,200/certified youngster. This quantity will improve for inflation, however there are nonetheless phase-outs. For households with dependents who don’t qualify for the CTC, there’s a now everlasting $500 credit score/dependent. There are some good modifications to 529 accounts.
The definition of a Certified Expense has elevated to incorporate as much as $20,000 for Okay-12 bills, in addition to persevering with schooling and credentialed applications. You’ll have heard of the Trump accounts-they are a brand new kind of financial savings account for youngsters below 18 starting in 2026.
They’re tax deferred accounts and no withdrawals will be made till the kid reaches age 18. Consider these as just like IRAs. If withdrawals are made earlier than age 59 ½, there’s a 10% penalty except the cash is used for increased schooling or as much as $10k for a primary time residence buy. The federal authorities will contribute $1000 robotically for youngsters born between 2025-2028.
Mother and father can contribute as much as $5000/tax 12 months adjusted for inflation, and employers can contribute as effectively. We expect these may very well be an choice for added financial savings as soon as a household has contributed the utmost to their youngster’s 529 account however a 529 has way more flexibility and higher tax benefits for fogeys’ contributions.
What Ought to Taxpayers Focus On Transferring Ahead?
Whereas some provisions are everlasting, others are set to run out in 2028, together with the senior tremendous deduction, tip and extra time deductions, and the additional Youngster Tax Credit score. As you and your tax skilled or advisor plan forward, be conscious of those timelines. For instance, with increased SALT caps and new obtainable deductions, some taxpayers could profit from quickly itemizing as an alternative of taking the usual deduction.
We’ll be addressing how these modifications have an effect on you personally once we meet however needed to ensure you are conscious of a number of the key modifications. You probably have any questions or wish to assessment these modifications collectively in additional element now, don’t hesitate to succeed in out immediately.
