The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings several permanent and temporary changes to tax laws that could affect your financial and retirement planning. Here are some notable takeaways:
Tax Brackets Made Permanent
The 2017 tax cuts are now permanent.
Lower brackets (10%, 12%, 22%) will adjust annually for inflation.
Why it matters: This gives you long-term planning opportunities—like timing Roth conversions or realizing income while rates are low.
New Deductions for Workers
No Tax on Tips: A new deduction of up to $25,000/year for tipped workers (phases out for higher incomes).
Overtime Pay Deduction: Up to $12,500 ($25,000 for joint filers) can be deducted for qualified overtime wages.
Car Loan Interest Deduction
Up to $10,000 deduction on interest for new, U.S.-assembled vehicle loans (starting 2025).
New Senior Deduction
Replaces the personal exemption: those 65+ can claim a $6,000 deduction (phased out at higher incomes).
Strategy Tip: Keep income lower with tools like Qualified Charitable Distributions (QCDs) to retain this benefit and potentially reduce Medicare surcharges.
Estate & Gift Tax
Exemptions rise to $15M/person (or $30M/couple) starting in 2026.
Opportunity: Consider gifting strategies while current limits remain in place.
Standard Deduction & SALT Cap Updates
Standard deduction made permanent ($15,750 single / $31,500 joint in 2025).
SALT cap raised to $40,000 starting in 2025 (was $10,000)—especially helpful for high-tax states.
Family & Education Updates
529 Plan Expansion: Can now cover tutoring, online classes, and credentials.
529-to-ABLE Rollovers: Made permanent.
Student Loan Repayment Help: Employers can offer $5,250/year tax-free—permanently.
Child Tax Credit: Now $2,200/child.
Homeowner Notes
Mortgage interest deduction capped at first $750,000 of debt.
Interest on home equity loans is only deductible if used to improve the home.
Healthcare & HSA Enhancements
HSAs can now cover telehealth services, direct primary care, and apply to more insurance plans.
Expanded access for ACA Bronze and Catastrophic plan holders.
Business Owners: You’ll Want to Know This
20% QBI Deduction made permanent.
100% bonus depreciation is now permanent.
Section 179 expensing limit raised to $2.5 million.
Employer child care credit increased to 40%, up to $500,000.
R&D expenses can be fully deducted again.
New rules on Opportunity Zones and QSBS (Qualified Small Business Stock) offer expanded tax advantages for long-term investments.
Energy Credits Expiring Soon
Several popular credits for energy-efficient vehicles and home improvements end by 2026. If you've been thinking about solar panels, EVs, or energy upgrades, consider acting in 2025 to capture those savings.
What Should You Do Now?
These changes present both opportunities and pitfalls depending on your situation. The new rules touch nearly every aspect of planning—from income and giving to retirement and business decisions.
We’re here to help you review your current plan and make any adjustments to align with the new tax landscape. Let’s talk.