Key Changes & Clear Answers: What the One Big Beautiful Bill Means for You

We know new legislation can be confusing. But worry not — we’re on top of it. We’ll make sure your financial plan stays on track and continue to answer any future questions you may have. The recently passed One Big Beautiful Bill (OBBB) touches many areas of personal finance, but not everything is changing — and not all the headlines are telling the full story. Below, we’ve broken down the changes that we believe matter most to clients and families, grouped in a way that makes it easier to understand what’s changing, when, and why it matters to you.

Ordinary Income Tax Brackets & Standard Deduction: Staying the Course

What’s Changing:

• The 2017 Tax Cuts and Jobs Act (TCJA) rates were set to expire after 2025. The OBBB makes these lower brackets permanent.
• The higher standard deduction we’ve all gotten used to is also staying put, meaning most households will continue utilizing the standard deduction over itemizing.

Why It Matters:

• Tax planning becomes more stable. No major “tax cliff” at the end of 2025.
• Your standard deduction stays high for 2025, indexed for inflation going forward:
  • $15,750 for Single and Married Filing Separately (MFS)
  • $23,625 for Head of Household
  • $31,500 for Married Filing Jointly (MFJ) and Qualifying Widow(er)

SALT Deduction: Temporarily More Room for High-Tax States

What’s Changing:

• From 2025 through 2029, the State and Local Tax (SALT) deduction cap increases:
  • $40,000 for MFJ
  • $20,000 for Single
• The cap begins phasing out at $500,000 Modified Adjusted Gross Income (MAGI), and drops back to $10,000 by $600,000 MAGI.
• It reverts back to the $10,000 cap in 2030.

Why It Matters:

• While most people will still use the standard deduction, the new SALT cap may be beneficial for clients here in New York and other higher income tax states.

SALT Deduction Examples for NYS under the OBBB:

• This table illustrates how someone who was unable to itemize in 2024, may now be able to do so thanks to the SALT increase.
  • It is important to note that without other itemizations (such as in this case with mortgage interest), the SALT increase may not offer a benefit to you.

• The next table illustrates how the SALT phaseout comes into play for high-income earners, specifically those making $500k to $600k annually.

*These illustrations are for educational purposes and should not be considered tax advice. All values are estimates and do not account for all available deductions or details. Please consult with your tax professional about your personal situation.

Estate & Gift Tax: Bigger Exemption, More Flexibility

What’s Changing:

• Starting January 1, 2026, the federal estate and gift tax exemption will increase to:
  • $15 million per person
  • $30 million per married couple
• The exemption remains indexed for inflation as we advance.

Why It Matters:

• This increase prevents the steep drop that was scheduled under the original TCJA sunset provisions (which would have cut the exemption roughly in half).
• Clients who were previously on the edge of needing estate planning strategies (like gifting, trusts, etc.) may now have more breathing room.
  • This is especially helpful for business owners and those with closely held entities, who may have otherwise faced federal estate tax exposure.
• However, it may still be worth discussing lifetime gifting strategies and updating estate plans, especially for those with growing assets or multi-generational goals.

Above-the-Line Charitable Deduction for Non-Itemizers

What’s Changing:

• Starting in 2026, a permanent above-the-line deduction of $1,000 (Single) / $2,000 (MFJ).
• No income limits. Must be cash donations to qualifying U.S. public charities (no Donor Advised Funds or private foundations).

Why It Matters:

• You can reduce your Adjusted Gross Income (AGI) even if you don’t itemize.
• Helps unlock some tax savings on donations for more people.

QBI Deduction: Permanently Protected

What’s Changing:

• The Qualified Business Income (QBI) deduction — which allows eligible pass-through business owners to deduct 20% of their income — is now permanent.

Why It Matters:

• This is a big win for business owners, especially those close to income limits or working in service-based industries.

“No Tax on Tips” & “No Tax on Overtime” — Clearing Up the Confusion

You may have seen emails or headlines suggesting tip income and overtime are no longer taxable — but here are the facts:

Tips (2025–2028):

• Up to $25,000 of tips can be deducted above the line.
• MAGI phaseout: Begins at $150,000 (Single) / $300,000 (MFJ).
• Not “exempt” from tax — you claim a deduction after the fact.

Overtime (2025–2028):

• Above-the-line deduction of:
  • $12,500 (Single)
  • $25,000 (MFJ)
• Phaseout: Reduced by $100 for every $1,000 of MAGI above $150K (Single)/$300K (MFJ).

Why It Matters:

• These are deductions, not exemptions — and must be claimed when filing.
• They don’t change withholding during the year.

Enhanced Senior Deduction: More Relief, Same Rules

What’s Changing:

• Seniors (65+) get an additional $6,000 deduction, up to $12,000 if MFJ and both are 65+ (MAGI phaseout begins: $75,000 Single, $150,000 MFJ) through 2028.
• The deduction is decreased by $0.06 for every $1 of income over the threshold.
  • This means 65+ single earners making $175k+ and joint filers making $250k+ will be fully phased out from this deduction.

What It Doesn’t Change:

• The way Social Security Benefits are taxed has not changed. The rules and formulas remain the same.
• Lowering AGI with this deduction may reduce how much of your benefits are taxed — that’s where the confusion came from.
  • The Social Security Administration’s “90% pay no tax” claim refers to the indirect effect of the increased standard deduction and new senior bonus deduction, which reduce taxable income.

Auto Loan Interest Deduction: Small Win, Big Conditions

What’s Changing:

• From 2025–2028, taxpayers can deduct up to $10,000 in car loan interest on U.S.-assembled vehicles.
• Phaseout begins at $100,000 (Single) / $200,000 (MFJ) AGI.

Why It Matters:

• In reality, most people only pay ~$500 – $1,000 in auto loan interest per year.
• Still, it’s a helpful deduction if you’re under the income limits.

Credits & Accounts for Families

Child Tax Credit:

• Raised from $2,000 → $2,200 per child (starting 2025).
• Fully indexed for inflation.
• Income phaseouts remain ($200K Single / $400K MFJ, not adjusted).

Trump Accounts:

• Each eligible child born between Jan 1st, 2025– Dec 31st, 2028, receives a one-time $1,000 contribution from the Federal Government.
• Parents/family can contribute up to $5,000/year (Indexed to inflation starting in 2027).
  • Contributions can be made up until the year they turn 18.
• These accounts are not college savings accounts. 529s are likely to be better suited for college savings compared to Trump Accounts.

Why It Matters:

• Offers a new savings tool for your children.
• Makes early savings easier and automatic for young families.

Final Thoughts:

While the One Big Beautiful Bill is over 900 pages long, most of the meaningful updates for households come down to a handful of deductions, credits, and permanent extensions. The confusion around tips, overtime, and Social Security has made headlines, but now you have the facts.

As part of our tax planning efforts, we keep an eye on tax-related updates to make sure opportunities aren’t overlooked. Whether it’s identifying a new deduction or helping flag a potential gap, our goal is to make sure everything fits together with the rest of your plan — especially in coordination with your tax professional.

If any of these changes apply to you — or if you’re unsure — reach out. We’ll help you find out if you’re properly positioned for what is to come.