A Practical Overview of the One Big Beautiful Bill Act

August, 2025

After months of speculation and political back-and-forth, the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. It’s the most comprehensive tax legislation since the Tax Cuts and Jobs Act of 2017, permanently extending many familiar provisions, such as the 10%, 12%, and 22% tax brackets, the enhanced standard deduction ($15,750 single, $31,500 married filing jointly), and the 20% Qualified Business Income (QBI) deduction. It also increases the Child Tax Credit to $2,200 per child and indexes it to inflation starting in 2026.

These extensions offer continuity for most taxpayers, but alongside them comes a new array of deductions and financial tools that merit careful planning.

Among the most impactful provisions is a set of temporary “below the line” deductions available from 2025 through 2028, regardless of whether you itemize. Seniors aged 65+ may deduct $6,000 (or $12,000 if both spouses qualify), phasing out after $150,000 of income. Individuals earning tipping income or overtime can deduct up to $25,000. Additionally, up to $10,000 of auto loan interest on U.S.-assembled vehicles is deductible, changes clearly aimed at middle-income earners and delivering new planning opportunities for those who qualify across multiple categories.

This year marks a major shift in the debate on SALT deduction limits.

Although the $10,000 cap remains through 2024, the OBBBA raises it to $40,000 beginning in 2025, but only for filers under $500,000 of income.

Above that threshold, the expanded cap phases out and returns to $10,000 by 2030. In the $500K–$600K income range, this phaseout can push you into an effective marginal tax rate higher than expected, making timing of income recognition and deductions more critical than ever.

If charitable giving is part of your strategy, consider accelerating donations into 2025.

Beginning in 2026, the law imposes a 0.5% AGI floor on deductions, meaning the first half percent of your income donated won’t count toward traditional AGI-percentage limits, significantly reducing the deductible portion. On the bright side, even standard deduction filers will be able to deduct up to $1,000 (or $2,000 for joint filers) in charitable cash gifts starting in 2026, a benefit previously limited to itemizers.

For business owners, the expanded income phaseout for the QBI deduction allows more high-earning professionals to access the full 20%, while more aggressive AMT phaseouts under OBBBA may bring taxpayers with Incentive Stock Options (ISOs) back into AMT exposure. If that applies to you, exercising options before the end of 2025 may help mitigate that risk.

Meanwhile, the estate and gift tax exemption rises to $15 million per person in 2026, up modestly from the current $13.99M and avoiding a sharp drop back to roughly $7M had TCJA expired. For families near the threshold, this change presents planning flexibility, but it also warrants reviewing strategies already structured around a lower exemption value.

OBBBA also broadens the use of 529 plans, allowing funds to cover K–12 textbooks, materials, testing, and credentials, capped at $20,000 per year, and including post-secondary professional certifications. These expanded rules open new possibilities for multi-generational education planning and more flexible use of education savings.

Perhaps the most novel development is the introduction of “Trump Accounts”, custodial IRA-type accounts for U.S. children born between January 1, 2025 and December 31, 2028. Upon establishment, these accounts would be seeded with a one-time $1,000 contribution from the U.S. government. Additional contributions of up to $5,000 per year (from parents, employers, or others) are permitted, and the funds grow tax-deferred in a low cost stock index fund until the child turns 18. This structure is designed to give kids a genuine head start in building wealth through compound growth.

Trump Accounts must be invested in U.S. stock index mutual funds or ETFs (e.g. S&P 500) with annual expense ratios capped at 0.1%, and no withdrawals are allowed before age 18. After that, the account transitions into a traditional IRA. Withdrawals for qualifying uses, like higher education, first-home purchases (up to $10,000), or starting a business, avoids penalties, but the gains remain fully taxable as ordinary income.

This new account type aims to democratize access to investing and foster financial literacy from birth. Still, many experts caution these may not replace the flexibility and tax advantages of 529 plans, given restrictions on investment choices and penalties for non-qualified uses.

In sum, the One Big Beautiful Bill Act brings both stability and innovation to the tax code. While many long-sunsetted provisions now become permanent, the statute also offers temporary relief in strategic new areas, from SALT relief and new deductions to education planning and entirely new savings vehicles like Trump Accounts. Whether you’re navigating deduction planning, charitable strategies, estate considerations, or generational investment tools, there’s new terrain to cover.