On July 4th, 2025, President Donald Trump signed into law the OBBBA, also known as the One Big Beautiful Bill Act. H.R.1 is primarily known for being a comprehensive tax & spending bill. In 2017 during his first presidential term, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), the OBBBA has been seen as an extension of that bill. Many of the provisions made within the TCJA were set to end in 2025, and the new OBBBA is extending those provisions for a few years. Read on for the ten most important changes regarding financial planning.
Additional $6,000 Senior Deduction
For the tax years of 2025 to 2028, taxpayers age 65 and older will receive an additional $6,000 ($12,000 when filing jointly) tax deduction. This deduction begins to phase out at $75,000 ($150,000 jointly) of income. The phase-out rate is 6 (12 for joint filers) cents on each dollar over the max.
For example, if a single taxpayer makes $90,000, their max additional deduction would be $5,100. This is found by multiplying the $15,000 over the limit by .06 to get $900, then subtracting $900 from the $6,000 max additional deduction amount.
This additional deduction is available for those taxpayers who do standard and itemized deductions. If you are married, you must file jointly to claim this deduction.
SALT Deduction Limits & No Sunsetting of 2017 Tax Brackets
The State and Local Tax (SALT) deduction cap has been raised to $40,000 for the 2025 tax year. Each year after, it will increase by 1% through 2029 and then will revert to the original max of $10,000 in the 2030 tax year.
Income phase-outs are also implemented with the provision. Modified adjusted gross income (MAGI) (Is your Adjusted Gross Income (AGI) with certain additional income items added back in, such as tax-exempt interest or foreign income. It is used to determine eligibility for various tax benefits and credits) over $500,000 is where the phase-outs begin, and the deductions are reduced by 30% of excess income above the $500,000 threshold.
The tax brackets established as part of the TCJA will stay in place permanently, as the income levels in the brackets are adjusted annually for inflation.
Children Tax Credits & Charitable Giving Deductions
The child tax credit will see an increase from $2,000 to $2,200, as well as inflation-related increases each year. The bill put in place a new parameter to qualify for the tax credit Prior to the bill, the parameters were that the child needed a social security number, the child had to live with the parent or guardian for six months within the year, and the child had to live within the United States for six months or more. Now, the newest parameter is that both the child and one of the parents must have a valid social security number to qualify.
For charitable giving, there are provisions for both itemized and standard deductions. Starting in 2026 for deductions along with the standard deduction, the tax break for charitable cash contributions is maxed at $1,000 for single filing and $2,000 for filing jointly.
Also starting in 2026, there will be two changes for those who do itemize tax deductions. For starters, there will be a “floor” necessary for giving to reach the break. The total must exceed 0.5% of adjusted gross income. Once you reach that point, the deduction can be utilized, but the .5% doesn’t count towards the deduction.
For example, if you have an AGI of $100,000 and make charitable donations of $750, you can make a deduction of $250. This is because 0.5% of 100,000 is $500, and then you must subtract that from your total charitable contributions of $750.
The other big change for itemized deductions is that there is now a cap for benefits for those in the 37% income tax bracket. That cap is 35%.
Additional 529 Qualified Expenses
The OBBBA increased the K-12 annual withdrawal limits from $10,000 to $20,000. It also expanded the qualified expenses to include the following for K-12:
- Curriculum materials
- Fees for National Standardized Tests
- Books and other instructional materials
- Dual-enrollment fees for college courses
- Online educational materials
- Tutoring or educational classes outside the home
- Specialized strategies designed to support students with disabilities
Since K-12 expenses are allowed by some states but prohibited by others, you’ll have to verify that your state allows them prior to utilizing the newest additions.
Additional qualified higher education expenses were also added to the list. Tax-free withdrawals are now allowed for qualified expenses for programs in the Workforce Innovation and Opportunity Act.
Taxation on Tips and Overtime Changes
For the tax years 2025 to 2028, qualified tips, which are cash or charged (on card) tips received from customers or tip sharing, can be deducted from income. The maximum annual is $25,000 dollars and has phase-outs when AGI is over $150,000 for single filers ($300,000 for joint).
By October of 2025, the IRS will release a list of occupations that are seen as regularly receiving tips as part of their business. To qualify for this deduction, your job must be on the list.
In a similar timeframe from 2025 through 2028, individuals may deduct up to an annual maximum of $12,500 of pay that exceeds their regular rate of pay. Deductions phase out at the same AGI as the tip’s deduction.
An example of math on the overtime deductions would be if your regular hourly rate is $50.00 an hour and your overtime is $75.00 (aka time and a half), you would be able to deduct $25.00 for each hour of overtime you worked during the tax year.
Both deductions are available for itemized and non-itemized taxpayers.
Trump Accounts for Children
Trump Accounts are IRA-esque accounts for children under the age of 18. These accounts are custodial accounts that are opened by an adult for a child, meaning the children cannot open the accounts on their own.
For children born in between January 1st, 2025, and December 31st, 2028, Trump accounts will be credited with $1,000 from the government for opening the account. Contributions into accounts are made with post-tax dollars and have a maximum contribution of $5,000 a year. Once the beneficiary turns 18, the account will shift into a traditional IRA and will be tax-deferred.
The account, while the beneficiary is still under the age of 18, will be invested in either an ETF or mutual fund that tracks a qualified index, such as the S&P 500. The expense for these funds will be no greater than .1%.
Trump accounts will be available to be opened on July 4th, 2026. Currently, there are plans for eligible qualified withdrawals for things such as higher education expenses, disability, and new home purchases. Accounts may allow penalty-free distributions for these qualified purposes after age 18 (not before).
Federal Estate & Gift Tax Exemptions
The federal estate and gift lifetime tax exemption has been increased to $15,000,000 ($30,000,000 for joint). This increase will begin January 1st, 2026, and will be indexed each year for inflation. The original increase to $13,990,000 was from the TCJA and was set to expire in 2025 but is now permanently increased.
Auto Loan Interest Deduction
Individuals who purchase a vehicle from 2025 through 2028, pending qualifications that will be listed below, may deduct the interest paid on the loan. To qualify for the loan, the interest must:
- Originate during the period of 2025 through 2028
- The loan must be used to purchase a new vehicle
- Be secured by a lien on the vehicle
For the vehicle to qualify, it must:
- Be used as a personal vehicle
- Must be a car, van, minivan, SUV, pickup truck, or motorcycle with a gross weight rating less than 14,000 pounds
- Undergone final assembly in the United States, which can be found either through the VIN number or listed on a label while at the car dealers
The max annual deduction is $10,000 and can be used for both types of taxpayers. To qualify, the taxpayer must include the VIN of the vehicle on their tax return. The deduction does have income phaseouts from $100,000 to $150,000 for single filers, and $200,000 to $250,000 for married filing jointly.
Green Energy Tax Credit Rollbacks
The green energy tax credits were a prominent factor in the Biden administration’s Inflation Reduction Act of 2022. The OBBBA supports the repeal of the following tax credits based on the listed date that it will likely take effect:
September 30th, 2025: Previously owned electric vehicle credit, electric vehicle credit, commercial vehicle credit
December 31st, 2025: Energy-efficient home improvement credit, residential clean energy credit
June 30th, 2026: Refueling property credit, new energy-efficient home credit, Energy-efficient commercial buildings deduction
The OBBBA has other effects, such as making wind and solar-based projects ineligible for the Inflation Reduction Acts most prominent tax credits unless beginning constructions within 12 months of July 4th, 2025, or in use before December 31st, 2027. Even if the projects are within these parameters, the credits are reduced.
The following credits are expanded or extended through the OBBBA:
- Clean Fuel Production Credit
- Carbon Oxide Sequestration Credit
There are many other components of the One Big Beautiful Bill Act of 2025. As the reader, you should continue to learn about each component and see how it affects your life, your business, or your future personally. There are many parts that can be beneficial if taken advantage of, but unless you are made aware of them, it is tough to utilize.
INNOVA is a SEC registered investment adviser. Information presented is for educational purposes only intended for a broad audience. INNOVA is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed. The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of author, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of the date indicated. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.