On July 4th, the “One Big Beautiful Bill Act” (OBBBA) was signed into law by President Trump. While the bill is far reaching - with impacts on income taxes, federal spending, healthcare, and more – here we want to focus on five key provisions likely to impact many of our clients.
We acknowledge that some of you reading this will find the bill to be beautiful, and some will not. The purpose of this article is not to provide an opinion on this new legislation, but to highlight a few pieces we are focused on as your financial planners.
Lower Tax Brackets and Higher Standard Deductions are Here to Stay
- OBBBA extends the current federal income tax rates, which were previously set to expire at the end of this year. This keeps us in a historically low income tax rate environment.
- At the time, the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction amounts. OBBBA extends the elevated standard deductions. For 2025, the standard deduction is now $15,750 for single filers / $31,500 for joint filers.
Seniors Will Benefit from Enhanced Deductions
- From 2025 - 2028, taxpayers age 65+ are now eligible for an enhanced tax deduction of up to $6,000 per person. This deduction is available whether you take the standard deduction or itemize deductions. The enhanced senior deduction begins to phase out once income exceeds $75,000 (single filers) / $150,000 (joint filers).
- The enhanced senior deduction is in addition to the increased standard deduction that has already been available to seniors of $2,000 (single filers) or $1,600/person (joint filers). For example, a couple age 65+ is now eligible for deductions up to $46,700 without itemizing!
$31,500 – standard deduction
1,600 – additional standard deduction for age 65+
1,600 – additional standard deduction for age 65+
12,000 – enhanced senior deduction
$46,700
- There was much conversation in recent months about the bill potentially eliminating taxes on Social Security benefits. While OBBBA did not technically change how taxes on Social Security are calculated, the increased deduction amounts will result in about 90% of Social Security recipients paying no federal taxes on their benefits (up from about 65%).
State and Local Tax (SALT) Deduction Cap is Increased
- From 2025-2029, the limit on SALT deductions is raised from $10,000 to $40,000*. The limit begins to reduce (gradually to $10,000) once income exceeds $500,000**. You must itemize deductions to take the SALT deduction.
- *$20,000 if married filing separately
- **$250,000 if married filing separately
Charitable Deduction Available for Non-Itemizers
- Beginning in 2026, taxpayers can deduct up to $1,000 (single filers) / $2,000 (joint filers) for cash gifts made to charity even if taking the standard deduction. With so many taxpayers now utilizing the standard deduction, this is a new opportunity for many people to receive a tax benefit for their charitable contributions.
New Savings Vehicle Available for Children
- OBBBA introduces a new tax-advantaged investment account exclusively for minors – “Trump Accounts”. While final guidance is still to come concerning the administration of these accounts, a few highlights as we understand them are included below.
- The contribution limit is $5,000, and both individuals and employers can contribute. For children born from 2025-2028, the government will make a one-time contribution of $1,000. Initial contributions are expected to be allowed in the summer of 2026.
- Trump accounts will effectively be treated as an IRA for the beneficiary. Beneficiaries can make penalty-free withdrawals for qualified expenses once age 18 (ex: higher education, first-time home purchase, starting a business) but other withdrawals prior to age 59½ will be subject to penalties. Whether for qualified or non-qualified expenses, account growth will be subject to taxes when withdrawn.
- Trump accounts could serve as a nice opportunity to introduce children to investing at a young age, helping them build saving habits and financial literacy. However, there are still alternative savings strategies for families to consider as they decide whether/how much to contribute. If prioritizing education, a 529 account presents greater tax benefits as qualified withdrawals are tax free. For general investing, Uniform Transfers to Minors Act (UTMA) accounts provide more flexibility, with no restrictions on withdrawals for beneficiaries after age 21.
- Like most everything in personal finance, the optimal strategy for your family is personal! We are here to help you plan for your family’s goals and assist in determining which account(s) will best help you reach them.
As always, please do not hesitate to reach out with any questions. Thank you for your continued trust in our team!