The One, Big, Beautiful Bill Act & How it Could Impact You
There have been a lot of headlines surrounding the One Big Beautiful Bill Act (OBBBA) that President Trump signed into law on July 4th. Even before signing the bill, there was plenty of back and forth on what was going to be included/excluded once finalized. While the actual OBBBA contains almost 900 pages, below are some of the provisions that might impact individuals the most.
Tax Brackets
The new law permanently extends the tax brackets that were put into effect in 2018 by the Tax Cuts and Jobs Act (TCJA). The TCJA rates were set to sunset at the end of 2025, raising marginal brackets across most income levels.
Standard Deduction
Included in the OBBBA is a provision that increases the standard deduction. Filers under the age of 65 will see a slight increase in their standard deduction.
One of the major headlines leading up to the OBBBA was no taxes on Social Security. Contrary to some of the initial reports, Social Security is still taxable. An increase to the standard deduction for those 65+ can be used to help offset some Social Security income. This additional deduction is temporary for individuals 65+ from 2025 through 2028 and results in an additional deduction of $6,000 for individuals or $12,000 for joint filers who are both over the age of 65. Phaseouts to the deduction do apply to individuals with over $75,000 modified adjusted gross income (MAGI) or joint filers with more than $150,000 MAGI.
Itemized Deductions
With the boosted standard deduction, especially for those 65+, many people will continue to forgo itemizing deductions on their return. An exception could be for taxpayers with high state and local taxes.
State and Local Tax Deduction (SALT)
Starting this year, the SALT deduction limit will increase from $10,000 to $40,000. This provision will apply through 2029 and revert to $10,000 in 2030. There is a phaseout which begins for taxpayers with MAGI exceeding $500,000. This increased deduction could push some taxpayers over the standard deduction and allow them to itemize.
Mortgage Insurance Premiums
In addition to being able to deduct interest payments on up to $750,000 of mortgage debt, taxpayers will now be able to deduct mortgage insurance premiums starting in 2026. This will apply mostly to homeowners who acquired a home with less than a 20% down payment.
Charitable Deduction Floor
Beginning in 2026, donors who itemize will only be able to deduct charitable donations that exceed 0.5% of their adjusted gross income (AGI).
Other Deductions
Charitable Deduction (for taxpayers using standard deduction)
In recent years, taxpayers needed to itemize deductions to receive the benefit of deducting their charitable contributions. In 2020, the CARES Act created a charitable deduction of up to $300 for individual ($600 for joint) taxpayers claiming the standard deduction. The OBBBA increases this amount to $1,000 single filers ($2,000 joint) and is not subject to 0.5% floor above.
Qualified Tips Deduction
The OBBBA temporarily makes tip income up to $25,000/yr deductible for individuals from 2025 through 2028. This deduction only applies to tip income from jobs that traditionally receive gratuity as part of their compensation. Income phaseouts apply.
Qualified Overtime Deduction
The OBBBA temporarily makes overtime pay up to $12,500 for individuals ($25,000 for joint) deductible for tax years 2025 to 2028. Income phaseouts apply.
Auto Loan Interest Deduction
Temporarily makes auto loan interest up to $10,000 deductible for vehicles that meet certain conditions for tax years 2025 through 2028. Income phaseouts apply.
Estate Tax Exemption
The Estate and Gift Tax exclusion was previously set at $13,990,000 per person or almost $28,000,000 per married couple. This has been permanently increased to $15,000,000 per person ($30,000,000 married couple) for 2026 with future inflation adjustments. This raises the bar significantly on what can be passed to future generations and avoid the 40% estate tax rate.
529 Expansion
As of July 5th, 529 funds can now be used for an expanded list of qualified education expenses. This list includes standardized testing, tutoring, educational therapies (speech, occupational, physical & behavioral), AP courses, and more. Beginning in 2026, 529’s can be used to fund qualified K-12 expenses up to $20,000 (increased from $10,000) per year.
Also new is the ability to utilize 529 funds for qualified postsecondary credentialling expenses.
Child Tax Credit
The Child Tax Credit was set to expire and made permanent. Beginning in 2026, the credit will be increased to $2,200 per qualifying child and adjust annually for inflation. Income phaseouts apply.
Trump Accounts
Children born in 2025 through 2028 will be automatically enrolled and receive a $1,000 deposit from the government into these accounts. Up to $5,000/yr. can be contributed into each beneficiary’s account. The contributions are not eligible for tax deductions but are able to be invested in a qualified mutual fund and grow tax-deferred over time. These new accounts come with a host of rules and regulations surrounding distributions and qualified expenses.
The OBBBA incorporates a wide range of provisions and laws that will take effect over the next few years. While the above represents only a small portion of the OBBBA, please feel free to reach out to our team with any questions on how it might impact you.
Jack Faerber, CFP®
Wealth Advisor
Sources
- Tax Foundation (https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/)
- My529 (my529.org)
- Kitces (https://www.kitces.com/blog/obbba-one-big-beautiful-bill-act-tax-planning-salt-cap-senior-deduction-qbi-deduction-tax-cut-and-jobs-act-tcja-amt-trump-accounts/)
- Tax Foundation (https://taxfoundation.org/blog/trump-accounts-could-be-better/)
Important Disclosures:
The views expressed herein are of Jack Faerber on July 22, 2025 and are subject to change at any time based on market or other conditions, as are statements of financial market trends, which are based on current market conditions. This information is provided as a service to clients and friends of Kavar Capital Partners, LLC solely for their own use and information. Kavar Capital Partners is not an insurance broker. The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as, investment, legal or tax advice. Past performance does not ensure future results. Kavar Capital Partners, LLC makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information. The information is subject to change and, although based on information that Kavar Capital Partners, LLC considers reliable, it is not guaranteed as to accuracy or completeness. This information may become outdated and we are not obligated to update any information or opinions contained herein. Articles may not necessarily reflect the investment position or the strategies of our firm.