TAX CHANGES FROM THE ONE BIG BEAUTIFUL BILL ACT THAT COULD IMPACT YOUR FINANCIAL PLAN

The One Big Beautiful Bill Act passed this summer, and the legislation is, as its name declares, big, in that it makes a wide variety of changes to the tax code. If you want to dive into the minutiae of each provision and what it means for your tax strategy, I recommend consulting your CPA, but for this blog, I’ll give you a high-level overview of the changes that are most likely to impact your financial plan and why they’re important.

The Basics

Many of the provisions made in the OBBBA are helpful simply because they allow for long-term planning. Several of the changes made in the Tax Cuts and Jobs Act were temporary, and this new bill made many of those provisions permanent, so taxpayers have a more definitive outlook on what exemptions and rates they can expect in the coming years. 

For starters, tax brackets and rates are the same, and the standard deduction has been raised to $15,750 for single filers and $31,500 for married couples. The standard deduction will be indexed for inflation, and it’s one deduction that offers equal opportunity for single and married filers, which can’t be said for all of them (see the SALT deduction below).

The higher estate tax exemption is now permanent and will increase from $13.99M per person to $15M per person beginning in 2026, also indexed for inflation. Again, knowing the limit allows taxpayers to plan more proactively and definitively.

New Benefit for Seniors

The bill added a personal exemption for seniors, in lieu of eliminating the Social Security tax. In tax years 2025 through 2028, individuals over the age of 65 can take a $6,000 deduction. This deduction applies to single filers and those filing jointly, so if you and your spouse are both 65 or older, you could receive $12,000, which is a great benefit. For joint filers whose MAGI (modified adjusted gross income) exceeds $150,000 (or $75,000 for single filers), the deduction starts to decrease and is eliminated completely at the $250,000 threshold ($175,000 for single filers).

The SALT Deduction

The State and Local Tax (aka SALT) deduction is what you receive for paying state and local taxes (e.g., property taxes and Georgia income tax), and the cap on this deduction went from $10,000 to $40,000 under the new bill, which is kind of a big deal. It increases every year with inflation, but it reverts to the $10,000 cap in 2030, and it offers the same amount per household whether you file jointly or alone.

It is important to note that the deduction starts to “phase down” to the $10,000 cap if your MAGI exceeds $500,000 (married or single). To that end, if you’re getting close to that amount, you might want to employ some strategies to lower your taxable income, whether by contributing more to your 401(k), Health Savings Account, or deferred compensation plan. If you own a business, you might consider adding some expenses, like purchasing equipment, rather than waiting until the next tax year.

Charitable Deductions

Lots of people don’t itemize because the standard deduction offers a decent benefit, but changes to the tax code might warrant a second look at itemizing. Under the new bill, individuals who do not itemize can receive a $1,000 “above the line” deduction for charitable contributions; married couples filing jointly can receive $2,000, and there’s no minimum donation to receive this deduction.

For those who do itemize, only contributions that exceed 0.5% of your adjusted gross income (AGI) are deductible. So let’s say a married couple makes $300,000, and they donate $30,000 to charity. One half of one percent of $300,000 is $1,500, so only contributions exceeding $1,500 are deductible. In this case, that would mean they could deduct $28,500 (just a few grand shy of the standard deduction).

There is also a cap for this deduction, but it applies only to very large cash donations (that is, 60% of one’s AGI). Meaning if a person makes $200,000 and decides to give everything away, only $120,000 of those donations would be deductible.

One strategy to make the most of itemized deductions is to increase your charitable contributions one year and take the standard deduction the next. Let’s say you typically donate $20,000 a year to charities, but you want to itemize and get a better deduction. You can establish a donor-advised fund and invest $100,000 into the fund, which allows you to receive a $100,000 (minus 0.5% of your AGI) deduction that year. Then you can donate $20,000 from the fund each successive year and take the standard deduction.

529 Plans

Under the new bill, 529 plans can be used for a wider variety of educational needs (e.g., apprenticeships, continuing education, etc.), and the limit on withdrawals for K-12 expenses has increased from $10,000 to $20,000, starting in 2026. This is especially helpful if you have a young child with special learning needs, and you need to give them all the advantages you can before you start planning for college.  

Business Planning

Again, now that more sections of the tax code have been made permanent, people are able to plan more definitively, which is especially helpful for business owners. If you own a business, there are several changes in the One Big Beautiful Bill Act that could impact you, so it’s important to talk to your CPA sooner rather than later. Ask them specifically about opportunity zones, research and development expenses, qualified small business stock, the qualified business income deduction, and bonus depreciation.

Moving Forward with Confidence

There’s a lot to the One Big Beautiful Bill Act, but the key takeaway is that it gives us specific parameters with which to plan. Everyone’s situation is different, so if you’d like to discuss how these provisions impact your particular plan, I’m happy to coordinate with you and your tax professional.