What the “Big Beautiful Bill” Means for Your Taxes
By Carl Lachman, MBA, CFP®
A summary of our Tax Update Reception discussion by Mike Giangrande and Carl Lachman on September 10, 2025.
The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and with it comes many new tax provisions that may directly affect you. There are many more tax provisions contained in OBBBA beyond the ones we have noted below. The provisions we highlight in this article are the ones that will probably have the most immediate impact on you.
Extension of Expiring Tax Provisions
The center point of OBBBA is a permanent extension of most of the provisions of the Tax Cuts and Jobs Act of 2017 that apply to individual taxpayers and were scheduled to expire at the end of 2025. These provisions include the following, among many others:
Lower income tax brackets with the top rate at 37% instead of 39.6%.
A higher standard deduction, with an additional $6,000 deduction for taxpayers age 65 and over ($12,000 for married taxpayers who are both age 65 and older).
The permanent extension of the §199A 20% qualified business income deduction for business owners, with minor modifications.
The increased unified estate and gift tax exclusion, with a bump up to $15 million on January 1, 2026.
State and Local Tax Deductions
The itemized deduction for state and local taxes (SALT) is temporarily increased from $10,000 to $40,000 for five years. The increased deduction is reduced for higher earners (those whose modified adjusted gross income exceeds $500,000, or $250,000 for married taxpayers filing separately).
Taxpayers who are owners of passthrough business entities and make a passthrough entity elective tax election can still use the election to maximize their SALT deductions.
Elimination of Energy Credits
OBBBA terminates many energy credits much earlier than their previously scheduled expiration date, including:
All three clean-vehicle credits are disallowed for vehicles acquired after September 30, 2025.
Both credits for home energy improvements expire after December 31, 2025.
What these early expiration dates mean is that if you want to claim a credit for the purchase of a clean vehicle, then you must take delivery of the vehicle no later than September 30, 2025. Keep in mind that there are multiple limitations to claiming the clean vehicle credits, so clients will want to discuss those requirements with us if you are contemplating an eligible vehicle before the credits expire.
For the home energy credits, your projects must be completed by December 31, 2025, to qualify. Eligible improvements include the installation of energy-efficient windows, doors, air conditioners, solar panels, and home batteries, among many others.
Charitable Contribution Deductions
Charitable contributions are subject to two new OBBBA provisions going into effect in 2026:
Non-itemizers can claim a $1,000 charitable deduction ($2,000 for married taxpayers filing jointly) starting in 2026.
Charitable contribution itemized deductions will be subject to a 0.5% AGI floor, starting in 2026.
Clients should discuss gifting strategies with us before the end of 2025 and how the nature of your contributions and their timing can maximize your tax deductions. That way, you don’t lose deductions due to the new AGI floor for itemized deductions.
Brand-New Deductions
Three brand-new deductions for individual taxpayers are available starting in 2025. These deductions may be known better by what they’ve been called in the news: (1) No tax on tips; (2) no tax on overtime; and (3) no tax on qualified car loan interest. Each of these provisions contains multiple limitations that should be investigated, if any of these potentially apply to you.
Business Provisions
In addition to the tax provisions applicable to individual taxpayers, OBBBA contains many business provisions, including:
Permanent 100% bonus depreciation rate for assets acquired after January 19, 2025.
An increased §179 expensing limitation for assets placed in service after December 31, 2024.
Immediate expensing of research expenses with a special election to immediately deduct previously capitalized research expenses.
An easing of the business interest limitation rules.
WEP Elimination
If someone has a pension from government work, such as teachers and state employees, their Social Security payments were reduced in the past. Now that reduction—or WEP (Windfall Elimination Provision)—has been eliminated.
Earlier this year, many people received a big check when WEP was eliminated, but no taxes were withheld. These people may need to pay quarterly estimated taxes or use the “Social Security Lump Sum Payment” option on their 2025 federal tax return.
Individual Trust Accounts for Minors
These are new tax-deferred accounts for 0- to 18-year-old minors and are being called “Trump Accounts.” Up to $5,000 can be contributed per year, but no distributions can be taken before the beneficiary is 18 years old.
Contributions are not tax-deductible but can be made by parents and grandparents. Distributions from the accounts are taxable as income, but they can be rolled into regular IRAs after the beneficiary turns 18 years old.
Changes to 529 College Accounts
Money in 529 accounts can now be used to pay for not just college but also a wider range of K-12 expenses. The best use of 529 accounts, however, is when money is contributed and then left in the accounts for as long as possible so that the tax-deferred growth can happen for a long period of time. So, taking the money out quickly for grammar school expenses is not ideal.
Contact us
There are caveats and phaseouts for most of these new tax code changes for individuals and joint taxpayers, and for small businesses. Please contact us if you would like to discuss any of these provisions in detail or would like to discuss planning opportunities arising from these changes.