What the One Big Beautiful Bill (OBBB) Will Mean For Your Financial Plan

The One Big Beautiful Bill (OBBB) passed last week. What does this mean for you? We are going to look at nine (9) items that may affect you from a tax perspective and in conjunction with this, the potential impact to your overall financial plan.

• First up: The tax rates will stay the same. The OBBB made the Tax Cut & Jobs Act (TCJA) tax brackets "permanent". I write in "permanent" in pencil, as this may change with the next election. But all the same, this is welcome news and makes our planning easier as we do not have to revert to the 2017 tax brackets.  Secondly, the standard deduction for 2025 got a bump to $15,750 single and $31,500 married. Previously for 2025 those deductions would have been $15,000 and $30,000.

• Number two is the additional bonus deduction for seniors 65+. This is an additional $6,000 single or $12,000 married on top of the standard deduction, or the itemized deduction. It works for both methods. There is however a 6% phase-out rate for those making over $75,000 single or $150,000 married (MAGI). The deduction phases out completely for income above $175,000 single and $250,000 married. So the notion about Social Security taxes going away is not correct. The taxes on Social Security are still in place; these additional deductions simply move to help offset those taxes. From a planning perspective, this new deduction is very useful in structuring retirement income and distribution strategy.

• Number three is an addition of a "permanent" below the line charitable deduction for 2026. The limit on this is $1000 single and $2000 married. This is valid for both those who take the standard deduction or the itemized deduction. There is a 0.5% floor on charitable contributions for those itemizing in 2026. That means only the portion of charitable contributions that exceeds 0.5% of their adjusted gross income (AGI) will be deductible. There is also some nuance here in terms of the type of charitable contribution that applies. For financial planning, and dependent on the situation, one might accelerate or bundle their giving in 2025 to take advantage of the current rules.

• Up next is a new tax-advantaged savings account for minors. This account would be pre-funded with $1000 for each child born between 2025 and 2028. You can make contributions of up to $5000 annually to this account. The investment options are limited to mutual funds and equity indices. There are no distributions allowed prior to age 18. Once the minor is 18, the account is treated as an IRA. There is forthcoming guidance on these accounts to help clarify the rules. For planning, we would add this savings account into the college savings and retirement equations.

• Up at number five is the mortgage interest deduction. The rules surrounding this deduction are now "permanent", starting in 2026. Mortgage interest is deductible on $750,000, as well as mortgage insurance premiums (PMI) are now deductible.

• For business owners, the 20% Qualified Business Income or QBI deduction is now "permanent". This reduces your taxable income by 20%. There are quite a few components to unpack on this one and worthy of a separate discussion if this applies to you.

• For estate planning, the TCJA estate and gift thresholds are now "permanent". The lifetime exemption amounts are $15m single and $30m married, starting in 2026. This is a significant increase from $13,990,000 in 2025. These exemption amounts will be indexed for inflation year to year wiih no sunset. The unused portion of a decedent’s federal estate/gift tax lifetime exemption continues to be portable to a surviving spouse. Lastly, the unused portion of a decedent’s federal generation-skipping transfer tax (GST) lifetime exemption is not portable to a surviving spouse.

• At number eight, State and Local Taxes, or SALT. The cap on this is increasing from $10,000 to $40,000 for 2025. It increases by 1% a year and reverts to $10,000 in 2030. This deduction is phased out for MAGIs above $500,000. This is going to have no effect on those in Alabama, but if you reside in a higher tax state, this will be a help for sure.

• Lastly, everyone's favorite tax, the Alternative Minimum Tax or AMT. Most of us are not subject to this and the change in the OBBB will exempt even more regular taxpayers. Those with higher incomes however may get caught into this separately calculated tax.

There you have it. I hope this helpful to you. If you have any questions about these or want to discuss any of the changes and what it might mean for your finances, please reach out to let us know!