The One Big Beautiful Bill (“OBBB”), signed into law by President Trump on July 4, 2025, represents the most significant tax legislation since the Tax Cuts and Jobs Act of 2017 (“TCJA”). The legislation has made permanent many of the key provisions from TCJA that were set to expire at the end of 2025 and enhances several areas for both individuals and businesses.
Estate Planning Tax Provisions
Estate, Gift, and Generation Skipping Transfer Tax Exemptions: Beginning in 2026, the OBBB permanently increases the estate, lifetime gift, and generation-skipping transfer tax exemptions to $15 million per individual ($30 million per married couple). The amount will continue to be adjusted for inflation after 2026. Under TCJA, these exemptions were set to be cut in half to an estimated $7.25 million, adjusted for inflation.
Individual and Family Tax Provisions
Income Tax Rates: The lower income tax rate brackets from TCJA were set to “sunset” and increase after 2025. The OBBB has made these lower rates permanent. Furthermore, the bill adds an additional year of inflation adjustment to the dollar amounts at which the 10% and 12% rate brackets end and the 22% bracket begins.
Source: IRS.gov
Standard Deduction: TCJA had created increased standard deduction amounts which, once again, were set to expire after 2025. The OBBB has made these increased standard deduction amounts permanent along with increasing them for 2025 to $15,750 (up from $15,000) for single and married filing separately filers and $31,500 (up from $30,000) for married filing jointly filers. These increased amounts will be adjusted from inflation for subsequent years.
Itemized Deduction Limit: The OBBB permanently removes the Pease limitation on itemized deductions and replaces it with a reduction in overall limit on itemized deductions of the lesser of 2/37th of the taxpayers (1) amount of itemized deductions; or, (2) the amount of taxable income that is above the amount that starts the 37% tax bracket.
State and Local Tax (“SALT”) Deduction: The OBBB temporarily increases the itemized deduction limit for SALT to $40,000 from $10,000 in years 2025 through 2029. However, the amount of the deduction begins to phaseout for a taxpayer with modified adjusted gross income (“MAGI”) over $500,000 with full phaseout once over $600,000. If a taxpayer is fully phased out of the increase, they will maintain the minimum SALT deduction of $10,000. Both the deduction amount and MAGI will be increased each year by 1% beginning in 2026. Tax years after 2029, the SALT deduction will revert back to $10,000.
Personal Exemptions: As with TCJA, the OBBB permanently reduces any personal exemption deductions to zero.
No Tax on Tips and Overtime Income: In years 2025 through 2028, the OBBB provides a deduction up to $25,000 for qualified tips and up to $12,500 ($25,000 for joint filers) of qualified overtime compensation. There is a phase out for each that begins at $150,000 of AGI for non-joint filers and $300,000 for those who are married filing jointly.
Senior Deduction: For tax years 2025 through 2028, taxpayers who are aged 65 or older, will have an additional deduction of $6,000. This new senior deduction begins to phaseout for individual and married filing separately filers with adjusted gross income over $75,000 and married filing joint over $150,000.
This new senior deduction is in response to the campaign promise by President Trump of eliminating income tax on Social Security Benefits. The Tax Foundation conducted a study on how this senior deduction compares to no income tax on Social Security benefits. It found that the largest benefit will be recognized by lower-middle and middle-income quintiles as represented below:
Child Tax Credit: Beginning in 2025, the child tax credit is permanently increased from $2,000 to $2,200 (with $1,400 being refundable) and is indexed for inflation for subsequent years. The phase out thresholds of $200,000 ($400,000 for those married filing jointly) were also made permanent.
Furthermore, it permanently extends the $500 credit for each dependent who is not a qualifying child, but the amount will not be adjusted for inflation.
Child and Dependent Care Credit: The OBBB permanently raises the maximum credit rate from 35% to 50% of qualifying child and dependent care expenses. The credit begins to phase down after $15,000 of AGI by 1 percent for each $2,000 over $15,000 (but not less than 35%) with further reduction (but not less than 20%) of 1 percent for each $2,000 that AGI exceeds $75,000 ($150,000 for joint filers).
Mortgage Interest Deduction: TCJA limited the amount of the qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt which was set to “sunset” after 2025. The OBBB has made the limit permanent along with the disallowance of any home equity indebtedness that was not used to buy, build or substantially improve the taxpayer’s home which secures the debt.
Auto Loan Interest: The OBBB establishes a new deduction up to $10,000 of interest on passenger vehicle loans that are assembled domestically for tax years 2025 through 2028. They have established a phase out for non-joint taxpayers with MAGI over $100,000 and $200,000 for those taxpayers who are married filing jointly.
Charitable Contribution Deduction: Beginning in 2026, the OBBB allows those who do not itemize their deductions to claim a new deduction up to $1,000 for single filers and $2,000 for married filing jointly filers for certain charitable contributions. Additionally, beginning in 2026, it creates an itemized deduction floor of 0.5% of AGI for charitable contributions by individuals and 1% for corporations.
Credit for Scholarship-Granting Organization Contributions: Beginning in 2027 and after, the OBBB creates a new credit of $1,700 for charitable contributions made to scholarship-granting organizations.
Newly Created or Expanded Investments
Trump Accounts: After 12 months from the date of enactment of the OBBB, a new savings accounts for individuals under age 18 will be available for funding. The Trump accounts cannot be accessed prior to the calendar year in which the child turns 18. For the calendar year which the child attains age 18, the account will be an individual retirement account (“IRA”) under the tax code. Post-tax contributions of up to $5,000 can be made for individuals up to the calendar year in which the child attains age 18. The contribution limit will be adjusted for inflation beginning after year 2027.
Under the Act, the Treasury can setup accounts for qualifying children born in 2025 through 2028 with a one-time $1,000 credit. Additionally, employers may choose to use the Trump accounts as an additional employee benefit. An employer could match up to $2,500 annually.
529 Plan Qualified Expenses: The OBBB has expanded the use of 529 Plans to include more K-12 and homeschool expenses, along with special education and post-secondary credentialing expenses. This newly expanded flexibility may cover items such as curriculum materials, books, digital content, tutoring, and testing fees (i.e. AP, SAT) to name a few.
Opportunity Zones (“OZ”): Under TCJA, OZs were created and in effect through 2028 which allowed investors to defer and potentially exclude capital gains for funds invested in support of designated low-income communities. The OBBB has made these OZs permanent with a rolling 10-year designation beginning in year 2027.
Key Business Provisions
Section 179 Expensing Limit: The OBBB permanently increases the maximum annual deduction for qualifying equipment purchases to $2.5 million and the phase-out threshold to $4 million. Both are adjusted for inflation beginning in 2026.
Bonus Depreciation: For business property acquired and put into service on or after January 19, 2025, the OBBB permanently extends the first-year depreciation deduction to 100%.
Special Depreciation for Qualified Production Property: The OBBB introduces a new category of property known as Qualified Production Property, which is eligible for bonus depreciation. It refers to nonresidential real estate used in manufacturing where construction begins after January 19, 2025 and before the end of year 2028. The new construction property needs to be placed into service by the end of 2030.
Qualified Business Income (“QBI”) Deduction: The OBBB permanently extends and expands the 20% QBI deduction which was introduced under TCJA. Phase-out amounts were increased to $75,000 for non-joint filers and $150,000 for married filing jointly. A new minimum deduction of $400 is created for those earning at least $1,000 in QBI from eligible businesses. Lastly, certain professional service providers, such as CPAs, physicians, architects, and consultants.
Research and Development Expenses: The OBBB permits taxpayers to immediately deduct domestic research or experimental expenses incurred in tax years after December 31, 2024. However, expenses related to research conducted outside the United States must still be capitalized and amortized over 15 years. Additional planning opportunities exist for small businesses with $31 million in gross receipts or less to apply rules retroactively to post-2021 tax years.
Qualified Small Business Stock (“QSBS”): For any QSBS acquired after the date of enactment of the OBBB, 75% of gain is excluded from gross income if held more than 4 years with 100% exclusion of gain if held more than 5 years. The gain exclusion limit is increased to $15 million (or 10 times basis) and the gross asset limit at purchase is increased to $75 million. Both limits are indexed for inflation after year 2026.
What This All Means for You
The OBBB brings long-awaited clarity and stability to the tax landscape. With many popular provisions from TCJA now made permanent, and several new benefits introduced, individuals, families, and business owners can plan with greater confidence.
Whether you’re saving for retirement, investing in your business, or planning your estate, the changes in this legislation offer meaningful opportunities to reduce your tax burden and enhance your financial strategy. From expanded deductions and credits to new savings tools and investment incentives, the OBBB is designed to support long-term growth and financial security.
As always, we’re here to help you understand how these changes apply to your unique situation. Please reach out to your HBKS advisor to discuss how you can take full advantage of the new rules and optimize your financial plan .
Sources: One Big Beautiful Bill tax information – H.R.1 – 119th Congress (2025-2026): One Big Beautiful Bill Act. (2025, July 4). https://www.congress.gov/bill/119th-congress/house-bill/1/summary/00
Important Disclosures
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