As we flip our calendars to August, many of us find ourselves savoring the final stretch of summer by balancing travel, barbecues, and last-minute adventures with family and friends. At our house, we are tackling the remaining items on our summer bucket list and doing our best to squeeze them into an already full calendar. I imagine many can relate, with fall around the corner and the early signs of the holiday season already creeping into store aisles.
As the season begins to shift, so too does our collective focus. We move from vacations and leisure back to progress and responsibilities. While it may have slipped under the radar amidst summer travels and celebrations, a substantial piece of tax legislation was signed into law on July 4th: the One Big Beautiful Bill Act (OBBBA). Despite its playful name, this bill includes actionable items, which extend key provisions, introduce notable changes, and create new planning opportunities for many Americans.
Over the coming months, we will explore these updates more deeply in our meetings. However, in the meantime, we have outlined a high-level overview of the most impactful provisions below. Several of these changes are already in effect, while others are slated to begin in 2026 or 2027. As always, we see this as an opportunity to think proactively, using outside-the-box, tailored strategies that align with your broader goals.
Change |
Description |
Effective Date |
Phase Outs/Notes |
General Impacts |
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| Additional Senior Deduction for Ages 65+ | Provides taxpayers age 65+ with an additional tax deduction of $6,000 (Single) and $12,000 (MFJ). | Immediately | $75,000 – Single $150,000 – MFJ |
| State and Local Tax (SALT) Deduction Increase | Increases the SALT deduction cap from $10,000 to $40,000 starting in 2025, indexed to 1% inflation annually through 2029. | Immediately | *Effective 2025 Phase Out: $500,000 |
| Auto Loan Interest Deduction | Allows a deduction of up to $10,000 in automobile loan interest. | Immediately | $100,000 – Single $200,000 – MFJ |
| Tax Bracket Continuation | Extends the 10%, 12%, and 22% tax brackets permanently, with annual inflation indexing, avoiding the 2025 sunset. | Immediately | |
| Standard Deduction Increase | Increases the standard deduction in 2025 to $31,500 (joint) and $15,750 (single), with inflation adjustments thereafter. | Immediately | |
| Mortgage Interest Limit Made Permanent | Limits the mortgage interest deduction permanently to interest on up to $750,000 of mortgage debt ($375,000 if filing separately). | Immediately | |
| Estate Tax Exemption Increase | Raises the estate tax exemption to $15 million per person beginning in 2026, with annual inflation adjustments. | 1/1/26 | $30 million for a married couple, when portability is properly completed. |
| Business Tax Provisions Permanent | Makes permanent: R&D expensing, 100% bonus depreciation, and the 20% pass-through deduction under Section 199A (also known as QBI: Qualified Business Income.) | See Act | |
Impacts for Parents/Grandparents |
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| Dependent Care Flexible Spending Account (FSA) Limit | Raises the employer-provided dependent care assistance cap from $5,000 to $7,500. | 1/1/26 | |
| 529 Plan Expansion | Increases the annual limit (on K-12 related expenses) from $10,000 to $20,000, while expanding qualified education expenses. | 1/1/26 | |
| Trump Accounts (Babies Born 2025-2028) |
Establishes tax-advantaged accounts treated similarly to IRAs but without an earned income requirement. Max contribution of $5,000 per year for children under 18, of which $2,500 can be made by the parent’s employer. Treasury seeds accounts for babies born 2025-2028 with $1,000. Distributions are taxed as income except for parental contributions. | Contributions cannot be made until 7/4/2026 | Accounts will be custodied at the Treasury Department. Many questions surrounding these accounts still exist and the future of funding is unknown. |
Impact on Charitable Giving |
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| Charitable Deduction (Non-Itemizers) | Provides a below-the-line charitable deduction of up to $1,000 (Single) or $2,000 (MFJ) for taxpayers who do not itemize. | 1/1/26 | |
| New 0.5% AGI Floor for Individual Charitable Deductions | Subjects charitable deductions to a 0.5% AGI (Adjusted Gross Income) floor, reducing the deductible amount eligible for itemization. Unused deductions may be carried forward or lost, depending on the taxpayer’s situation. | 1/1/26 | |
| New 1% Taxable Income Floor for Corporate Charitable Deduction | Limits corporate charitable deductions to amounts exceeding 1% of taxable income. Maintains existing 10% cap and 5-year carryforward. | 1/1/26 | |
| Reduction to 37% Itemized Deduction Threshold | Reduces itemized deductions by 2/37 for taxpayers in the 37% tax bracket, effectively limiting the benefit of itemized deductions to 35% for top tax bracket households. | 1/1/26 | |
| Tax Credit for K-12 Scholarship-Granting Organizations | Offers a nonrefundable credit of up to $1,700 per taxpayer, or 100% of the gift (whichever is lower), for contributions to K–12 scholarship-granting organizations. | 1/1/27 | The federal credit is offset by any state credit received for the same contribution. |
Impacts on Wages |
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| Tip Income Deduction | Allows workers earning tips to deduct up to $25,000 of tipped income from federal taxes. | Immediately | $150,000 – Single $300,000 – MFJ |
| Overtime Pay Deduction | Allows workers earning overtime pay to deduct $12,500 ($25,000 for married couples) from federal taxes. | Immediately | $150,000 – Single $300,000 – MFJ |
Interesting |
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| New Tiered Endowment Tax | Establishes a new tiered endowment tax on university endowment earnings, with rates from 1.4% to 8%. Applies to private colleges with more than 3,000 tuition-paying students; public colleges are exempt. | 1/1/26 | |
| Qualified Opportunity Zones | Creates a more permanent version of Qualified Opportunity Zones with a narrower scope and updated rules. | 1/1/27 | |
Disclosure:
The information provided in this article is for informational and educational purposes only and is SOLELY intended to offer a high-level overview of recent changes in tax laws. It does not constitute tax, legal, or financial advice, and should not be relied upon as such. This content does not cover all aspects or details of the tax law changes and may not apply to your specific situation. Before making any decisions or taking any action based on this information, you are strongly encouraged to consult with a qualified tax attorney or Certified Public Accountant (CPA).
