The "One Big Beautiful Bill" Act Overview
The "One Big Beautiful Bill" Act (OBBBA) is a sweeping piece of legislation with many provisions. Before it was passed, many of the provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) were set to expire, or "sunset," on January 1 2026. The OBBBA makes many of the provisions in the TCJA permanent, as well as introducing new ones. The following guide covers some of the most relevant changes and how they might impact you and your loved ones. And, since some of the provisions don't begin until 2026, you may wish to contact your Guardian Financial representative to take action before the provisions do.
Individual Taxes
Income tax rates
Status: Staying the same
The bill makes the individual tax rate cuts from the 2017 TCJA permanent, including top marginal rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
- You should review your potential marginal tax rate with your CPA who can determine which one you might fall into. This could impact your decisions to defer income or accelerate deductions, depending on what year might provide the most tax savings.
- If you are thinking of selling a business or other appreciated asset, you could now consider an installment sale, which might keep you in a lower marginal bracket and spread the tax burden over many years.
Personal Exemptions & Standard Deductions
Status: Staying the same
The bill makes the TCJA's standard deduction increase permanent, including a small permanent increase to 15,750 for single filers and $31,500 for married filing jointly These changes are effective in 2025.
- If you take the standard deduction may pay slightly less in taxes due to the small increase.
Mortgage and home equity loan interest deductions
Status: Staying the same
The TCJA limited the deductibility of mortgage interest to interest on the first $750,000 of the mortgage. The TCJA also excluded interest paid on home equity lines of credit. The OBBBA makes both of these changes permanent.
- If your mortgage is greater than $750,000 and you itemize deductions, you may wish to consider paying down the mortgage as the carrying cost for the interest is higher than if it were fully deductible.
Alternative Minimum Tax (AMT)
Status: Staying the same
The TCJA increased the exemption for the AMT and also increased the level at which the exemption is phased out. The OBBA makes these changes permanent.
- If you have Incentive Stock Options, this could be good news for you. When an ISO is exercised, the difference between the stock's fair market value and the option price is included in AMT for the year in which the exercise occurs. If you have ISOs, you should check in with your CPA or tax advisor before you exercise them to review any AMT implications.
Deduction for State and Local Taxes (SALT)
Status: Changed, effective 1/1/2025
The TCJA limited the deduction for SALT to $10,000. The OBBBA increase that amount to $40 for married filing jointly and $20K for single filers, but with a phase-out that starts at $500K for married filers and $250K for single filers.
- The phase-out reduces the deductible amount by 30% of adjusted gross income greater than the threshold. This could put you in a higher marginal tax rate and create a larger bill. If possible, you may wish to defer income into a later tax year to avoid hitting the higher marginal rate. This should be discussed with your CPA.
- Because the SALT deduction will be available for non-grantor trusts, your attorney could potentially draft multiple trusts to avoid the phase out. For example, in a family with three grandchildren, using three separate trusts correctly would generate $120,000 of SALT deduction.
Qualified Tip Deduction
Status: New, effective 1/1/2025
For occupations that "customarily receive tips," the OBBBA creates a tax deduction for qualified tips. The deduction for any taxable year can't exceed $25,000, and there is a phase out starting at $150,000 of adjusted gross income (AGI), or $300,000 in the case of a joint return. This deduction sunsets in 2029.
- If you are in a profession where you customarily receive tips, you may be able to deduct the tips from your income. You would need to check with your CPA to be sure you meet the criteria.
Car Loan Interest Deduction
Status: New, effective 1/1/2025
The OBBB creates a new deduction for "qualified passenger vehicle loan interest" for personal use up to a maximum deduction of $10,000 for loans incurred after 12/31/2024. A phase out of the deduction beings at $100,000 of modified adjusted gross income (MAGI). The deduction also applies to ATVs, motorcycles, campers and RVs, but not to commercial vehicles.
- If you have purchased a new car in 2025 with a loan, you may be able to deduct the interest. You would need to check with your CPA to be sure you meet the criteria.
Qualified Overtime Deduction
Status: New, effective 1/1/2025
The OBBB creates a new deduction for "qualified" overtime compensation. The deduction is capped at $12.5K for single and $25K for married joint filers, with a phase out starting at an AGI of $150 per year for single or $300K for married filers. The deduction sunsets in 2029
- If you receive overtime, you may be able to take all or part of the deduction.
The "Senior" Deduction
Status: New, effective 1/1/2025
The OBBBA gives seniors an additional $6,000 exemption ($12,000 for couples) provided they are below a certain income threshold, with a phase out starting at an AGI of $75K per year for single or 150,000 for married joint filers. This provision is available to seniors who have attained age 65 in these tax years: 2025, 2026, 2027 and 2028. The deduction sunsets in 2029
- If you are 65 or older in year 2025, 2026, 2027 or 2028 then you may receive the exemption. Your CPA will determine if you qualify.
Charitable deductions
Status: New/Changed, effective 1/1/2026
The OBBBA had three provisions for charitable contributions:
- It created a $1,000 "above the line" charitable deduction for non-itemizers ($2,000 for married filing jointly)
- It created a new threshold for deductions -- contributions must exceed 0.5% of the taxpayer's contribution base to be deductible
- It permanently increases the cash contribution limit from 50% to 60% of income
- If you don't itemize but do make charitable contributions, starting in 2026 you may be able to take advantage of the above the line charitable deduction for up to $1,000 single /$2,000 married joint filers.
- If you have itemized in the past and have not hit the 0.5% threshold, you may wish to increase your charitable contributions to hit the threshold to regain the deduction.
Estate Taxes
Status: Changed, effective 1/1/26
The OBBBA increases the estate tax exemption to $15M per person, which will be indexed for inflation going forward
- If your estate is less than $15M, or $30M if you are married, you may not be subject to federal estate taxes. However, the estate tax exemption level has been modified by Congress many times over the years, and it could be adjusted downward again.
- If your estate is higher than the threshold, amounts above the exemption could be taxed at 40%. Estate planning could be considered to mitigate that tax bite.
Trump Accounts
Status: New, effective 1/1/26
Starting in 2026, parents and others can contribute to a Trump Account up to $5,000 per beneficiary until the account beneficiary reaches the age of 18. Employers can also give up to $2,500 to a Trump Account of an employee or dependent, and while these contributions wouldn't be taxable, they don't give rise to cost basis, meaning they would be taxed on distribution. For children born between December 31, 2024 and January 1, 2029, the U.S. Government will give each child $1,000 to start a Trump Account, unless the taxpayer elects out of the funding of the account.
- If you have children who qualify, a Trump account could provide an additional saving opportunity for them. These accounts and their provisions can be complex and a full description is too long to be presented here. For more information, see Guardian's piece "Tax Reform: What You Need to Know About the New Tax Bill"
Business Taxes
1
Corporate income tax rate
Status: Staying the same
The TCJA reduced the corporate income tax rate to 21%, and the OBBBA makes this change permanent
Additionally, the bill reinstates 100% immediate expensing for capital developments. The bill similarly allows small businesses engaged in domestic research and development immediate expensing of R&D costs.
These changes are permanent
2
199A Pass-Through Business Deduction
Status: Changed, effective 1/1/2026
The TCJA introduced the Section 199A deduction, which allowed taxpayers to exclude up to 20% of their income from pass-through businesses from federal income tax, subject to a phase out.
This deduction was set to expire in 2026 and the OBBBA made it permanent. Additionally, the OBBBA increased the phase out was increased from $50K to $75K.
- If your business is a pass-through entity like an S Corporation, partnership, or sole proprietorship, you may be eligible for a higher 199A deduction. Consult your CPA.
It's often said the only two things you can be sure of are death and taxes – and even taxes can change. While the OBBBA provides more clarity for the tax environment over the next four years, you can be sure there will be other changes ahead. Now is the time to reach out to your advisors about your situation and to discuss the planning opportunities that may be appropriate for you.
To learn more, contact SageFolio Advisors today.
