Breaking Down the One Big Beautiful Bill Act

Quick Take

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4th, replacing the Tax Cuts & Jobs Act of 2017. 

The OBBBA extended most of the key provisions established under the Tax Cuts and Jobs Act of 2017; however, there are several of new components worthy of review to ensure your approach to tax planning remains appropriate.

The majority of the OBBA’s provisions will take effect in 2026; however, certain components will impact your 2025 tax filing.

The One Big Beautiful Bill Act (OBBBA) was passed by Congress and signed into law by President Trump on July 4, 2025. While its primary goal is to extend the key provisions of the Tax Cuts and Jobs Act (TCJA), the law also introduces several changes that could affect your taxes and broader financial plan. 

Tax Brackets

• The OBBB permanently extended the marginal tax brackets created under the Tax Cuts and Jobs Act of 2017. (10% - 12% - 22% - 24% - 32% - 35% - 37%)

Standard Deduction

• As expected, the elevated standard deduction is here to stay. 

• For those using the standard deduction, the updated version of the bill provided a “Christmas in July” by way of a $1,500 and $750 increase to the 2025 standard deduction for married and single taxpayers, respectively. 

Filing Status Pre-OBBB OBBB

Single 15,000 15,750

Married Filing Joint 30,000 31,500

Married Filing Separately 15,000 15,750

Head of Household 22,500 23,625

Bonus Deduction for Seniors

• Each taxpayer aged 65 or above will receive an additional $6,000 deduction. 

• The bonus deduction is not associated with the standard deduction; therefore, taxpayers are eligible for the bonus deduction regardless of whether they use the standard deduction or itemize. There is an income-based phaseout for the bonus deduction:

  • Single: $75,00 – $175,000 (fully phased out)

  • Married: $150,000 - $250,000 (fully phased out)

• The bonus deduction is not a permanent fixture in the OBBB and is set to expire following the 2028 tax year.

State and Local Tax Deduction (SALT)

• The deduction for state and local taxes was by far one of the heaviest debated provisions in the OBBB.

• The previous deduction limit of $10,000 has been increased to $40,000 through 2029; however, there is an income-based phase-down to the deduction. 

• Each dollar earned above $500,000 will reduce the deduction by 30 cents. 

• Households with Adjusted Gross Income of $600,000 or more will be subject to the current SALT cap of $10,000. 

New Charitable Deduction

• Starting in 2026, taxpayers will be able to deduct part of their charitable contributions, even if they utilize the standard deduction. 

• Married taxpayers can deduct up to $2,000 for charitable gifts, while all other taxpayers may deduct $1,000. 

Itemized Charitable Deductions

• Beginning in 2026, the deduction for itemized charitable gifts will be capped at 35% - even for taxpayers in the 37% marginal bracket. 

• For example, a $10,000 donation could yield a maximum deduction of $3,500 instead of the $3,700 deduction under current TCJA rules.  

• Deduction Floors: Charitable deductions are only deductible to the extent they exceed 0.5% of your household adjusted gross income (AGI). If your AGI is $1 million, only donations above $5,000 would be deductible. 

• Planning Considerations: High-income earners may want to accelerate large gifts into 2025 to benefit from the current full rate deductions. Additionally, consider bunching charitable contributions into fewer, larger gifts to clear the AGI-based deduction floor. 

Estate & Gift Tax Exemption

• The OBBA permanently increased the estate and lifetime gift tax exemption to $15 million for single filers and $30 million for married taxpayers. 

• The exemption will continue to receive annual inflation-linked adjustments. 

Trump Account Pilot Program

• Children born between 2025-2028 are eligible to participate in the Trump account pilot program. 

• Eligible account owners will receive a credit of $1,000 to seed the account. According to reports, the credits may be available as early as July 2026.

• Contributions: Up to $5,000 per year, indexed for inflation beginning in 2028, until the child reaches 18 years of age. 

• Distributions: Generally, are not allowed before age 18. Owners may begin making distributions at age 18 for qualified expenses. 

• Qualified Expenses: College tuition, professional credentialing, small business expenditures, & first-time home purchases. 

• Tax Status: Distributions for qualified expenses are taxed at long-term capital gains rates. Distributions for non-qualified expenses are subject to ordinary income tax rates and penalties if taken before age 59 ½. 

• Should I open a Trump Account for my child? If your child qualifies for the $1,000 account opening credit, go for it! Beyond that, these accounts are less powerful and more convoluted than traditional child savings options such as 529 accounts and Uniform Transfers to Minors Act (UTMA) Accounts.  

Final Thoughts

The One Big Beautiful Bill Act introduces a range of tax changes that could impact your forward-looking tax and financial planning strategies. While this is not a comprehensive analysis of the 900+ page bill, our goal is to prioritize the topics we believe could have an immediate impact on how you approach tax planning moving forward. 

As always, tax law is complex, and its impact will vary depending on your unique financial situation. Please reach out to us if you have any questions or would like to explore how these changes may affect your tax and long-term financial goals. 

Contact us at 865-584-1850 or info@proffittgoodson.com

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