Since President Trump took office in January, there has been a lot of discussion about tax laws and what might change with the sunset of the TCJA of 2017 at the end of this year. On July 4th, the One Big Beautiful Bill Act (OBBBA) was passed into law, which not only addressed some important tax decisions, but also added some other provisions and new planning opportunities. Some of these changes will have larger implications for your personal finances than others. Unfortunately, there has also been some misinterpretation of the new law circulating, which we hope to correct to the best of our knowledge.

Affordable Care Act Provision Changes

As it stands today, there is an opportunity to get a subsidy or tax credit to offset health insurance premiums on the marketplace through the ACA. As income for an individual or married couple rises, the subsidy is slowly phased out. The change made by the OBBBA will put back into place a limit of four times the federal poverty level as the threshold for receiving a subsidy, meaning that anyone making over that amount gets no subsidy at all. For those that have been receiving a subsidy for marketplace health insurance, this could decrease the amount received or eliminate the subsidy altogether.

Income Tax Bracket Changes

Many people have been curious about whether this administration would allow the tax brackets to sunset at the end of the year. The OBBBA made these tax brackets permanent, effectively extending the TCJA provisions, which is positive for taxpayers, as these rates are more favorable than the previous law. 

Social Security Taxability

Over the last few weeks, there have been many false or misleading statements made by various groups regarding the taxability of Social Security benefits at the federal level. Despite these statements, Social Security remains taxable in the same way it has been in the last several years. Up to 85% of benefits are taxable at the taxpayer’s marginal tax rate. In some cases, 0% or 50% of benefits are taxable depending on income. While the taxation of Social Security did not change, the income limits with respect to determining what percentage of benefits are taxable did increase. 

Some states have chosen to exempt Social Security benefits from state taxes, and Kansas and Missouri are two of those states as of last year. This is on a state-by-state basis.

Additional Standard Deduction for Taxpayers over Age 65

One major change is the additional deduction for individuals over age 65. In addition to a slightly increased standard deduction for all taxpayers, those over age 65 get an additional $6,000 per taxpayer deduction whether you choose to take the standard deduction or itemize from 2025 to 2028 subject to income limitations. 

Child Tax Credit

The child tax credit was originally set to be $2,000 in 2025 and decrease in 2026 with the sunset of the TCJA. The OBBBA increased this tax credit to $2,200 for 2025 and is indexed for inflation going forward. 

SALT Deduction

SALT stands for state and local taxes. There has been an opportunity to deduct these expenses previously, but only up to $10,000 cap. This cap was instituted with TCJA of 2017.   Most taxpayers do not utilize this because they are required to itemize to take advantage of the deduction. The SALT cap per the OBBBA has been increased to $40,000 in 2025 and indexed for inflation but sunsetting back down to $10,000 in 2030. This change could temporarily make it easier to itemize, especially for those with higher state and local taxes. 

Vehicle Loan Deduction

As a new provision, taxpayers can deduct up to $10,000 in vehicle loan interest (without needing to itemize) for tax years 2025-2028 with certain income limitations. One caveat is that the new vehicle must have had final assembly in the United States. To qualify, the loan must have been taken out after 12/31/2024.

Charitable Donation Deduction

Even if taxpayers are unable to itemize, beginning in 2026 they can take advantage of a deduction for charitable contributions up to $1,000 for single taxpayers and $2,000 for married filing jointly taxpayers. For those taxpayers who itemize and have a charitable donation deduction, a limit will now be applied to the first 0.5% of AGI.  For example, if an individual has AGI of $100,000, the first $500 of charitable donations would not be deductible as an itemized deduction. 

Deduction for Tips and Overtime

For tax years 2025-2028, there is a $25,000 deduction for tip income subject to limitations based on gross income. This applies to industries that customarily receive tips such as restaurant staff, cosmetologists, etc. Additionally, for tax years 2025-2028, there is a new deduction for qualified overtime income of $12,500 for single taxpayers and $25,000 for MFJ taxpayers. 

Tax Credits for Energy/Green Purchases

Many of these credits have been repealed by the OBBBA going forward. 

Estate Tax Exclusion

The estate tax exclusion, or the amount of your estate that is not taxable at your death, was set to sunset at the end of this year with the TCJA. The OBBBA permanently increased the exclusion to $15 million per person indexed for inflation beginning in 2026. 

Trump Savings Accounts

One new provision of the OBBBA is a new savings account for each child born in the U.S. between 2025 and 2028. The government is set to make a $1000 contribution to these accounts, and parents/grandparents or other individuals can also contribute to these accounts on an annual basis until the child reaches age 18. No contributions can be made, however, until one year from the date the law went into effect, which will be July 4, 2026. At age 18, the account becomes similar to an IRA in that there are penalties for accessing dollars before age 59.5. There are many uncertainties around these accounts. Stay tuned for more information over the next year as the rules are clarified. 

While this is not a comprehensive list of all the changes in the OBBBA, these changes are most likely to impact a majority of people. There are many other provisions, some that specifically impact business owners and others. If you have questions about how the OBBBA may impact you and your finances, we encourage you to come visit with your Advisor or a member of our Financial Planning Team. We are glad to talk through any questions you may have.