The One Big Beautiful Bill, now OBBB Act, was…. big. TGIF 2 Minutes is all about giving as complete and concise a message as possible. There will be follow-ups to the OBBBA, and as one analyst concluded, the “2026 Surprise” will come with “patches” to various wordings and actual applications of parts of the OBBBA, similar to the Secure Act – in particular referencing “patches” that came over time to the Secure Act for required minimum distributions from Inherited IRAs.
The OBBBA is far too BIG to be summarized by any one person. Although several nuggets can be highlighted, followed up by more highlights and so on. Here are a handful of major topics, with brief explanations. These are meant to spur questions and conversations that are relevant and unique to each client and each person.* Also, important – please keep in mind that due to the relatively higher wealth and income of most folks reading today, income phase-outs of lots of these provisions make a number of them less impactful (perhaps a “quality problem” to have?).
- INFLATION ADJUSTMENTS TO TAX BRACKETS
This is one of the most basic – the brackets and rates stay the same AND get an inflation expansion; but even the “inflation bump” to the brackets does not meaningfully affect those making over $300,000. For those making less (in retirement?) there could be a small tax savings – and I mean small.
- INCREASED STANDARD DEDUCTION
There will be an increase in the number of taxpayers who can take the increased standard deduction and will NOT need to itemize (thus saving on CPA costs?).
- CHARITABLE GIVING CHANGES
There is a new “floor” to the % of Adjusted Gross Income (AGI) that must be donated in order to get a charitable deduction. BUT, even if a taxpayer does NOT itemize there is a way to get a small (and I mean small) deduction for charitable contributions. Exceptions apply.
- ITEMIZED DEDUCTION LIMITATION
For the highest income generators there will be a slight (and sometimes not so slight) loss of benefit when itemizing.
- ENHANCED SENIOR DEDUCTION
There is an extra deduction of $6,000 for individuals age 65 and over… BUT!! there is a phase-out of this provision for taxpayers with Modified Adjusted Gross Income (MAGI) of over $75,000 for single filers and $150,000 for married filing jointly. Ask your CPA!
- SALT (State and Local Taxes) Deduction Cap
This was obviously one of THE most contentious (and expensive) items of the OBBBA. The SALT cap increases to $40,000 BUT there are phase-outs for high income generators of over $500,000 and $600,000 of joint income and $250,000 and $300,000 for single filers, respectively. The minimum $10,000 SALT cap stays in place for even the highest income generators.
- TAX CREDITS THAT WILL EXPIRE @ END OF 2025
One interesting tax credit that will EXPIRE is the energy efficient home credit. Therefore, it has been said to DO ENERGY EFFICIENT HOME IMPROVEMENTS IN 2025. There are other tax credits that will expire or phase out in 2026.
- And… finally, TRUMP ACCOUNTS. These accounts will not come into being until 2026. Their provisions look extremely similar to traditional IRA accounts. Contributions will NOT be deductible. But these could be a great starter IRA for kids’ futures. More to come on these.
*Consult with a tax professional on ALL tax matters and tax planning.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.