Decoding the One Big Beautiful Bill: What the New Tax Law Means for You

With President Trump signing the One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025, many people are trying to wrap their heads around the new legislation. This almost 900-page sweeping legislation impacts a variety of sectors, and you may be wondering, How will this information affect me? And what new financial planning opportunities are available?

In order to answer those questions, we recommend that you begin by making sure your current information is organized and your annual financial plan is up to date. If not, now may be the perfect time to take a fresh look at your plan with your advisor. You will want to review your income, assets, and financial goals so you can take full advantage of the new opportunities—and avoid any surprises.

While details are still emerging and we are digesting the full implications of the bill, we wanted to provide a summary of some of the key provisions.

Estate and Gift Tax Exemption: The OBBBA permanently raises the federal estate and lifetime gift tax exemption to $15 million for individuals (or $30 million for married couples) starting in 2026, with future increases tied to inflation.

Tax Rates and Standard Deduction: The bill will extend and make permanent the seven individual income tax rates (10%, 12%, 22%, 24%, 32%, 35% and 37%), which were set to expire at the end of 2025. The standard deduction will also be permanently increased, which represents a significant reduction in taxes for most filers since the tax rates were set to revert to the previous levels at the end of 2025. For 2025, the deduction will be $15,750 for single filers and $31,500 for married filing jointly filers.

Senior Deduction: Individuals aged 65 or older before the close of the tax year can claim a temporary $6,000 deduction on their federal taxes from 2025 through 2028. However, this benefit begins to phase out for single filers with Modified Adjusted Gross Income (MAGI) over $75,000 (and disappears entirely around $175,000) and for married couples filing jointly with MAGI over $150,000 (fully phased out by $250,000).

The bill does not incorporate President Trump’s proposal to eliminate taxes on Social Security benefits. Currently, these benefits remain taxable—up to 85%—for single filers earning more than $34,000 annually or married couples with a combined income exceeding $44,000. However, the senior deduction described above may help offset Social Security taxes for some seniors at or near these income thresholds over the next four years.

Child Tax Credit: The OBBBA also increases the nonrefundable child tax credit to $2,200 per child in 2025 and indexes the credit for inflation. The bill will make permanent the $1,400 refundable child tax credit ($1,700 currently) that will also be adjusted for inflation. The credit is phased out when a single taxpayer has MAGI that exceeds $200,000 or married filing jointly taxpayers who have MAGI that exceeds $400,000.

State and Local Tax (SALT) Deduction: The bill temporarily raises the federal deduction limit for SALT from $10,000 to $40,000, starting in 2025. The new cap will be adjusted for inflation—reaching $40,400 in 2026 and increasing by 1% annually through 2029. Beginning in 2030, the cap will return to the original $10,000. The deduction begins to phase out once MAGI exceeds $500,000 in 2025 and is fully phased out when MAGI reaches $600,000, with the threshold also adjusted for inflation through 2029. If phased out, the SALT deduction is reduced by 30% of the amount by which MAGI exceeds the threshold, but the deduction will never fall below $10,000.

For itemized tax filers with state income tax over $10,000 annually and MAGI below $500,000, this provision could represent a significant tax deduction.

Charitable Contributions: Beginning in 2026, taxpayers who do not itemize their deductions may benefit from a deduction of up to $1,000 for single filers—or $2,000 for married couples filing jointly—for certain charitable contributions. This change allows more people to receive a tax break for donations, even if they take the standard deduction. For those who do itemize, the bill adds a limitation beginning in 2026: charitable deductions will be reduced by 0.5% of the taxpayer’s contribution base, which is typically Adjusted Gross Income (AGI). The bill also permanently increases the cash contribution limit to qualified public charities to 60% of your AGI in 2025 and forward.

Mortgage Interest Deduction: The bill makes permanent the mortgage interest deduction, limiting it to the first $750,000 of home acquisition debt. It also permanently excludes interest on home equity loans from being treated as qualified residence interest. Additionally, beginning in 2026, certain mortgage insurance premiums tied to acquisition debt will now be treated as deductible mortgage interest.

Moving Expenses: The OBBBA permanently eliminates the federal tax deduction for moving expenses, except for active-duty members of the Armed Forces and certain individuals in the intelligence community.

Miscellaneous Itemized Deductions: Certain deductions, such as unreimbursed employee expenses and tax preparation fees, were permanently eliminated by the OBBBA. However, a new exception has been introduced for certain unreimbursed expenses incurred by educators.

Casualty Loss Deduction: The bill makes losses from certain state-declared disasters eligible for the casualty-loss deduction beginning in 2026.

Bicycle Reimbursement Expenses: The bill permanently removes qualified bicycle commuting reimbursements from the list of tax-free transportation benefits, meaning these reimbursements will now be treated as taxable income to employees.

Adoption Credit: The OBBBA also makes up to $5,000 (indexed for inflation) of the adoption credit refundable beginning in 2025. Taxpayers cannot carry the refundable portion of the credit forward to a future tax year.

Car Loan Interest: Individuals may deduct interest paid on a qualified passenger vehicle loan from 2025 through 2028, provided the loan is secured by a first lien on a U.S.-assembled vehicle used for personal purposes. The deduction is capped at $10,000 per year and begins to phase out for single filers with MAGI over $100,000, and for joint filers with MAGI over $200,000. This is in addition to the standard deduction, so you do not have to itemize to take advantage of this deduction.

No tax on tips: The bill introduces an above-the-line deduction of up to $25,000 for individuals who earn tips in occupations where tipping is customary for tax years 2025 through 2028. This deduction allows eligible workers to reduce their taxable income, whether they take the standard deduction or itemize. The deduction begins to phase out for taxpayers with MAGI over $150,000 (or $300,000 for joint filers).

No tax on overtime: The bill offers a temporary above-the-line deduction of up to $12,500 for individuals—and up to $25,000 for joint filers—on qualified overtime compensation earned in a given tax year. This deduction is available whether you itemize or take the standard deduction. It begins to phase out for taxpayers with MAGI over $150,000 (or $300,000 for joint returns) and will apply to tax years 2025 through 2028.

529 Plans: The bill expands how taxpayers can use 529 savings plans, allowing tax-free withdrawals for a broader range of education-related expenses. This provision includes costs associated with enrollment or attendance at elementary and secondary schools, as well as new categories of qualified higher education expenses, such as postsecondary credentialing programs. Beginning in 2026, the bill also increases the annual withdrawal limit to $20,000 for K-12 tuition expenses from the current limit of $10,000 a year.

Scholarship Granting Organization (SGO) Tax Credit: The bill adds a new provision where taxpayers can claim a nonrefundable federal credit of up to $1,700 for donations to a qualified SGO operating in states that opt in. The credit will be available for tax years 2027 and forward. The provision aims to encourage private donations to SGOs, which in turn provide financial assistance to help eligible students cover the cost of elementary and secondary education.

The credit is available to all taxpayers, including those who do not itemize deductions, and can be carried forward for up to five years if not fully used. However, the credit is reduced by any state tax credit received for the same donation, and donations claimed for this credit cannot also be deducted as charitable contributions on federal returns.

Health Savings Accounts (HSA): The legislation expands eligibility for HSAs by allowing more types of health plans and participants to qualify. Beginning in 2026, the bill also permits HSA funds to be used for direct primary care arrangements, up to $150 per month for individuals or $300 per month for families. Additionally, it permanently extends the ability to use HSAs alongside telehealth services beginning in 2025.

Trump Accounts: This new provision allows parents, relatives, or other entities to contribute up to $5,000 (indexed for inflation for future years) of after-tax dollars per year to a special new traditional IRA-type account for a beneficiary. These accounts are limited to U.S. stock index funds, and the funds must remain untouched until the beneficiary turns 18. A special bonus applies to children born between 2025 and 2028—they will receive a $1,000 government contribution to jump-start their account. Contributions to these accounts can only be made during calendar years before the beneficiary turns 18, and withdrawals are only allowed starting in the year the beneficiary turns 18. These accounts must be formally designated as Trump accounts at the time they are opened, and contributions cannot begin until 12 months after the bill is enacted.

Qualified Business Income (QBI) Deduction: The bill makes the 20% QBI deduction permanent and expands access by increasing the phase-out thresholds. The phase-out range now starts at $150,000 for joint filers (up from $100,000) and $75,000 for single filers (up from $50,000) beginning in 2026. Additionally, beginning in 2026, a new minimum deduction of $400 is available for taxpayers with at least $1,000 in QBI from one or more active trades or businesses in which the taxpayer materially participates.

Repeal of Energy Credits: The bill repeals several Inflation Reduction Act green energy tax credits primarily aimed at individuals, such as electric vehicle and residential energy efficiency credits, beginning as of September 30, 2025 or within a year of the law’s enactment.

Student Loans: Beginning July 1, 2026, borrowers taking out new federal student loans will have access to just two repayment options: 1) Standard Repayment Plan, with terms ranging from 10 to 25 years, depending on the total amount borrowed, 2) A new Repayment Assistance Plan where monthly payments are set between 1% and 10% of a borrower’s AGI, with a minimum payment of $10. Any remaining balance will be forgiven after 30 years.

Also beginning July 1, 2026, GradPlus loans will be eliminated. Federal Direct Unsubsidized Stafford graduate borrowing for master’s programs will also be capped at $20,500 per year ($100,000 lifetime amount); $50,000/year for professional programs such as law and medicine ($200,000 lifetime amount).

While we are still digesting the full scope and details of this bill, we expect to discover and communicate more planning opportunities in the days and weeks ahead. Please reach out to your Blue Trust Advisor with any questions. If you do not have a Blue Trust advisor and would like to speak with someone, you can connect with us at 800.987.2987 or email info@bluetrust.com.

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