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Destiny Financial Team, One Big Beautiful Bill Act, Press Release Aug 4, 2025
| As you all know, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, extends or expands many provisions of the 2017 Tax Cuts and Jobs Act (TCJA), while also introducing new measures impacting individuals and businesses. We at DFT, as your financial advisors, are aware of the following key changes to effectively guide our clients: |
| Individual Tax Planning: • Permanent TCJA Provisions: The OBBBA makes the reduced individual income tax rates and brackets from the TCJA permanent, along with the higher standard deduction. • Enhanced SALT Deduction: The cap on the State and Local Tax (SALT) deduction is increased to $40,000 for taxpayers earning under $500,000 (MAGI) through 2029. • Senior Deduction: A temporary $6,000 additional standard deduction is available for seniors (65+) from 2025 through 2028, with income limitations. • Child Tax Credit and Trump Accounts: The Child Tax Credit (CTC) increases to $2,200 per child and is indexed for inflation. New tax-advantaged savings accounts called "Trump Accounts" are created for children under 8. • Tip and Overtime Deductions: Temporary deductions are available for qualified tip income (up to $25,000) and overtime pay (up to $12,500 for single filers) through 2028, subject to income phase-outs. • Auto Loan Interest Deduction: A temporary deduction for interest on qualified auto loans (up to $10,000 per year) is available through 2028 for loans originating after January 1, 2025, with income phase-outs. • Charitable Giving: Beginning in 2026, itemizers can only deduct charitable contributions exceeding 0.5% of AGI. However, non-itemizers can deduct up to $1,000 ($2,000 for joint filers) in charitable contributions. |
| Business and Estate Planning: • Estate Tax Exemption: The estate and lifetime gift tax exemption increases to $15 million per person ($30 million for married couples) starting January 1, 2026, and is indexed to inflation. • Qualified Business Income (QBI) Deduction: The 20% QBI deduction is made permanent for pass-through businesses and REITs, with slightly higher income thresholds. • Bonus Depreciation & Section 179 Expensing: 100% bonus depreciation is reinstated for qualified property placed in service after December 31, 2024. The Section 179 expense limit increases to $2.5 million, phasing out at $4 million. • Qualified Small Business Stock (QSBS): Changes to QSBS rules include a tiered exclusion system based on holding period, an increase in qualifying company asset limit to $75 million, and an increase in the exclusion amount to $15 million (or 10 times the investment). |
| Retirement and Savings: • "Trump Accounts" (Child Savings Accounts): A new tax-advantaged savings account for children is established, potentially fostering long-term savings, although details on functionality are still emerging. • Expanded 529 Plan Use: Withdrawals can now cover a wider range of educational expenses, including K-12 tuition (up to $20,000 annually starting 2026) and postsecondary credentialing expenses, according to Ameriprise Financial. Advisors should review education savings strategies with clients. • ABLE Account Changes: Increased contribution limits and other changes to ABLE accounts offer additional benefits for individuals with disabilities. |
| Broader Impact and Planning Opportunities: • The permanent extension of TCJA provisions offers stability for strategies like Roth conversions and tax-loss harvesting. • High-income clients in states with high taxes may benefit significantly from the increased SALT deduction cap. • The OBBBA's impact on charitable giving is mixed, potentially leading some itemizers to front-load contributions in 2025 due to the new floor in 2026. • Expanded use of 529 plans for various educational expenses may require reviewing education savings strategies. • Other provisions include increased defense spending, new tariffs, a 1% tax on international remittances, and Medicaid funding adjustments. |
| Proactive planning and client communication are crucial for navigating these changes. If you have any questions about how the OBBBA impacts you and your estate & retirement planning for the coming years, please do not hesitate to contact us at jcribbin@destinyfinancialteam.com or (703) 244-0292. Respectfully, James and DFT Team |
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