The One Big Beautiful Bill Act (OBBBA) 2025: Your Financial Planning Guide
- Holzberg Wealth Management
- Jul 16
- 9 min read
Updated: Aug 20
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Key Takeaways
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The most significant US tax overhaul since the 2017 Tax Cuts and Jobs Act has arrived. On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, fundamentally reshaping the American tax landscape for years to come.
This 870-page economic package affects nearly every aspect of your financial life – from income taxes and retirement planning to estate strategies and business operations. Whether you are a retiree, working professional, or business owner, understanding these changes is crucial for your financial future.
Not interested in reading 870 pages of Congressional legalese? We don’t blame you. We’ll break it down for you.
What is the One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OBBBA) is a comprehensive tax reform package that extends many provisions from the Tax Cuts and Jobs Act (TCJA) of 2017 while introducing new deductions, credits, and tax changes. The legislation addresses concerns about the TCJA's scheduled sunset at the end of 2025, making many individual tax cuts permanent while adding new benefits for specific groups.
Major Tax Changes That Affect Your Finances
Extension of TCJA Tax Brackets
In 2017, the TCJA lowered federal income tax rates across the board. These tax cuts were not permanent and thus set to expire at the end of 2025.
The OBBBA permanently extends the reduced tax brackets from the TCJA: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Higher Standard Deduction Amounts
The legislation increases and makes permanent the higher standard deduction amounts, and these amounts will continue to adjust for inflation in future years:
New Standard Deductions Under OBBBA
Filing Status | Old 2025 Standard Deduction Under TCJA | New 2025 Standard Deduction Under OBBBA |
|---|---|---|
Single | $15,000 | $15,750 |
Married Filing Jointly | $30,000 | $31,500 |
Head of Household | $22,500 | $23,625 |
State and Local Tax (SALT) Deduction Changes
The SALT deduction, short for State and Local Tax deduction, lets taxpayers reduce their federal tax bill by deducting certain state and local taxes they have paid, such as property taxes and income taxes. It particularly benefits taxpayers in high-tax states, such as California, New York, and New Jersey, although the benefit diminishes for high earners.
Under prior law, the SALT deduction was capped at $10,000, which limited its usefulness for residents in high-tax states.
But starting in 2025, the SALT cap will temporarily increase to $40,000 for those with Modified Adjusted Gross Income (MAGI) below $500,000. In addition, from 2026 to 2029, that limit will increase by a fixed 1% each year.
For higher-income taxpayers, the expanded SALT deduction begins to phase out by 30% once your income exceeds certain thresholds based on your filing status:
Married Filing Separately (MFS): Phase-out begins at $250,000, fully phased out at $300,000
All other filers: Phase-out begins at $500,000, fully phased out at $600,000
Here, “fully phased out” means the enhanced SALT deduction is gone, but you are still eligible for the original deduction cap of $10,000 (or $5,000 for MFS). These income thresholds will also increase each year by 1%.
This change is not permanent: the higher SALT cap is set to expire after 2029, meaning that unless Congress acts, the $10,000 cap will return in 2030.
New Deductions and Tax Benefits
Temporary Additional Deductions for Seniors Age 65+
Starting in the 2025 tax year, taxpayers age 65 and older will be eligible for a new "Senior Bonus Deduction" of up to $6,000 per person.
This new deduction is on top of the standard and the existing additional deduction already available for those 65 and up. And here is what makes it especially unique: you can claim it whether you take the standard deduction or itemize.
To keep things simple, the examples below assume the taxpayers are taking the standard deduction:
Example 1: Married Filing Jointly (Both Age 65)
2025 standard deduction under the OBBBA: $31,500
Existing age 65+ additional standard deduction: $3,200
New "Senior Bonus Deduction": $12,000
Total standard deduction in 2025: $46,700
Example 2: Single (Age 65)
2025 standard deduction under the OBBBA: $15,750
Existing age 65+ additional standard deduction: $2,000
New "Senior Bonus Deduction": $6,000
Total standard deduction in 2025: $23,750
The Senior Bonus Deduction is temporary – it is available for tax years 2025 through 2028, so you have a four-year window to take advantage of it. That opens up some interesting planning opportunities for retirees.
Lastly, there are income limits to this bonus deduction:
Starts to phase out at $150,000 Modified Adjusted Gross Income (MAGI) for joint filers and $75,000 for single filers.
Reduced by 6 cents for every $1 over the limit.
Completely eliminated if MAGI is over $250,000 (joint filers) and $175,000 (single filers).
Note: Calculating your Modified Adjusted Gross Income (MAGI) can be complicated and includes adding things back into your gross income that are otherwise excluded. However, this only applies to a small percentage of filers. Therefore, for the vast majority of households, when MAGI is referenced relating to one of the OBBBA's provisions, it can be read as interchangeable with Adjusted Gross Income (AGI).
No Tax on Tips
From 2025 through 2028, eligible taxpayers can deduct up to $25,000 of qualified tip income. Qualified tips include cash tips received in an occupation that customarily and regularly receives tips on or before December 31, 2024.
The deduction begins to phase out once Modified Adjusted Gross Income (MAGI) exceeds certain thresholds:
$150,000 for single filers (phases out at $100 of deduction per $1,000 over that limit)
$300,000 for married couples filing jointly
Note: Married individuals filing separately are not eligible for this deduction.
No Tax on Overtime
Eligible single-filing taxpayers can deduct up to $12,500 of qualified overtime income, or $25,000 if filing jointly.
The deduction begins to phase out once your Modified Adjusted Gross Income (MAGI) exceeds:
$150,000 for single filers
$300,000 for joint filers
The deduction is reduced by $100 for every $1,000 over the applicable threshold.
“Qualified overtime compensation” refers to pay earned under Section 7 of the Fair Labor Standards Act of 1938; specifically, compensation paid at a rate above an employee’s regular hourly rate.
Note: Married individuals filing separately are not eligible for this deduction.
Charitable Deduction for Non-Itemizers
Starting in 2026, taxpayers who take the standard deduction can deduct charitable contributions up to $1,000 (single) or $2,000 (married filing jointly). This deduction only applies to cash contributions to qualifying 501(c)(3) organizations.
Car Loan Interest Deduction
Starting in 2025, taxpayers can deduct up to $10,000 per year in interest paid on new auto loans for personal-use vehicles. The deduction applies to new cars, vans, SUVs, pickup trucks, and motorcycles – as long as they are assembled in the U.S. and have a gross vehicle weight under 14,000 pounds. Used vehicles, RVs, ATVs, trailers, and cars purchased for business or resale do not qualify. You can check whether your vehicle was assembled in the U.S. by looking up its Vehicle Identification Number (VIN).
Only loans taken out after December 31, 2024, are eligible for this benefit. If you refinance an older loan in 2025 or later, without increasing the loan amount, the interest on the refinanced loan qualifies. However, taking out a new loan on a car you have already paid off would not. While there is no limit on the number of loans that can qualify, the total deductible interest across all loans is capped at $10,000 per year. This deduction begins to phase out if your Modified Adjusted Gross Income (MAGI) exceeds $100,000 (single) or $200,000 (joint), and disappears entirely at $149,000 and $249,000, respectively.
Enhanced Tax Credits
Increased Child Tax Credit
The OBBBA permanently increases the Child Tax Credit from $2,000 to $2,200 per eligible child in 2025. Additionally, the credit will be indexed to inflation starting in 2026. This marks the first time the Child Tax Credit will automatically increase with the cost of living in the credit's nearly three-decade-long history.
The OBBBA keeps the same income-based phaseout rules that were introduced under the Tax Cuts and Jobs Act. If your Modified Adjusted Gross Income (MAGI) is over $200,000 (for single or head-of-household filers) or $400,000 (for joint filers), your credit will be reduced by $50 for every $1,000 over those limits. Keep in mind that these income thresholds are not adjusted for inflation, so they will stay the same each year unless Congress decides to change them.
Adoption Credit Becomes Refundable
Up to $5,000 of the adoption credit becomes refundable starting in 2025, with amounts adjusted for inflation in future years. Prior to the OBBBA, the Adoption Credit was non-refundable – meaning the credit could reduce the amount of tax you owe, but could not create or increase your tax refund. Now, the Adoption Credit is refundable, meaning it can result in a tax refund if the total of your credits is greater than the tax you owe.
Scholarship Credit
Beginning in 2027, taxpayers can claim a non-refundable credit of up to $1,700 annually for cash donations to approved Scholarship Granting Organizations (SGOs). This credit is available to all taxpayers (regardless of whether you itemize or not) and can be carried forward for up to five years if unused. However, the credit is reduced by any state tax credit received for the donations, and the donations claimed for this credit cannot also be deducted as charitable contributions.
Other Provisions
Increased Estate Tax Exemptions
The federal estate tax exemption permanently increases to $15 million per person ($30 million for married couples) starting in 2026, allowing estates to be passed to heirs without incurring federal estate tax.
"Trump Accounts"
A new type of retirement account, nicknamed “Trump Accounts,” will be available for children starting in 2025. These are tax-deferred investment accounts, similar to IRAs, designed to help kids build retirement savings.
Each child born between 2025 and 2028 will automatically receive a $1,000 federal contribution to jumpstart their account. Children born before 2025 can still open an account but will not receive the initial $1,000 deposit. Parents or others can contribute up to $5,000 per year until the child turns 18.
While the idea encourages early savings, it also has some downsides. Contributions are not tax-deductible, and distributions are treated similarly to those from an IRA. Therefore, investment gains are eventually taxed at ordinary income rates, rather than the lower capital gains rates that many taxable investment accounts benefit from.
Conclusion
While this is by no means a comprehensive look at all 870 pages of the One Big Beautiful Bill Act, it does highlight some of its key provisions. The OBBBA represents a significant shift in American tax policy, extending and expanding tax benefits while introducing new deductions and credits. The legislation provides immediate relief for many taxpayers while creating long-term planning opportunities.
As we move forward, staying informed about implementation details, IRS guidance, and potential future changes will be crucial for effective financial planning. The OBBBA provides a framework for tax planning through the rest of the decade, but flexibility and ongoing attention to tax law developments remain essential for optimal financial outcomes.
Need help figuring out how the new tax law changes affect your financial plan? Reach out, we're here to help you make the most of your retirement and charitable giving needs. You can schedule a complimentary, no-obligation call with us here.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.
