Big Tax Changes Are Here: The One Big Beautiful Bill Act (OBBBA)

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4th, 2025, made permanent the current federal income tax brackets, which were set to revert to their pre-Tax Cuts & Jobs Act levels in 2026. Several new provisions will also create unique planning opportunities and, depending on your specific situation, lower your future tax liability.

Some of the highlights are below:

Increased Standard Deduction 

• Beginning in 2025, $15,750 for single filers, and $31,500 for married couples who file jointly (MFJ)

• Adjusted for inflation after 2025

Enhanced Senior Deduction (Age 65+) 

• Beginning in 2025, up to an additional $6,000/person through 2028, but with income phaseouts

  • Single phaseout between $75,000 and $175,000

  • MFJ phaseout between $150,000 and $250,000

• Independent of the existing over-65 deduction

Increased SALT (State & Local Taxes) Deduction 

• Beginning in 2025, up to $40,000/year for both single filers and MFJ through 2029, but with phaseouts

  • Both single and MFJ phase down to the previous $10,000 between $500,000 and $600,000 of income

  • Thresholds adjusted by 1% after 2025

• Reverts to $10,000 in 2030

Charitable Deductions 

• Beginning in 2026, cash contributions of up to $1,000 for single filers and $2,000 for joint filers can be deducted from taxable income without having to itemize deductions

• Non-itemized deduction made permanent

• Beginning in 2026, a 0.5% AGI reduction will be added when itemizing, which is not applicable to QCDs

• 60% AGI cap made permanent

Child Tax Credit (Made Permanent)

• Increased in 2025 to $2,200, but with income phaseouts

  • Single phaseout begins at $200,000 and reduces by $50 for each $1,000 of income

  • MFJ phaseout begins at $400,000 and reduces by $50 for each $1,000 of income

• Adjusted for inflation after 2025

• $1,700 is refundable for 2025

Section 199A Qualified Business Income (QBI) Deduction 

• Made permanent at 20%, with increased income phaseouts

  • Single phaseout begins at $75,000

  • MFJ phaseout begins and $150,000

• Beginning in 2025, a new minimum $400 deduction if at least $1,000 of QBI

  • Adjusted for inflation after 2025

Estate Tax Deduction (Made Permanent)  

• Increased in 2026 to $15,000,000/person

• Adjusted for inflation after 2026

529 Accounts

• Beginning in 2025, the definition of “qualified” K-12 expenses is expanded to include items such as books, instructional/educational materials, fees, tutoring, and educational therapies

• Beginning in 2025, “recognized” post-secondary credentials are added

• Beginning in 2026, annual K-12 withdrawals increased to $20,000

With many of the additional provisions taking effect in 2025, it may make sense to generate additional taxable income (such as IRA distributions, Roth conversions, or annuity withdrawals) by the end of the year or to utilize taxes you have already paid to the IRS. We look forward to discussing these opportunities with our current and future clients. Please note that this list does not cover all potential changes that might impact your exact situation.

Due to income phaseouts and timing differences, we recommend confirming rules and eligibility with your CPA or tax preparer. This Commentary is provided by Spraker West Wealth Management, a registered investment advisor, and is for informational purposes only. It should not be construed as investment advice and is not intended as a solicitation of any specific product or service. Investments and/or investment strategies include risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. Information provided is not intended as tax or legal advice and should not be relied upon as such. You are encouraged to seek tax or legal advice from a qualified professional.