Key tax changes for 2025 and beyond.
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, is one of the most wide-reaching legislative packages to affect the U.S. tax code in recent memory. Designed to touch nearly every corner of the economy—from families and small businesses to farmers and retirees—it introduces an array of changes that are important to be aware of and that may have an impact on financial planning.
The Tax Cuts and Jobs Act (TCJA) of 2017 was originally scheduled to sunset at the end of 2025. However, the OBBBA extends the TCJA and maintains current marginal tax rates, with the top bracket remaining at 37%.
Beginning in 2025, the standard deduction increases to $15,750 for single filers and $31,500 for joint filers, with annual adjustments for inflation. The law also introduces temporary deductions for tip income and overtime pay, available through 2028. Eligible taxpayers may deduct up to $25,000 in tips and between $12,500 and $25,000 in overtime pay, depending on filing status, with phaseouts at higher income levels.
At the same time, clean energy tax credits will be repealed, gradually phasing out incentives for electric vehicles, wind, and solar energy.
For taxpayers aged 65 and older, a new deduction of $6,000 is available, or $12,000 for married couples who are both 65 and older (for tax years 2025 through 2028). This deduction begins to phase out for single filers earning above $75,000 and joint filers above $150,000. Additionally, taxpayers may deduct up to $10,000 in interest on auto loans for new personal vehicles assembled in the U.S.
Charitable giving sees two key updates beginning in 2026. First, all taxpayers may claim an above-the-line deduction of up to $1,000 in charitable contributions for single filers ($2,000 for those filing jointly), regardless of whether they itemize their deductions. Those who itemize their deductions must now give more than 0.5% of their AGI to begin deducting any charitable contributions.
Lastly, the state and local tax (SALT) deduction cap increases from $10,000 to $40,000 for tax years 2025 through 2029, with the expanded deduction phasing out for incomes starting at $500,000 ($250,000 married filing separately). Unless extended, the cap will return to $10,000 ($5,000 married filing separately) in 2030.
Several updates in the new law focus on supporting families with children. The Child Tax Credit rises to $2,200 per child and will be adjusted annually for inflation. The Child and Dependent Care Credit has been expanded to cover up to 50% of eligible expenses, and higher income thresholds allow more families to benefit. In addition, the annual contribution limit for Dependent Care Flexible Spending Accounts has increased to $7,500, giving families more flexibility in setting aside pre-tax dollars for childcare.
A new program called “Trump Accounts” establishes a government-funded investment account with an initial deposit of $1,000 for children born between 2025 and 2028. Families can contribute up to $5,000 per year, while employers may add up to $2,500 tax-free. These accounts grow tax-deferred and are designed to transition to individual retirement accounts when the child turns 18.
The law also expands the ways families can use 529 education savings plans. Starting in 2026, the annual tax-free withdrawal limit for K–12 expenses increases to $20,000 per child. Qualified expenses now include curriculum, tutoring, standardized testing fees, and therapies for students with learning needs. Postsecondary use now includes trade schools, professional certifications, and continuing education programs, providing broader flexibility for educational and career-focused goals.
Families caring for dependents with disabilities may now roll unused 529 funds into ABLE accounts on a permanent basis, helping ensure long-term financial planning remains on track. And while homeschool-related costs weren’t listed directly, many states are interpreting the expanded definitions to include materials and digital platforms used in education.
The legislation introduces several tax updates that may benefit small businesses and investors. The Qualified Business Income (QBI) deduction is now permanent and continues to offer a 20% deduction for eligible income. The phase-out thresholds have been adjusted to start at $200,000 of taxable income for single filers and $400,000 for joint filers. Additionally, a minimum $400 deduction is now available for qualifying taxpayers earning as little as $1,000 in QBI.
For capital investments, bonus depreciation has been restored to 100% for property placed in service after January 19, 2025. Section 179 expensing limits have been increased to $2.5 million, with phase-out beginning at $4 million of total property placed into service.
Businesses conducting domestic research may now immediately deduct R&E expenses paid or incurred after December 31, 2024. This benefit is also available retroactively for 2022 and 2023 for firms with less than $31 million in gross receipts. The rules for business interest deductions have also changed, returning to a calculation based on earnings before interest, taxes, depreciation, and amortization (EBITDA), which may expand deductibility for certain companies.
Taxpayers with Qualified Small Business Stock (QSBS) acquired after July 4, 2025 may now exclude gains up to $15 million. Partial exclusions are available for shares held for three or four years, expanding the planning options for business owners, founders, and early-stage investors using a C corporation structure.
The new law introduces a permanent increase to the estate tax exemption. Starting in 2026, individuals can pass along up to $15 million without triggering federal estate tax, or $30 million for couples. These exemption levels will adjust over time for inflation. The same increase applies to the Generation-Skipping Transfer (GST) tax, which may offer additional planning options for families looking to transfer wealth across multiple generations.
Under the new act, several Health Savings Account (HSA) rules were updated. Starting in 2026, ACA Bronze and Catastrophic health plans will qualify as High Deductible Health Plans (HDHPs), making more individuals HSA-eligible. The law also allows Direct Primary Care (DPC) arrangements—up to $150/month for individuals or $300/month for families—to be treated as HSA-eligible medical expenses. Additionally, HDHPs can now cover telehealth services before the deductible is met without affecting HSA eligibility, effective for plan years beginning in 2025.
The OBBBA keeps the higher AMT exemption amounts that were put into place under the TCJA—$81,300 for single filers and $126,500 for joint filers, with automatic inflation adjustments going forward. One change to note is that the income limits where the exemption starts to phase out now match the older 2018 levels—$500,000 for individuals and $1 million for couples—marking a stark reduction from the current levels. The phase-out happens faster now and with a rate of 50% compared to the previous rate of 25%.
In a slight relief for small business owners subject to AMT, Gains from Qualified Small Business Stock (QSBS) are no longer considered AMT preference items. This change could simplify tax planning around equity compensation, especially for taxpayers involved in startups or early-stage companies.
As we enter a new era of tax law, planning becomes both more complex and more full of opportunity. These provisions—some temporary, others permanent—create dynamic new paths for saving, investing, and gifting. Whether you’re a retiree looking to ease your property tax burden, a parent building generational wealth, or a small business owner expanding operations, there are fresh tools at your disposal.
Together, we can tailor a strategy that responds to these changes in a way that fits your personal financial picture. We are here to help you navigate these transitions with clarity, confidence, and purpose. Let’s take a closer look at how these updates might work best for you.
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