Highlights from the One Big Beautiful Bill that could impact financial and tax planning for pre-retirees and retirees. While there can be arguments made on the amount of debt added by the bill, the point of this information is not to be political, but rather open eyes to opportunities that are available now.
Let’s start off with the marginal tax brackets. As of July 4, 2025, 10%, 12%, 22%, 24%, 32%, 35%, and 37% were made permanent. Well, permanent until a future Congress votes to change the tax code again. This creates an extended opportunity for tax efficient planning moving forward for many pre-retirees and retirees today. Note: For pre-retirees and retirees, it’s important to understand the difference between marginal rates and effective rates.
In addition to the permanency of the marginal rates, the bill also made the standard deduction permanent and increased the amounts. Note: These amounts will be inflation adjusted in the future.
- 2025 Single Filer: $15,750
- 2025 Married (MFJ): $31,500
In addition to the standard deduction rates, individuals who are 65 or older will receive an additional $6,000 beginning this year in 2025. It’s important to note, this is ONLY for a temporary period of time 2025 – 2028. There are income limits that affect the amounts that can be deducted. The $6000 will be reduced by 6% by which your amount exceeds $75,000 for a single filer and $150,000 for MFJ. In looking at this closer, this was an attempt to have “no tax on Social Security”, as this could not be fully implemented/changed due to something called the Byrd Rule. While this isn’t a complete elimination of taxes on Social Security, it will provide temporary relief for those 65 and older and help provide additional tax planning opportunities.
Staying with deductions, there’s also up to $10,000 deduction for car loan interest. However, there are a couple of catches:
- There’s a phase out starting at $100,000 of income for single filers ($200,000 MFJ). The amount will be reduced by $200 for each $1000 over these limits.
- The final assembly of the car must be here in the U.S.
Charitable Giving– the change created a .5% floor to Adjusted Gross Income. This creates an opportunity for those individuals and families who are charitably inclined to maximize tax planning in combination with charitable giving. For those who do not itemize, there’s now an opportunity for an above the line deduction of $1000 per person ($2000 MFJ). Note: In your tax planning, a great way to reduce your taxable income is to start Above the Line. Lastly, the estate tax exemption is going from $13.99 million to $15 million in 2026 and will be inflation adjusted from there.
Bonus Depreciation is back to 100%, with a catch. It’s for assets purchased/put in place on or after 1/19/2025. This could provide some beneficial tax planning opportunities for rental property owners.
Both New and Used EV credits end after 9/30/2025. Also included are the energy efficient home improvements and residential energy credits that end at the end of the year 12/31/25.
OBBB also created temporary (2025 – 2028) no tax on tips– up to $25,000. Of course, there’s a phase out: Reduced by $100 for every $1000 if your income exceeds $150,000 Single ($300,000 MFJ). Uniquely, this is allowed even if you’re taking the standard deduction. For overtime, the deduction is up to $12,500 with the same income phase outs.
Lastly, the SALT cap was dramatically changed. For 2025, it is increasing to $40,000 and will continue to increase by 1% through 2029. In 2030, the amount will go back to $10,000. The upper threshold here is $500,000 for both single and MFJ.
While this write up doesn’t encompass all the changes in the OBBB, it does contain a higher level view of the ones I feel will most likely impact the average individual and family. The tax door has now been left open for a few more years. With the rising amount of debt we are facing here in the U.S., individuals and families should take a closer look at maximizing the planning efforts. Our team will be working with you during your reviews to help offer suggestions on what will be best for you and your family.
Also, please don’t hesitate to refer us to a friend. I’m fairly certain most advisory individuals and firms are not sending out this type of timely information. Therefore, they may appreciate a firm taking a closer and more proactive look at things in real time.
Sources:
https://taxfoundation.org/…/big-beautiful-bill-senate…/
https://wcginc.com/blog/one-big-beautiful-bill-obbb/
https://fortune.com/…/trump-signs-one-big-beautiful…/https://www.bogleheads.org/forum/viewtopic.php?t=457576
https://www.cnbc.com/…/what-trumps-one-big…/…