On July 4, 2025, after months of negotiations and compromises, the One Big Beautiful Bill Act (OBBBA) became law. This sweeping legislation makes permanent many of the provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of 2025. Had these tax cuts not been made permanent, the average taxpayer may have seen a tax increase.
While the bill covers a wide range of provisions, we’ve highlighted some of the most notable changes for individuals, families, and businesses. Some are permanent, while others expire in just a few years, making ongoing planning essential.
Key Changes for Individuals
- Standard deduction rises to $15,750 for single filers and $31,500 for joint filers, indexed for inflation after 2025.
- Enhanced deduction for age 65+ of $6,000 per individual is available until the end of 2028, with income phaseouts starting at $75,000 for single filers and $150,000 for joint filers.
- Mortgage interest deduction remains capped at $750,000 of mortgage debt, and private mortgage insurance (PMI) is deductible in some cases.
- State and Local Tax (SALT) deduction limit increases from $10,000 to $40,000 for 2025, with a 1% annual increase until 2029. High-tax states like California, Massachusetts, New York, Maine, and Connecticut may see more residents itemizing. Keep in mind that the deduction phases out at $500,000 of adjusted gross income.
Samantha Binning, CPA with Mason + Rich of Concord, NH, explains: “It will be important to consider the timing of these payments (state estimated tax, real estate taxes, and personal property taxes) as bunching may be more useful when limitations and thresholds allow. This increase will also have an effect on non-grantor trusts. It’s important to work with your tax advisor and estate planning team.”
- Alternative Minimum Tax (AMT) exemption is permanent at $88,100 for individuals and $137,000 for joint filers, but higher phaseout rates could pull some taxpayers back into AMT territory.
- Auto loan interest deduction of up to $10,000 is available for qualifying taxpayers, expiring after 2028. See your tax advisor for income limits and purchase eligibility rules.
- No taxes on tips and overtime until the end of 2028, subject to income limits.
Child and Family Benefits
- Child Tax Credit increases to $2,200 per child, now adjusted annually for inflation.
- Trump Savings Accounts: Children born in the U.S. from 2024–2028 receive a $1,000 federal deposit into a managed savings account, with annual contributions up to $5,000 allowed until age 18.
Charitable Giving
With the higher standard deduction, fewer taxpayers will itemize, but there are still opportunities for charitable deductions.
- Above-the-line deduction of up to $1,000 for individuals ($2,000 for joint filers) begins in 2026 for non-itemizers.
- For itemizers, new floors on cash gifts mean it’s worth exploring alternatives like Qualified Charitable Distributions (QCDs) from retirement accounts. Alyssa Hodges, CPA with Mason + Rich, explains: “If cash gifts are not optimal for your tax situation, consider making donations from your retirement account’s required minimum distribution (RMD). Gifts made out of your RMD reduce your taxable income. New reporting in 2025 should make these gifts more obvious to your accountant. If you’re not taking RMDs yet, look to your taxable account to gift highly appreciated stocks.” Learn more in our estate and legacy planning insights article.
Estate and Gift Tax
- Lifetime exemption rises permanently to $15 million per individual starting in 2026, indexed for inflation. This makes regular reviews of your estate plan and gifting strategies even more important. Mason + Rich’s Samantha Binning emphasizes, “Although the exemption thresholds will continue to be higher, it continues to be important to review estate plans and lifetime gifting strategies with your estate planning team on a regular basis.”
For Business Owners
- Qualified Business Income (QBI) deduction of 20% for sole proprietorships and partnerships is now permanent.
- Bonus depreciation and full expensing for most business investments are also permanent, retroactive to January 19, 2025.
What Did Not Change
Social Security benefits remain taxable under the same rules, although the new $6,000 deduction for taxpayers 65+ could help offset some of the impact for those in qualifying income ranges.
Planning Considerations
Tax changes can create both opportunities and pitfalls. Here are a few ways to start thinking about your next steps:
- Review whether it makes sense to itemize or take the standard deduction in light of the new SALT and charitable rules.
- Revisit charitable giving and estate planning strategies annually with your financial and tax advisors.
- If you own a small business, consider whether this is the right time to establish a retirement plan for you and your employees.
- In lower income tax years, look for opportunities to diversify concentrated stock positions or convert Traditional IRA assets to a Roth IRA. In higher tax years, focus on strategies to lower taxable income, such as maximizing retirement plan contributions or leveraging gifting strategies.
As Carlson Relationship & Portfolio Manager Kate Graham notes: “Some clients come in with a plan in mind, but after we look at the full picture we often find strategies they didn’t know were possible. That’s the value of understanding a client’s whole financial life.”
Coordinating between your financial advisor, tax advisor, and estate attorney can make these strategies far more effective. “It’s a no-brainer to ask for a copy of a client’s tax return,” Kate adds. “When we collaborate with their tax advisor, the client benefits from all of our expertise working together.”
Tax law changes like the OBBBA are complex, and how they affect you depends on your unique situation. If you’d like to explore how these updates could fit into your broader financial plan, reach out to our team for a conversation.
Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.
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