Xerxes Nabong, CFP®, CDFA®
Philip M. Maliniak, CRPC®
Nicole Brown-Griffin, CFP®, CDFA®, EA
Aaron Petty, Client Associate
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What the “One Big Beautiful Bill” Means for Your Financial Plan
Last week, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, a major tax and spending bill that touches nearly every area of financial planning. Here are the key takeaways that could affect your tax, estate, retirement, and investment strategies:
TAX PLANNING HIGHLIGHTS
2017 Tax Cuts Made Permanent
- These lower tax brackets and larger deductions were set to expire in 2026. Now, they’re here to stay.
- Why it matters: Certainty around income tax rates makes it easier to implement multi-year strategies like Roth conversions or capital gains harvesting.
- Tip: Space out Roth conversions over future years to remain in lower brackets.
Standard Deduction (2025 Onward)
- New limits: $15,750 (Single) / $31,500 (Married Filing Jointly, MFJ); previously $15,000 (Single) / $30,000 (MFJ).
- Why it matters: Fewer people need to itemize, and more retirees may avoid taxation on IRA distributions and capital gains.
- Tip: Review whether itemizing still makes sense for you. This could simplify tax filing for many households.
Extra Deduction for Seniors (65+)
- $6,000 additional deduction available from 2025–2028. Phases out at $75k (Single) / $150k (MFJ).
- Why it matters: This could lower your taxable income and reduce how much of your Social Security is taxed.
- Tip: If you are still working, consider income deferral strategies, such as increasing 401(k) contributions or if retired, managing IRA distributions, to stay below key income phaseout thresholds and take advantage of additional tax deductions.
Child Tax Credit
- Increased from $2,000 to $2,200 per child. Phaseouts remain at $200k (Single) / $400k (MFJ).
- Why it matters: Families receive more support per child. This also benefits grandparents who claim dependents.
- Tip: Consider strategies like gifting or increasing contributions to retirement plans or health savings accounts (HSAs) to strategically reduce taxable income and keep the household below the Child Tax Credit phaseout threshold.
Tip and Overtime Deductions (2025–2028)
- Deduct up to $25,000 (tips) and $12,500 (overtime); phased out at $150k (Single) / $300k (MFJ).
- Why it matters: Provides tax relief for hourly and tipped workers.
- Tip: If you’re married, look at your combined income when filing jointly. For example, if your spouse can increase 401(k) or HSA contributions to reduce taxable income, that may keep your joint income under the $200,000 limit, allowing you to preserve full access to these deductions.
Car Loan Interest Deduction (2025–2028)
- Deduct up to $10,000/year on U.S.- assembled vehicle interest. Phased out at $100k (Single) / $200k (MFJ).
- Why it matters: Could make buying a car more tax-efficient, but only for middle-income earners.
- Tip: Time vehicle purchases or refinancing before deduction window closes. This only applies to the interest portion of the loan, not the full car payment.
Mortgage & Equity Loan Interest
- The mortgage interest deduction cap remains at $750,000 of qualified mortgage debt, meaning you can deduct interest on loans used to buy, build, or substantially improve a primary or secondary residence, despite prior discussions about raising the cap back to $1 million. For home equity loans or HELOCs, interest is only deductible if the funds are used specifically for home-related purposes like renovations or improvements. If the proceeds are used for non-housing expenses, such as paying off credit cards, buying a vehicle, or covering education costs, the interest is not deductible.
- Why it matters: Homeowners with larger mortgages or equity loans need to be strategic, as interest is only deductible on debt used for qualified housing purposes. With the cap holding at $750,000 and stricter rules around equity loan use, failing to align your borrowing with eligible home improvements can result in losing valuable tax deductions.
- Tip: Keep documentation for equity loan use and consider refinancing to consolidate deductible debt.
Charitable Contributions
- Non-itemizers can now deduct up to $1,000 (Single) or $2,000 (Married Filing Jointly) in charitable contributions, even if they don’t itemize.
- Itemizers must now clear a 0.5% of AGI “floor” before donations become deductible. This means only the portion of your charitable giving that exceeds 0.5% of your AGI will count toward a tax deduction. For example, if your AGI is $300,000, the first $1,500 of charitable giving is not deductible.
- This rule applies across all income levels and replaces the former phaseout system that reduced deductions gradually at high incomes.
- Why it matters: This change broadens access to charitable deductions for nonitemizers but limits the tax benefit for higher earners unless they give above the 0.5% AGI floor. Strategic giving is more important than ever.
- Tip: Consider front-loading donations through a Donor-Advised Fund (DAF) during highincome years to exceed the 0.5% floor and lock in the deduction, especially if you expect lower income in future years.
State and Local Tax (SALT) Deduction
- Raised from $10,000 to $40,000 (2025– 2029); returns to $10k in 2030. Phases out above $500k MAGI.
- Why it matters (business owner): If you own an S corporation, partnership, or LLC in a state that allows a Pass-Through Entity Tax (PTET) election, this lets your business pay state taxes directly, making them fully deductible at the federal level and bypassing the SALT cap. It’s a valuable strategy in hightax states like California, New York, and New Jersey to reduce federal taxable income and boost after-tax cash flow. This change significantly benefits taxpayers, especially those in high-tax states like California, New York, and New Jersey, who itemize deductions and pay large amounts in state income taxes and property taxes. The temporary increase can reduce federal taxable income and improve after-tax cash flow during the fiveyear window.
- Tip (business owner): If your state offers PTET and you have significant pass-through income, talk to your CPA or tax advisor before year-end to ensure your business opts in and makes any required estimated payments.
- Why it matters: Property taxes count toward the SALT deduction, which is temporarily raised to $40,000 (2025–2029). To maximize this, consider timing payments in highincome years or when your income is under the $500k phaseout. For instance, if you usually pay in January, prepay before yearend to bunch two years of taxes into one, especially when paired with other deductions like charitable gifts.
- Tip: Talk to your tax advisor ahead of 2029, the last year of the expanded cap, to see if accelerating payments makes sense before the limit returns to $10,000.
High-Income Deduction Limits
- Above $751,600 (MFJ), itemized deductions begin to shrink.
- Why it matters: Impacts ability to reduce taxable income via deductions.
- Tip: Bunch charitable giving and defer income where possible.
Personal Exemption Eliminated
- The $4,050 per person deduction has been eliminated for 2025–2028. Seniors age 65+ receive a temporary $6,000 offset, but it phases out at higher income levels. This change removes a key tax reduction tool previously available to individuals and families.
- Why it matters: Without the personal exemption, taxable income increases, especially for retirees living on a mix of Social Security, pensions, and IRA distributions. This can lead to a larger portion of Social Security being taxed, higher Medicare premiums (IRMAA), and fewer tax credits or deductions. Careful income planning is essential to reduce unnecessary tax exposure.
- Tip: Work with your advisor to coordinate RMD withdrawals, consider Qualified Charitable Distributions (QCDs), and review the timing of Social Security benefits to stay below key tax thresholds and preserve income-related deductions.
FAMILY & EDUCATION
Adoption Credit
- The adoption credit is now refundable up to $5,000, meaning eligible families can receive the credit as a cash refund, even if they owe little or no federal income tax. This change makes the credit more accessible for lowerand moderate-income families who previously couldn’t take full advantage of it.
- Why it matters: Making the credit refundable allows more adopting families—particularly those adopting from foster care or with limited tax liability—to receive meaningful financial support to help cover adoptionrelated costs such as legal fees, travel, and home studies.
- Tip: Since the credit is tied to the year the adoption is finalized, families should consider timing the finalization before year-end to claim the credit that tax year. Work with your adoption agency and tax advisor to ensure proper eligibility and documentation.
Dependent Care Exclusion
- Increased to $7,500 from $5,000 for qualifying expenses related to child or dependent care, such as daycare, afterschool programs, or in-home assistance.
- Why it matters: Helps working parents and caregivers offset rising care costs while remaining employed, offering greater tax savings across a wider range of income levels.
- Tip: Use a Dependent Care FSA if your employer offers one but coordinate with the credit to avoid overlapping claims on the same expenses.
QBI Deduction for Service Businesses
- Phaseout thresholds for the 20% Qualified Business Income (QBI) deduction have increased from $50,000 (Single) / $100,000 (MFJ) to $75,000 (Single) / $150,000 (MFJ).
- Why it matters: This allows more highearning professionals in fields like law, medicine, and consulting to qualify for the full or partial deduction, reducing taxable income.
- Tip: Explore strategies like income-splitting with a spouse, increasing retirement plan contributions, or restructuring your business entity to stay within the new limits and maximize the deduction.
ABLE & 529 Plans
- The age limit to open an ABLE (Achieving a Better Life Experience) account has increased from 26 to 46, allowing more individuals with later-onset disabilities to qualify. 529 plans have been expanded to cover K–12 tuition, trade schools, and now allow rollovers into ABLE accounts. The combined contribution limit for 2025 is $19,000.
- Why it matters: These updates give families greater flexibility to use education savings or support a disabled family member under one tax-advantaged structure.
- Tip: If you have a family member with a disability, consider rolling unused 529 funds into an ABLE account to preserve savings without triggering penalties or taxes.
Trump Accounts (New)
- A new savings account for children born between 2025 and 2028. The government contributes $1,000 at birth, and families can contribute up to $5,000 per year. Funds can be used tax-free for education, starting a business, or buying a first home.
- Why it matters: A fresh way to build early wealth for the next generation.
- Tip: Use alongside 529 plans to diversify how you save for your child’s future—covering both education and broader life goals like entrepreneurship or homeownership.
ESTATE & LEGACY
Estate Tax Exemption Increased
- The federal estate tax exemption has been permanently raised to $15 million per individual starting in 2025, up from $13.61 million in 2024. Congress extended the higher exemption, avoiding the previously scheduled drop to around $7 million in 2026.
- Why it matters: With the higher exemption now locked in, fewer estates will be subject to federal estate tax, giving families more certainty in long-term estate planning.
- Tip: Even with the increased exemption, it’s important to review your estate plan, gifting strategy, and beneficiary designations to ensure your legacy goals are protected and aligned with current law.
SOCIAL SECURITY & RETIREMENT
Trust Fund Depletion Now 2032
- The Social Security Trust Fund is now projected to be depleted by 2032, one year earlier than the previous estimate of 2033, largely due to lower-than-expected tax revenue.
- Why it matters: While current retirees are unlikely to see reduced benefits, future retirees—especially younger workers—may face benefit cuts of up to 20% unless funding changes are made.
- Tip: Plan proactively by increasing retirement contributions and exploring guaranteed income options to reduce reliance on Social Security in the future.
Taxation of Social Security Benefits
- Social Security benefits are still taxable, but the impact is reduced for many retirees due to the larger standard deduction and senior offset under current law. This means fewer seniors will owe taxes on their benefits compared to prior years.
- Why it matters: Crossing certain income thresholds can trigger taxes on up to 85% of your benefits, so managing your taxable income is key to keeping more of what you receive.
- Tip: Roth conversions, done strategically before or early in retirement, can lower future taxable income and help minimize how much of your Social Security is taxed.
Your Team at Wealth Avenue,
*All information is from sources deemed reliable but may not be guaranteed.*
P.S. At Wealth Avenue, we are committed to working with individuals and families who are thoughtful about their wealth and seek expert guidance to make informed financial decisions.
If you know someone navigating a financial transition or seeking clarity on how these OBBBA updates may impact their wealth, we’d greatly appreciate an introduction. Whether it’s a close friend, family member, or colleague, we’re happy to share this resource and have a conversation to see how we can add value. With offices in Virginia, Arizona, and California, and the convenience of virtual meetings, we’re here to help, wherever they are!
To those of you who have introduced us to your family, friends, and colleagues, thank you. We’re truly honored by your trust and grateful for the confidence you place in us.
One last read below…This article breaks down the key estate planning considerations in today’s now high-exemption environment, covering everything from income tax strategies and non-grantor trusts to flexible planning tools like special power of appointment trusts, so you can better understand what to update, what to rethink, and how to prepare for what might come next.
July 7, 2025
Martin Shenkman, Contributor
