The Responsible Investor
What's in the One Big Beautiful Bill Act?
Congress recently passed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, a sweeping tax and spending policy bill with lots of long-term implications. Much of the news coverage has focused on its difficult legislative path and the potential political, economic and social consequences. But like many people, you’re probably wondering what this new legislation means for you and your family.
The full answer depends on the makeup of your family and the unique details of your finances. In this blog, we will highlight a few immediate implications for financial planning worth considering.
The Key Benefit of Almost Any Tax Legislation: Certainty
On the whole, financial planning is a lot easier to do when you know what the tax code will look like in the future. With several tax provisions from previous legislation set to expire, Americans were in a position of potentially making important financial decisions with incomplete information. The passage of this bill removes much of that uncertainty.
In some cases, the bill preserves the status quo by making temporary provisions of the 2017 Tax Cuts and Jobs Act permanent. The lifetime estate and gift tax exemption was scheduled to sunset in December 2025, dropping the exemption to $6 million from nearly $14 million. Instead, that higher exemption has been made permanent and will increase next year to $15 million ($30 million for married couples).
The legislation also makes permanent the larger standard deduction—which will increase next year to $15,750 ($31,500 for married couples)—and the lower maximum mortgage interest deduction of $750,000.
Business owners can plan with the knowledge that the Section 199A deduction for qualified business income is now permanent and remains capped at 20%.
Time Is Running Out on Some Eco-Friendly Tax Incentives
Other recently enacted tax provisions are being cut short by the legislation. The bill brings a premature death to electric vehicle tax credits, which will expire at the end of September 2025—seven years earlier than planned.
A suite of tax credits for clean-energy upgrades and energy-efficient residential and commercial properties are likewise on borrowed time. The expiration dates for these are staggered. If you’re planning a switch to solar or wind power, that credit expires at the end of December 2025. Other credits will sunset later, but the clock is ticking to take advantage of any of them.
Complex Tax Law Requires Care and Expertise
Certainty doesn’t necessarily mean simplicity. For example, the bill’s temporary increase of the state-and-local-tax (SALT) deduction limit to $40,000 begins to phase out dramatically once modified adjusted gross income (MAGI) exceeds $500,000. Every dollar of income above that threshold decreases the maximum deduction by 30 cents. That is, until income reaches $600,000, at which point the limit has dropped all the way back down to $10,000—where it was before the bill passed. As a result, some taxpayers whose incomes fall within the SALT phaseout range may face more complicated decisions when considering financial moves that increase their income.
At around 900 pages total, the legislation is full of provisions that could impact your financial decisions in complex ways, whether you’re a business owner preparing to add a new location, a retiree planning strategic withdrawals or a working-age investor looking for opportunities to maximize your wealth over the long term.
Other Benefits from OBBBA
The bill introduces new deductions for tips, overtime pay, auto loan interest, and senior Social Security benefits.
1. Social Security Benefits. Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law. The $6,000 senior deduction is per eligible individual (i.e., $12,000 total for a married couple where both spouses qualify). To qualify for the additional deduction, a taxpayer must attain age 65 on or before the last day of the taxable year. Deduction is available for both itemizing and non-itemizing taxpayers (https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions).
2. No Tax on Car Loan Interest. Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.) The maximum annual deduction is $10,000. The deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers). To qualify for the deduction, the loan must be originated after December 31, 2024. Deduction is available for both itemizing and non-itemizing taxpayers. (https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions).
3. No tax on overtime. Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (such as the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act (FLSA) and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual. Maximum annual deduction is $12,500 ($25,000 for joint filers). Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). Deduction is available for both itemizing and non-itemizing taxpayers (https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions).
4. No tax on tips. Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137. Qualified tips are voluntary cash or charged tips received from customers or through tip sharing. For more information, go to https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions.
The complexity of the OBBBA can easily spark confusion. So, if you’re unsure what exactly you should be doing to adapt your financial plan to account for the new tax rules, contact your financial advisor. The One Big Beautiful Bill Act brings significant changes that could open new opportunities for taxpayers and savers. Understanding how these updates affect your income, benefits, and long-term goals is key. Partnering with a fiduciary advisor can help you make the most of the new rules and keep your financial plan on track.
Learn more about Derek Van Calligan
Hello! I’m Derek, a wealth advisor and director of investment research at Allodium Investment Consultants, located in Minneapolis, MN. I am passionate about helping individuals and families build holistic financial plans to help them reach their goals. When I’m not helping our clients make investment decisions, I enjoy spending time in the mountains in Colorado—skiing, fishing and hunting with my wife, Kelly, and my dog, Hank. I am also an active church member and volunteer at Big Brothers Big Sisters and Junior Achievement.
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