On July 4, 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), the biggest tax overhaul since 2017’s Tax Cuts and Jobs Act.
Some changes are permanent, others expire in just a few years, and many come with income-based “danger zones” where the benefits vanish quickly.
Here’s what’s in it for you, what to watch out for, and how we’ll position your plan to take advantage.
Tax Rates Aren’t Going Up — and Lower Brackets Get Wider
First, the good news: OBBBA locks in today’s income tax brackets — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — permanently. No more looming “tax cliff” at the end of 2025.
Even better, starting in 2026, the lowest brackets get an extra inflation boost, meaning more of your income stays taxed at those lower rates. This creates a little more room for Roth conversions, capital gains harvesting, or bonuses without pushing you into a higher bracket.
Standard Deduction Gets a Permanent Boost — Seniors Get Even More
Starting in 2025, the base standard deduction rises to:
- Married Filing Jointly: $31,500
- Single: $15,750
- Head of Household: $23,625
If you’re 65 or older, you already get an extra $1,600 each. OBBBA adds another $6,000 per person from 2025–2028 — and you get it whether or not you itemize.
A married couple, both over 65, with income under $150,000 could claim $46,700 in deductions before the first dollar is taxed. That’s a powerful shield for Social Security and other retirement income.
But beware the phase-out: the enhanced senior deduction begins shrinking at $150,000 AGI for joint filers ($75,000 single) and disappears completely by $250,000 ($175,000 single). A single large Roth conversion, property sale, or mutual fund distribution could erase it.
SALT Deduction Temporarily Jumps to $40,000
If you live in a high-tax state, this one matters. The cap on deducting state and local taxes (SALT) jumps from $10,000 to $40,000 from 2025–2029 — but only if your AGI is under $500,000.
From $500,000 to $600,000 AGI, it phases out quickly. At $600,000 or more, you’re back to the $10,000 cap. The rules apply equally to single and joint filers, so there’s no “marriage bonus” here.
The phase-out is punishing — each extra dollar in that range comes with an effective marginal tax rate north of 45%. I’ll be watching your AGI closely to make sure one poorly timed income event doesn’t wipe out tens of thousands in deductions.
Trump Accounts — Permanent, but Limited-Time Federal Seed Money
Trump Accounts are a new, kid-focused IRA-ish account created by OBBBA. Parents (and others) can contribute up to $5,000 per year before the year the child turns 18; employers can add up to $2,500 and those employer dollars appear to count toward the $5,000 cap. Government and 501(c)(3) charitable contributions don’t hit the cap and aren’t taxable to the child. Unlike IRAs, Trump accounts do not require earned income to make contributions. Typically, IRA contributions can only be made with income from a job—no contributions from mom or dad or passive income.
Different rules before and after age 18
Pre-18, the account is deliberately boring—in a good way. Investments are limited to unlevered index funds tied to broad U.S. equity benchmarks (think S&P 500 or total-market styles), and fees are capped at 0.10%. No withdrawals are allowed before the calendar year the child turns 18, with one narrow exception: a full rollover to an ABLE account in the year the child turns 17 if they qualify. The point is forced, low-cost compounding with guardrails until adulthood.
From the year the beneficiary turns 18 onward, the training wheels come off and the account behaves much more like a traditional IRA: growth remains tax-deferred, after-tax “basis” (the parents’ direct contributions) comes out tax-free, and pre-tax amounts are taxed as ordinary income when withdrawn. Take money before 59½ and the taxable portion generally gets a 10% early-withdrawal penalty unless an exception applies. One unusual wrinkle for planners: Trump Accounts are not aggregated with other IRAs when calculating the taxable share of withdrawals or conversions—useful for avoiding the backdoor-Roth pro-rata mess—though Treasury still owes us clarity on whether/when rollovers to standard IRAs or Roth conversions will be allowed.
Extra money for newborns
There’s also a limited “baby bonus.” For U.S. citizens born in 2025–2028, families can opt in to a one-time $1,000 federal deposit once the child has an SSN and the account is set up; the mechanics of making that election will come via IRS/Treasury guidance. It’s free money, but it isn’t automatic—you’ll have to raise your hand.
Where does this fit? If your top goal is education funding, 529 plans still win more often—they deliver tax-free withdrawals for qualified expenses (expanded details and uses in next section) and can even roll a limited amount to a Roth IRA after long holding periods. If your teen has a hob, a custodial Roth IRA remains the cleanest long-term retirement account. That leaves Trump Accounts as a nice bonus: grab the $1,000 if eligible, consider small annual contributionsif you have extra cash laying around, and let it compound. It should be thought of as a bonus, not a focal point.
529 Plan Changes — More Flexible Than Ever
OBBBA made several notable changes to 529 college savings plans starting in 2025:
- Expanded Qualified Expenses & Higher K–12 Limit
- The annual limit for using 529 funds for K–12 tuition increases from $10,000 to $20,000 per beneficiary.
- In addition to tuition, fees, books, and the new K–12 cap, OBBBA permanently adds:
- Approved career and technical education programs
- Certain gap-year programs that meet federal criteria
- Student loan repayment up to $15,000 per beneficiary (lifetime limit) — an increase from the prior $10,000 limit.
- Roth IRA Rollovers
- Starting in 2025, unused 529 funds can be rolled into the beneficiary’s Roth IRA up to $35,000 lifetime (as established under SECURE 2.0, unchanged by OBBBA), provided the account has been open for at least 15 years and the rollover excludes contributions (and related earnings) from the past five years.
- This makes “overfunding” a 529 less risky — extra money can now jump-start your child’s retirement savings instead of being trapped.
- State Tax Nuances Still Apply
- While these changes are federal, state 529 tax deductions and credits still follow state law — and states can be slow to match federal updates.
- In New York, for example, we’ll need to watch how the expanded rollover and expense list is treated for state tax purposes before acting.
With a doubled K–12 tuition cap, expanded uses, and flexible rollover options, 529 plans are no longer just “college accounts” — they’re a versatile tool for both education funding and multi-decade wealth planning. Policymakers are really trying to get rid of the “What if my kid doesn’t go to college?” argument against funding a 529 account.
Auto Loan Interest Deduction — A Limited-Time Car Buyer Perk
From 2025–2028, you can deduct up to $10,000/year in interest on loans for U.S.-assembled passenger vehicles, including cars, trucks, SUVs, vans, and motorcycles.
The deduction phases out between $200,000–$249,000 AGI for joint filers and $100,000–$149,000 for singles. It’s a below-the-line deduction, so you don’t have to itemize to claim it.
If you’re already planning a vehicle purchase, timing it could unlock a meaningful deduction, but it’s not a reason to buy a car you don’t need.
Other Changes for Business Owners and Estates
- 20% QBI deduction for pass-through businesses made permanent, with phase-out ranges loosening in 2026.
- 100% bonus depreciation restored from 2025–2029.
- Immediate R&D expense deductions starting in 2026.
- Estate tax exemption doubles in 2026 to $15M/person ($30M/joint), creating a window for large gifts and trust funding before Congress reconsiders.
The “Danger Zones” for Your AGI
Many of these new deductions and credits vanish quickly once your AGI crosses certain thresholds. A Roth conversion, property sale, or one-time income bump could erase multiple benefits at once.
Phase-Out Danger Zones — Joint Filers
| Provision | Full Benefit ≤ (AGI) | Phase-Out Range (AGI) | Fully Lost ≥ (AGI) | Notes |
|---|---|---|---|---|
| Enhanced Senior Deduction | $150,000 | $150,001–$249,999 | $250,000 | Extra $6,000 per senior (2025–2028), below-the-line. |
| SALT Deduction Cap Increase | $500,000 | $500,001–$599,999 | $600,000 | $40k cap drops toward $10k; very high marginal in band. |
| No Tax on Tips | $300,000 | $300,001–$549,999 | $550,000 | Max $25k; reduces $100 per $1k over $300k → gone by $550k. |
| No Tax on Overtime | $300,000 | $300,001–$549,999 | $550,000 | Same math as tips (max $25k; $100 per $1k over). |
| Auto Loan Interest | $200,000 | $200,001–$248,999 | $249,000 | Max $10k/yr; U.S.-assembled vehicles; 2025–2028. |
| Child Tax Credit (1 child) | $400,000 | $400,001–$443,999 | $444,000 | $2,200/child; −$50 per $1k over $400k → 44 increments. |
| Itemized Deduction Limitation | — | Starts at $751,600 | — | Caps itemized benefit at 35% once in 37% bracket. |
Phase-Out Danger Zones — Single Filers
| Provision | Full Benefit ≤ (AGI) | Phase-Out Range (AGI) | Fully Lost ≥ (AGI) | Notes |
|---|---|---|---|---|
| Enhanced Senior Deduction | $75,000 | $75,001–$174,999 | $175,000 | Extra $6,000 (2025–2028), below-the-line. |
| SALT Deduction Cap Increase | $500,000 | $500,001–$599,999 | $600,000 | Same mechanics as MFJ. |
| No Tax on Tips | $150,000 | $150,001–$399,999 | $400,000 | Max $25k; $100 per $1k over $150k → gone by $400k. |
| No Tax on Overtime | $150,000 | $150,001–$274,999 | $275,000 | Max $12.5k; $100 per $1k over $150k → 125 increments. |
| Auto Loan Interest | $100,000 | $100,001–$148,999 | $149,000 | Max $10k/yr; U.S.-assembled; 2025–2028. |
| Child Tax Credit (1 child) | $200,000 | $200,001–$242,999 | $243,000 | $2,200/child; −$50 per $1k over $200k → 44 increments. |
| Itemized Deduction Limitation | — | Starts at $626,350 | — | Caps itemized benefit at 35% once in 37% bracket. |
By seeing exactly where the cliffs are, we can time income, deductions, and investment moves to keep you from overpaying on taxes.
TL;DR
OBBBA offers some big wins — higher deductions, new savings tools, and more generous brackets — but it also sets income traps that can cost you thousands if you’re not paying attention.
It also adds another layer of complexity to an already complicated tax code. Between permanent provisions, temporary boosts, and multiple phase-out cliffs, there’s no one-size-fits-all answer to whether your taxes will go up or down. The reality is that every individual and family’s situation is different — and the impact will vary based on income, filing status, where you live, and how your income is structured. Adjusting your financial plan makes sense.
Looking at income projections over the next few months for 2025–2028, timing Roth conversions and capital gains, and positioning can provide a lot of advatages when it comes time to file taxes. Now is the time to plan!