The "One Big, Beautiful Bill" Act, or OBBBA, introduces a comprehensive range of permanent and temporary tax changes with significant implications for individuals across various income brackets, ages, and occupations. Here's how it could affect your financial strategy.
Income Tax, Deductions & Credits
Good news if you've enjoyed the lower income tax brackets from the TCJA—they're now permanent with revised thresholds. Additionally, the higher standard deduction will continue and be adjusted annually for inflation.
The Child Tax Credit sees revisions too, with clarified refundable and nonrefundable amounts and income-based phaseouts. You may also benefit from a new $10,000 car loan interest deduction, provided your vehicle is assembled in the U.S.
For those in qualifying occupations, there's a temporary tax break on up to $25,000 in tip income, with more details to be released soon. High-tax state residents might find relief in the increased SALT deduction cap of up to $40,000, though watch for income-based phaseouts.
Wealth Transfer, Investment & Retiree Provisions
Senior citizens could utilize a $6,000 "Senior Bonus" deduction, subject to income-based eligibility. Estate, gift, and generation-skipping transfer tax exemptions now permanently increase to $15 million.
Investors benefit from inflation-adjusted capital gains brackets, helping you remain in the lower tax ranges. Furthermore, the AMT relief is permanent, although phaseouts happen faster for high earners.
Other Noteworthy Changes
Major Medicaid changes include $1 trillion in cuts, new work requirements, and tighter eligibility. Also, "Trump Accounts" for kids offer tax-advantaged growth, though contributions and investments have limits.
Clean energy and EV tax credits are phasing out, so act quickly if you're considering a purchase or home upgrade.
The OBBBA affects a wide spectrum of taxpayers—from low-income families to wealthy investors and retirees. Don't wait for tax season to understand its impact; start strategizing now and consult a financial advisor for personalized guidance.
