The “One Big Beautiful Bill Act” (OBBBA) introduces a host of permanent and temporary tax changes that could significantly impact your financial strategies. This is more than just a political talking point; it’s a transformative law affecting a wide array of taxpayers. Let’s explore what it means for you.
Income Tax, Deductions & Credits
Income Tax Brackets:
The lower income tax brackets under the TCJA are now permanent, with adjusted thresholds to benefit many Americans.
Standard Deduction:
Enjoy the continued higher standard deduction, which adjusts annually for inflation, potentially reducing your taxable income.
Child Tax Credit:
Stay informed about the changes in refundable and nonrefundable amounts, and the income-based phaseouts that might affect you.
Car Loan Interest Deduction:
If you qualify, take advantage of the new $10,000 deduction on car loan interest, providing the vehicle is assembled in the U.S.
Tip Income Tax Break:
Temporary relief is available for up to $25,000 in tip income, benefiting certain occupations.
SALT Deduction Cap Increase:
The deduction cap rise to $40,000 could offer relief in high-tax states, though phaseouts for higher earners may apply.
Wealth Transfer, Investment & Retiree Provisions
Senior Bonus Deduction:
Explore the $6,000 temporary deduction for seniors, available based on income.
Transfer Tax Exemptions:
Benefit from the increase in estate, gift, and generation-skipping transfer tax exemptions to $15 million.
Capital Gains Brackets:
These will now adjust for inflation, aiding investors in staying within lower tax ranges.
Alternative Minimum Tax (AMT):
Permanent relief is here, though higher-income earners might face quicker phaseouts.
Other Noteworthy Changes
Medicaid Changes:
Prepare for significant shifts with $1 trillion in funding cuts and new work or volunteer requirements.
Trump Accounts:
These new accounts for eligible children offer tax-advantaged growth and have specific contribution limits.
Clean Energy and EV Tax Credits:
Act swiftly as these benefits will phase out soon, especially if planning a purchase or home upgrade.
The OBBBA affects everyone from low-income families to wealthy investors and retirees. Don’t wait for tax season; start evaluating your tax strategy now. We recommend consulting a financial advisor or tax professional for personalized guidance.
