Understanding the One Big Beautiful Bill Act: A Client Guide

The “One Big, Beautiful Bill Act” (OBBBA) introduces significant tax changes that could reshape financial strategies across various income brackets, ages, and occupations. It's essential to understand this is more than a political talking point—it's a law with real impacts that may affect your financial planning.

Income, Deductions & Credits

With OBBBA, the lower income tax brackets from the TCJA are now permanent. You'll find thresholds adjusted to reflect inflation, along with a continued higher standard deduction. Notably, the Child Tax Credit has been revised, with both refundable and nonrefundable aspects adjusted for income-based phaseouts. Additionally, a new $10,000 car loan interest deduction is available for U.S.-assembled vehicles, and a temporary tax break on up to $25,000 in tip income is introduced, although it's vital to check the forthcoming list of eligible occupations. The increased SALT deduction cap provides relief in high-tax states but includes phaseouts for high earners.

Wealth Transfer, Investment & Retirement

The OBBBA includes a temporary $6,000 “Senior Bonus” deduction, based on income eligibility, and increases the estate, gift, and generation-skipping transfer tax exemptions to $15 million. Inflation-adjusted capital gains brackets can help investors remain in lower tax ranges, and there's permanent relief from the Alternative Minimum Tax (AMT), although higher-income earners may still experience a quicker phaseout.

Additional Noteworthy Changes

Significant Medicaid changes are underway, including $1 trillion in funding cuts and new work/volunteer requirements with tighter eligibility standards. The creation of “Trump Accounts” for eligible children features tax-advantaged growth, contribution limits, and an investment structure. However, be informed that clean energy and EV tax credits are phasing out soon; act quickly if considering a purchase or home upgrade.

The impact of OBBBA spans across a wide spectrum of taxpayers, from low-income families to wealthy investors and retirees. Don't wait until tax season to evaluate your tax strategy. Begin now, considering the permanent and temporary provisions in the legislation. We recommend consulting a financial advisor or tax professional for personalized advice.