What Does the “One Big Beautiful Bill Act” Mean for You?

Picture of Steve Latham, CFA, CFP® | Chief Investment Officer

Steve Latham, CFA, CFP® | Chief Investment Officer

One of the largest pieces of legislation was recently passed by Congress and signed into law by President Trump on July 4th. The “One Big Beautiful Bill Act” (OBBBA) encompasses a variety of aspects detailing tax breaks, spending cuts, and changes to the way individuals will plan for retirement. Given how comprehensive the OBBBA is, we’ll keep our focus on the details of the bill that impact retirees the most.

Enhanced Senior Tax Deduction

This is one of the most significant changes for retirees. The bill introduces an additional $6,000 deduction for individuals aged 65 and older. For married couples filing jointly, where both are 65 or older, this means a potential extra $12,000 deduction. This is in addition to the existing standard deduction.

Unfortunately, this provision does have a relatively short sunset period where it’s set to expire at the end of 2028. There is also an income cap limit for households with modified adjusted gross income (MAGI) exceeding $150,000.

Estate Tax Exemption Increase

For those focused on legacy planning, the bill significantly increases the unified gift-and-estate tax exemption to $15 million per individual (or $30 million per married couple filing jointly), starting in 2026 and indexed for inflation. This means a much larger amount of your estate can be passed on to heirs without incurring federal estate tax. These levels are made permanent, meaning there is no longer an “Estate tax cliff” to worry about due to a future expiration date.

Affordable Care Act (ACA) Subsidies Expire

The OBBBA allows for the enhanced tax credits (also known as the 8.5% rule) for ACA coverage to expire. This could lead to higher out-of-pocket premium payments for individuals and households on ACA plans. Specifically, the “tax credit cliff” is now back in play for 2026 and beyond. This means in order to earn tax credits to help offset ACA costs, your modified adjusted gross income (MAGI) will need to be less than 400% of the federal poverty level. If your MAGI exceeds this threshold, you may no longer be eligible for ACA tax credits.

Additional Charitable Contribution Deductions

When filing your taxes, if you take the standard deduction, you can now earn an additional $1,000 deduction ($2,000 for married couples) for cash charitable contributions made in the tax year you’re filing for. If you itemize your deductions, a new 0.5% of adjusted gross income (AGI) floor has been introduced. This means your charitable donations must exceed 0.5% of your AGI before you can begin to deduct your donations.

Standard Deduction Permanently Increased

The standard deduction now becomes more attractive when compared to itemizing for most tax filers. For tax year 2025, the standard deduction for couples married filling jointly increases $1,500 to $31,500. In subsequent years the standard deduction will increase based on inflation.

State and Local Tax (SALT) Deduction Cap Increased

The bill increases the cap on the SALT deduction to $40,000 for both individual filers and married couples filing jointly, up from the current $10,000. This increased cap is temporary, set to revert to $10,000 after 2029. The $40,000 benefit phases out for households earning more than $500,000 in MAGI.

Income Tax Brackets Made Permanent

The current individual and Married Filing Jointly income tax rates and brackets, including the top marginal rate of 37%, are made permanent. This avoids a general tax increase that would have occurred after 2025 had the provision been left to expire. The income levels associated with each bracket will be adjusted for inflation each year.

There are many other notable provisions associated with the OBBBA that may impact you if you’re a small business owner, earn overtime wages or tips, are planning on having children or grandchildren, or rely on Medicaid for healthcare. We’re happy to answer any questions you may have related to this bill and how it could impact planning for your future.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Individuals showing a CFP® designation hold an active CERTIFIED FINANCIAL PLANNER™ certification. To earn the CFP® designation, the individual had to complete an approved educational program, pass a rigorous examination and meet stringent experience requirements. Designation holders also adhere to a professional Code of Ethics and fulfill annual continuing education requirements to remain aware of current planning strategies and financial trends. You can find more information about this designation at CERTIFIED FINANCIAL PLANNER™ (CFP®) Certification.

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