Understanding The One Big Beautiful Bill Act (OBBBA)

Hi, I'm Ben Gurwitz, a Certified Financial Planner™ and CEO of Financial Life Advisors. We're a firm that helps families navigate investments, tax, insurance, and their estates to help them achieve their life goals.

Specifically today, I wanted to put together a little video to cover the One Big Beautiful Bill Act (OBBBA) — what those changes in that bill mean and how someone may benefit from them. Not just today, but when keeping a long-term view.

Of course, I always need to put in our disclosures: We are not CPAs. We are not attorneys. We don't give legal or tax advice, but we will cover some of these topics. I encourage you to work with your attorney, CPA, or qualified professional before implementing anything you hear about today.

In the OBBBA, there are several things we want to cover today. Some of the changes — what they are, who is impacted, and how you might benefit from them.

Itemized Deductions and SALT Cap

In addition to the tax rates that were passed in 2018 becoming permanent, the new lower rates are now permanent rates. There were also significant changes to itemized deductions.

One of the more controversial things that happened when the standard deduction was increased was the limitation on State and Local Taxes (SALT) — capped at $10,000. If your state income tax or property tax or sales tax combined exceeded 10,000, you were only able to count $10,000 towards your standard deduction That cap has now been raised to $40,000, effective in 2025 and set to continue until 2030.

That means a lot more taxes that are paid are potentially deductible as itemized deductions. Often under the old rules, people couldn’t itemize because their deductions didn’t exceed the higher standard deduction. Now, there’s potential for many more taxpayers to benefit.

In addition: Mortgage insurance premiums have been added back in as an itemized deduction.

• For the first time ever, a phase-out of charitable contributions has been added. The first 0.5% of Adjusted Gross Income (AGI) is excluded from itemized deductions on charitable contributions.

• Wagering losses can now only offset 90% of winnings (previously 100%).

• Educator expenses: Teachers who have additional out-of-pocket expenses can now add those as an itemized deduction if they itemize.
  

This impacts families paying high state or property taxes, those with large mortgages or mortgage insurance, those with charitable intent, and educators with out-of-pocket expenses who are itemizing their deductions

Planning Tip: Homeowners with high state income or property taxes, for example, in Texas can choose when to pay property taxes — for example, paying in January and December to “bunch” deductions in one year. Similarly, those with charitable intent can “bunch” their charitable contributions. This creates more planning opportunities where you can alternate between itemizing one year and taking the standard deduction the next, depending on timing.

Senior Standard Deduction (5:15)

New this year, and for the next few years, there is an extra senior standard deduction.

This is in addition to the standard deduction of $31,500 for married couples, and the “over 65” addition of $1,600, there will now be an extra $6,000 added on.

So, a married couple filing jointly could have a total standard deduction of $46,700.A single person over age 65 could have a standard deduction of $23,350.

However, this phases out for higher incomes:

• Single: Phases out between $75,000–$175,000 of income

• Married filing jointly: Phases out between $150,000–$250,000 of income
  

If you’re over 65 and have a large income year (for example, from capital gains or retirement plan distributions), your standard deduction could be reduced. This “tax torpedo” can sneak up on retirees — so it’s worth planning around.

For those under the thresholds, the extra $6,000 deduction can help offset income — potentially making IRA distributions or Roth conversions more favorable. This benefit is temporary and will phase out after 2028.

New “Trump Accounts” (7:25)

As if the alphabet soup of 401(k)s, 403(b)s, 457s, IRAs, Roths, and 529s weren’t enough — now we have the Trump Account.

This account allows money to be set aside for children or grandchildren — similar to an IRA, but without requiring earned income to contribute.

• Starting July 2026, children can receive up to $5,000 per year per person into a Trump Account.

• The funds receive tax-favored status and must be invested in index investments.

• If you have a baby in 2025, 2026, or 2027, the government will contribute $1,000 to start the account.
  

This is useful for parents and grandparents interested in building multi-generational wealth in a tax-advantaged manner and will not impact other contribution limits.

Employers can also contribute as a benefit. 

The account can be used for education, a first home, or retirement — more flexible than a 529 plan, but details are still emerging. It may be helpful to compare the Trump Account with college savings accounts and/or trusts to ensure you are meeting your asset protection, tax advantage, and savings or other financial goals.

Estate Tax and AMT (9:30)

The estate tax exemption that previously doubled is now made permanent — about $15 million per person, or $30 million for married couples.

If your estate is under those limits, no federal estate tax applies. This reduces the urgency to gift aggressively before 2026, but estate planning remains important.

Alternative Minimum Tax (AMT): (10:40)The AMT exemption amounts and phase-outs have also been extended. Many high earners were previously ensnared in AMT, particularly those with large deductions or incentive stock options.

This extension prevents many from being caught, but high earners should still monitor AMT exposure and consider strategies like ordinary income acceleration if affected.

Child Tax Credit (11:41)

The Child Tax Credit has been expanded and made permanent, now $2,200 per child, with $1,700 refundable (even if no tax is owed). It will adjust for inflation going forward.

Phase-outs remain:

• Single: $200,000

• Married filing jointly: $400,000
  

Parents under those income thresholds will continue to benefit.

Education Scholarship Credits (12:48)

Beginning in 2027, a new $1,700 education scholarship tax credit will allow taxpayers to donate up to $1,700 to a Scholarship Granting Organization (SGO) and receive a $1,700 (or dollar for dollar) tax credit — essentially donating for free. 

States will determine how SGOs are structured, but they are intended to fund scholarships for middle- and lower-income students in public and private schools.

Green Energy Credits (14:00)

Unfortunately, green energy credits were largely repealed under OBBBA.

If you didn’t buy your electric car by September 30, or complete your home energy project by 2025 year-end, those lucrative credits —

• $7,500 for new EVs,

• $4,000 for used EVs,

• 30% residential clean energy credit —are now gone. Existing projects must be completed and in service by December 31 to qualify.
  

Overtime and Tip Income Credits (14:47)

New tax credits offset taxable income on:

• Up to $25,000 of tips, and

• Up to $12,500–$25,000 of overtime pay (depending on filing status).
  

These phase out at $100,000 (single) and $200,000 (married). Only tip-paying industries qualify, and restructuring pay to exploit these rules is not permitted — check with a CPA or payroll provider before making changes. These changes are temporary.

Vehicle Loan Interest Deduction (15:56)

New for 2025 and later: You can deduct up to $10,000 per year of interest on a personal-use vehicle loan, provided the car: Is assembled in the U.S., and

• Weighs less than 14,000 lbs.
  

This lowers effective borrowing costs but has income-based phaseouts.

Simulation and Planning (16:45)

With so many moving parts and phase-outs, simulation is key. Advanced planning software can model different scenarios over the next few years — itemizing vs. standard deduction, Roth conversions, gifting strategies, and drawdown strategies for retirement.

Comparing “old law” vs. “new law” outcomes helps families act with clarity today and plan for the next five years with confidence.

17:42-Resources for more information

Next Steps (17:56)

You can always schedule a complimentary consultation with Financial Life Advisors or contact your CPA to review how these tax law changes may affect you.

We recommend:

• Reviewing your estate and gifting plans

• Evaluating Roth conversions

• Assessing retirement drawdown strategies

• Staying ahead of these permanent changes
  

If you’d like our help, we can build a custom five-year action plan tailored to your goals. Email us, call us, visit our website, or scan the QR code to get started on your financial journey.

Thanks for watching and here’s to your financial clarity!

Investment Advisory and Financial Planning Services offered through Financial Life Advisors, LLC.

Financial Life Advisors (FLA) provides tax planning to assist clients in managing their financial affairs effectively. However, it's important to note that FLA is not a tax, legal, or accounting firm. While we strive to offer comprehensive financial guidance, our services are not intended to replace professional tax, legal, or accounting advice.