Just over two weeks ago, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The bill passed narrowly, with the Senate approving it 51–50 and the House following with a 218–214 vote.
With the provisions from the 2017 Tax Cuts and Jobs Act (TCJA) set to sunset at the end of this year, many expected new legislation to preserve or extend some of those changes. The OBBBA does exactly that—and more.
While the bill addresses areas such as immigration, Medicaid, and food nutrition, we’re going to focus exclusively on key tax-related changes that may impact your financial planning starting in 2025.
1. Extension of Marginal Tax Brackets on Ordinary Income
The TCJA tax brackets (10%, 12%, 22%, 24%, 35%, and 37%) will remain in place and have now been made permanent. The previously published 2025 brackets will hold, with adjustments for inflation beginning in 2026.
In addition, the 10% and 12% brackets will receive an extra inflation adjustment in 2026, giving those brackets what is essentially a two-year cost-of-living increase.
For long-term capital gains, the top rate will remain at 20%. However, it’s worth noting that starting in 2025, there will be a small gap between the capital gains and ordinary income thresholds. For example, a portion of income could be taxed at a 15% capital gains rate, even while remaining in the 12% ordinary income bracket. This creates a rare instance where some capital gains may be taxed higher than ordinary income.
2. Extension of Higher Standard Deduction Amounts
The higher standard deductions introduced by the TCJA are now permanent—and slightly increased for 2025:
Single filers: $15,570 (up from $15,000)
Married filing jointly (MFJ): $31,500 (up from $30,000)
These amounts will be adjusted annually for inflation going forward.
3. Temporary Additional Deduction for Seniors 65+
From 2025 through 2028, taxpayers age 65 or older will receive an additional deduction:
Single filers: $6,000
MFJ (both spouses 65+): $12,000
However, this deduction phases out based on Modified Adjusted Gross Income (MAGI):
Phaseout begins at: $75,000 (single) and $150,000 (MFJ)
Completely phased out at: $175,000 (single) and $250,000 (MFJ)
We won’t get into the detailed phaseout calculation here, but it’s worth noting that this deduction could make a noticeable difference for many retirees over the next few years.
4. State and Local Tax (SALT) Deduction
The TCJA capped the SALT deduction at $10,000. The OBBBA increases this limit to $40,000 in 2025, with a 1% annual increase through 2029 (so, $40,400 in 2026, and so on).
This deduction is subject to a phaseout:
Phaseout begins at: $500,000 MAGI
Fully phased out at: $600,000 MAGI
Even households that are fully phased out will still retain the baseline $10,000 deduction. Both the deduction and the phaseout thresholds will increase annually by 1%.
Important: In 2030, this provision sunsets, and the cap reverts back to $10,000.
5. New Floor for Charitable Deductions (Itemizers)
Starting in 2026, a new floor will apply to itemized charitable deductions: taxpayers can only deduct amounts that exceed 0.5% of their AGI. This is a shift from prior limits that focused on a ceiling (maximum percentage of income you could deduct).
There’s a specific ordering rule for how this applies to different types of charitable contributions, so anyone planning sizable charitable gifts should review these carefully with a tax advisor beginning in 2026.
6. Limitation on Total Itemized Deductions for High-Income Taxpayers
Beginning in 2026, taxpayers in the 37% bracket will face an itemized deduction reduction equal to:
2/37ths of the lesser of:
Total itemized deductions, or
Taxable income above the 35% threshold
This functions like a soft cap on deductions for high earners and adds another layer of complexity to year-end tax planning for those in the top bracket.
7. Charitable Deductions for Non-Itemizers
With standard deductions remaining high, most taxpayers will continue not itemizing. The OBBBA now allows a modest charitable deduction for those using the standard deduction starting in 2026:
$1,000 for single filers
$2,000 for MFJ
This deduction applies only to cash contributions to qualified charities and is a permanent provision.
8. Gift and Estate Tax Exemption Adjustments
One of the more significant provisions of the OBBBA for high-net-worth families is the treatment of the federal estate and gift tax exemption. Under previous law, the current exemption—roughly $13.6 million per person in 2024—was set to sunset at the end of 2025 and revert to about half that amount in 2026. However, the OBBBA establishes a permanent exemption of $15,000,000 per person, starting in 2026, with future inflation adjustments.
This means individuals who pass away in 2026 or later will have a larger exemption than expected under prior law. For those engaged in long-term wealth transfer or estate planning, this change may reduce the urgency of making large lifetime gifts before the end of 2025. That said, careful coordination is still important to ensure gifting strategies align with overall planning goals.
Wrapping Up
The One Big Beautiful Bill Act contains quite a few changes, and we’ve only scratched the surface of what might apply to your situation. As with all areas of financial planning, the impact will vary depending on your specific goals and financial picture.
If you have any questions or would like to talk through how these provisions could affect your 2025 and long-term planning, please don’t hesitate to reach out. That’s what we’re here for.
Matt J Black,CFP®, AAMS®
mblack@larsonfs.com
913-428-2233
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