After years of tension over the scheduled sundown of the Tax Cuts and Jobs Act (TCJA) on the finish of 2025, the extensively anticipated laws extending and changing TCJA – often known as the “One Large Lovely Invoice Act” (OBBBA) – was signed into legislation on July 4, 2025.
At its core, OBBBA makes everlasting lots of the provisions of the unique TCJA, together with TCJA’s tax brackets, elevated customary deduction, Part 199A deduction for Certified Enterprise Revenue (QBI), and elevated Baby Tax Credit score. All of those obtain minor tweaks however stay considerably the identical as they have been beneath TCJA. Nevertheless, the $10,000 limitation on State And Native Tax (SALT) deductions is quickly elevated to $40,000 beneath the brand new legislation. Greater-income households might even see this deduction phased again all the way down to the $10,000 restrict, and all households will once more be topic to the $10,000 SALT cap starting in 2030.
Moreover, OBBBA introduces a number of new below-the-line tax deductions whereas amending quite a few others. The brand new legislation introduces a brief $6,000 deduction for seniors age 65+, deductions of as much as $25,000 of revenue from suggestions and additional time wages, and as much as $10,000 of curiosity paid on qualifying auto loans. All of those provisions take impact from 2025 by 2028. Amongst a number of adjustments to itemized deductions, the brand new legislation most notably introduces a 0.5%-of-AGI ‘ground’ on charitable contributions, decreasing the deductible worth of quantities donated to charity. It additionally imposes a brand new limitation for taxpayers within the 37% tax bracket, capping the ‘worth’ of itemized deductions to 35% of taxable revenue.
Additionally included are a number of different tax adjustments, together with (however not restricted to) decreased phaseout thresholds and a quicker phaseout price for the Different Minimal Tax (AMT) exemption, an enlargement of eligible 529 plan bills to cowl Ok–12 supplies and postsecondary credentials, and an extension of the Certified Alternative Zone program. The legislation additionally will increase the reward and property tax exclusion to $15 million per individual and creates a brand new “Trump account”, a sort of IRA that may be funded at a younger age (and with none earned revenue).
Finally, whereas lots of the particular person provisions beneath OBBBA are comparatively minor adjustments from current legislation, collectively they signify a considerable shift in tax coverage – one which provides a major quantity of complexity to tax planning with the variety of new deductions, phaseout guidelines, and efficient dates governing OBBBA’s provisions. Which can make it all of the extra useful for advisors to know how their shoppers stand to be impacted by the brand new guidelines, in order that they interact in proactive planning that takes all the brand new (and previous) guidelines under consideration and interprets them into actionable methods for his or her shoppers!