Explore how 2025’s new tax law could unlock time-sensitive opportunities to lower taxes, protect wealth, and align your plan with the changes ahead.
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, delivers one of the most comprehensive overhauls to tax and fiscal policy in decades. With changes spanning individual taxation, estate planning, business incentives, and clean-energy policy, the bill reshapes how individuals and businesses will manage income, assets, and investments going forward. While there is a significant amount of information in the OBBBA, we want to provide you with a quick overview of many key elements, as well as examples of how these may impact you in 2025 and beyond.
This legislation introduces both permanent reforms and temporary, time-sensitive opportunities, making 2025 a pivotal year for financial decision-making. We believe that understanding the nuances of this bill is critical and will allow clients who plan strategically to potentially minimize taxes, protect their wealth, and stay ahead of future changes.
The OBBBA cements several tax cuts initially introduced under the 2017 Tax Cuts and Jobs Act (TCJA), providing clarity and stability for taxpayers. The top marginal income tax rate of 37% is now permanent, and the larger standard deduction remains in place going forward. At the same time, new and revised deductions create planning opportunities, especially for working families, retirees, and middle-income earners.
Additionally, some deductions are only available for a limited time, such as those related to tip income, overtime, and auto loan interest. Clients must act promptly to benefit.
Allows for more accurate long-term income and retirement planning by eliminating sunset provisions from earlier legislation.
Joint filers under $500K can deduct up to $40,000 in state and local taxes (SALT), phased down over time. High earners still face limitations, particularly in high-tax states.
Increased permanently to $2,200 per child beginning in 2025, with inflation indexing and phase-outs.
Taxpayers aged 65+ receive an additional $6,000 deduction per person starting in 2025 through 2028, subject to income thresholds.
Up to $25K in tips and $12.5K in overtime are now deductible above the line (subject to income phaseouts), offering direct income relief for service workers and hourly professionals.
Deduct up to $10K in interest annually for qualifying vehicle purchases, incentivizing borrowing ahead of rising rates.
A server earns $60K total with $25K in tips. A nurse earns $12K in overtime.
→ Deducting these amounts reduces taxable income, potentially lowering their tax bracket and increasing refund eligibility.
A retired couple earning $140K jointly can deduct an extra $12K.
→ Makes Roth conversions or realizing capital gains more tax-efficient.
A couple with $35K in SALT and $15K in mortgage interest can now deduct $40K, far above the standard deduction.
→ Enables strategic itemizing and better tax optimization.
The bill provides permanent tax relief and reinvestment incentives to closely held businesses and entrepreneurs. These include enhanced deductions for Qualified Business Income (QBI), full expense for R&D and capital assets, and new benefits aimed at startup founders and employees.
The legislation also provides temporary employer incentives, like student loan repayment support, which can be powerful recruitment tools.
Looking ahead, the relaunch of the Opportunity Zone (OZ) program in 2027 signals a new chapter for tax-advantaged investing tied to real estate and business development.
Applies to owners of pass-through businesses such as LLCs, partnerships, and S corps (subject to phaseouts).
Encourages reinvestment in innovation and modernization. Eligible purchases after January 19, 2025, qualify for 100% bonus depreciation.
Entrepreneurs and early employees can exclude up to $15M in gains from capital taxes, with additional tiered benefits for shorter holdings.
Employers can contribute up to $5,250 annually, tax-free, to employees.
Provides capital gains deferral and elimination for investments held in designated low-income areas.
A consulting firm owner earns $500K in pass-through income.
→ The 23% deduction reduces taxable income by $115K, cutting the effective tax rate significantly.
A medical technology company spends $800K on R&D and $400K on equipment.
→ All $1.2M can be written off in 2026, preserving capital for future growth.
A founder sells startup shares after six years for $10M.
→ Entire gain excluded from capital gains taxes under expanded QSBS.
An employer offers $5,250/year in student loan assistance.
→ Helps attract talent without increasing wage expenses or payroll taxes.
The OBBBA offers unprecedented opportunities for wealth transfer, but some are fleeting. The estate and gift tax exemption increases permanently in 2026 to $15M per individual ($30M for married couples). However, potential political changes make proactive use of this higher limit crucial.
Charitable deductions face a new 0.5% Adjusted Gross Income (AGI) floor starting in 2026, which will reduce tax benefits for high-income donors unless structured effectively.
Strategic use of Donor-Advised Funds (DAFs), Charitable Remainder Trusts (CRTs), and front-loaded gifting can help clients retain the full value of their giving.
A historic opportunity to transfer wealth before exemption amounts are potentially reduced again.
Only donations exceeding 0.5% of AGI will be deductible.
A couple gifts $25M to heirs in 2025 using the full $30M exemption.
→ Shields large estates from future tax law changes.
A client with $10M AGI donates $100K/year.
→ In 2025: Full $100K deductible.
→ In 2026: Only $50K deductible.
→ Solution: Use a DAF in 2025 to front-load gifts and preserve maximum deductibility.
A client donates highly appreciated real estate via a CRT.
→ Offsets income, avoids capital gains, and supports a charitable legacy.
The OBBBA marks a pivot away from prior clean-energy policies. Federal tax credits for electric vehicles and residential energy upgrades will expire at the end of 2025. Meanwhile, support for fossil fuel development expands.
Clients considering ESG investments or sustainability-related capital improvements should act promptly to capture remaining incentives. Long-term investment planning may also need to adjust based on shifts in energy policy.
A client buys a qualifying EV in August 2025.
→ Claims the full $7,500 credit before the program ends.
A homeowner installs $20K in solar and insulation in 2025.
→ Accesses remaining credits before year-end deadline.
A high-income earner in New York considers moving to Florida.
→ Eliminates state income tax exposure and maximizes SALT benefits.
Through the OBBBA actions, 2025 offers a rare period of clarity. Use it to realign investment structures, assess income timing, and reposition assets to maximize deductions and exemptions.
Many opportunities, EV credits, charitable deductions, and tip/overtime deductions, expire soon. Clients must act deliberately and promptly.
A retiree, a business owner, and a tech executive will all experience OBBBA differently. Personalized planning ensures relevance, efficiency, and value.
Legislative headlines are constantly shifting like the wind. What endures is good, sound advice. As always, our focus is on ensuring that you achieve Financial Peace of Mind and stay focused on long-term strategy and goals, not politics or panic (aka, Dirty Water).
The Big Beautiful Bill fundamentally shifts the tax and financial landscape, but within those shifts lie opportunities. Whether it is reducing taxable income, locking in wealth transfers, or optimizing charitable giving, the months ahead potentially offer immense planning potential, and our advisory staff is ready to collaborate with you on addressing potential shifts that may make sense given your current financial situation. As stated earlier, your Financial Peace of Mind is our mission, and we look forward to navigating the changes as the currents shift.
We hope you are enjoying the summer and look forward to seeing you soon!
Disclosure:
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