One Big Beautiful Bill Act Summary

By Peter A. Pigeon, CFP
Hobbs Group Advisors, LLC

The One Big Beautiful Bill Act of 2025 (OBBBA) will impact tax planning for many clients in 2025 and 2026. There is truly something for everyone in this bill. The key to understanding the relevance of the deductions noted in the article is to understand the difference between Itemized deductions and the Standard deduction.  For starters, a certain amount of income for every taxpayer is not subject to tax. A deduction is a reduction of income for the purposes of calculating your income tax. I’ll start with the standard deduction. For 2025, the standard deduction is as follows: Single: $15,750 Married filing jointly: $31,500 Every taxpayer gets the larger of the standard deduction, or an itemization of their deductible expenses, which includes mortgage interest, state and local tax payments, and charitable contributions. The other key pertinent term for this discussion is a Phaseout, which is the level of income for which certain deductions are reduced. For example, the Enhanced Senior Deduction of $6,000 per person begins to phaseout for joint taxpayers beginning at $150,000 of modified adjusted income. Taxpayers need to pay attention to their projected income when thinking about many of these items. Here is a list of the changes from this bill:

1. More SALT, please

Too much salt is bad for you, unless you are dealing with tax deductions. SALT stands for State and Local Tax Deductions. Prior to the OBBBA, there was a cap of $10,000 for State and Local Tax Deductions, which means that regardless of how much state income tax, real estate tax, and personal property tax you paid, you could only count $10,000. This is changing for 2025, as the cap is now $40,000. So, keep those receipts and pay attention to the phaseout for this deduction, which begins once income exceeds $500,000 for both single and joint taxpayers. This change is for 2025, so take note during your year-end planning.

2. Charitable- Every Bit Counts

• Starting in 2025, there is a new charitable deduction for taxpayers who do not itemize their deductions. Prior to the OBBBA, if you took the standard deduction (see above), you could not deduct any charitable contributions. Now, you can ($1,000/$2,000)
• New deduction limitation for charitable contributions- For those making large charitable contributions, there is a new formula for calculating your deduction. Make sure to talk with your tax advisor to better understand this rule.
  
  

3. Expansion of 529 expenses: More ways to save for the kids/grandkids/adults

This is a welcome change especially for people with K-12 beneficiaries as well as adults attempting to add credentials for their professional career. The 529 started off as a college savings-only mechanism, but recent bills have made these more friendly for other forms of education.

• Starting in 2025, there is an expansion of qualified expenses for admission exams, tutoring, educational therapies, and college admission fees.
• For professionals, 529s can be used to cover post-secondary credentialing expenses. This also applies for 2025.
• Beginning in 2026, the annual limit for using 529 funds for K-12 expenses doubles from $10,000 to $20,000. This is a big deal in conjunction with the expanded expense items listed above since many K-12 private schools have annual tuitions that exceed the old $10,000 cap
• In summary, 529s should be used more for all of the tax and investment benefits that have always been present. This should sweeten the benefits even further.
  
  

4. No Tax on Social Security/Overtime/Tips. How the Sausage was made

For 2025, many of the items below are available to all taxpayers, whether they itemize their deductions or not:

• The “No Tax on Social Security” campaign promise from President Trump came out in the OBBBA as an extra deduction for taxpayers age 65 and older. The enhanced Senior Deduction adds a deduction of $6,000 per taxpayer. It does have a phaseout for higher income taxpayers, so make sure this applies to you.
• The “No Tax on Tips and Overtime” promise manifested as deductions that must be reported on your tax return:
  • $12,500 deduction (Single)/$25,000 Married Filing Joint for Overtime ($150,000 (Single)/$300,000 (Joint) phase out
  • $25,000 deduction for Single and joint taxpayers for Tips ($150,000 (Single)/$300,000 (Joint) phase out
  • $10,000 for Auto Loan interest for new loans ($100,000 (Single)/$200,000 (joint) phase out

It is extremely important to consult with a trusted tax advisor to better understand how these changes may impact your tax return and overall tax planning. Please pay close attention to items with December 31^st deadlines like Charitable contributions. If you’d like to further discuss the potential impact for you and your family, please contact us.