Editor’s Note: This article was originally written shortly after the One Big Beautiful Bill Act (OBBBA) was signed on July 4, 2025. It has been updated as of July 2026 to reflect the official IRS inflation figures for 2026 (Revenue Procedure 2025-32, issued October 2025), IRS guidance on the tips and overtime deductions, the launch of Trump Accounts on July 4, 2026, and Nebraska’s 2026 update to its 529 rules.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, a sweeping piece of legislation that extends and expands many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) while introducing some notable new changes as well.
While the bill touches on business incentives, energy policy, and more, our focus here is on the elements that directly impact households like yours—income tax rates, deductions and credits, exclusions from taxable income, and new opportunities for saving and investing. We’ll break it down section by section, highlighting how these changes could influence your financial plan. Many provisions apply to tax years beginning in 2025, with some temporary through 2028 or 2029 and others made permanent, so we’ll make note of when these changes take effect. As always, individual circumstances vary, so if you’re a client, please let us know if you want to discuss more of any of these in detail. Also, many of these changes are tax-specific, so we also suggest consulting with your tax-preparer.
Income Tax Rate Changes: Locking in Lower Brackets
The OBBBA permanently extends the TCJA’s individual income tax rates, effective for tax years beginning after December 31, 2025 (i.e., starting in 2026), preventing a scheduled reversion to higher pre-2018 levels. The brackets remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%, with inflation adjustments applied to all but the top bracket.
For example, a married couple filing jointly with $300,000 in taxable income would fall primarily in the 22% and 24% brackets, compared to the old 28% and 33% rates. This permanence provides a certain level of long-term planning certainty, allowing families to better forecast after-tax income for retirement contributions or debt payoff. High earners should note the 37% top rate in 2026 applies to income over approximately $640,000 for joint filers, adjusted annually.
Enhanced Standard Deduction and Itemized Changes
The OBBBA permanently extends and enlarges the increased standard deduction from the TCJA. This is a permanent increase, not a temporary 2025–2028 boost as some early summaries (including our original article) suggested—the amounts are now indexed for inflation each year going forward. The official figures are: for 2025, $15,750 for singles, $23,625 for heads of household, and $31,500 for joint filers; and for 2026, $16,100 for singles, $24,150 for heads of household, and $32,200 for joint filers.
This makes itemizing less necessary for many, as over 90% of filers now take the standard deduction. However, for those who do itemize, key changes include:
- A permanent limit on home mortgage interest to debt up to $750,000, effective 2026 onward.
- Casualty losses restricted to federally declared disasters, effective 2026.
- Miscellaneous itemized deductions, like unreimbursed employee expenses, are permanently eliminated starting in 2026.
- New for 2026: taxpayers in the top 37% bracket have the benefit of their itemized deductions capped at a 35% rate, a limitation added by the OBBBA that took effect this year.
A notable update is the State and Local Tax (SALT) deduction cap. Previously limited to $10,000, it’s raised to $40,000 ($20,000 for married filing separately) for tax years 2025 through 2029, with a phase-down starting at $500,000 in adjusted gross income (AGI) for joint filers—reducing by 30% for every dollar over the threshold until hitting $10,000. Both the cap and the phase-down threshold increase 1% per year through 2029: for 2026, the cap is $40,400 and the phase-down begins at $505,000 of income. The cap still reverts to $10,000 in 2030 without phase-outs. This offers relief for households in high-tax states like California or New York, where property and income taxes can exceed the old cap, potentially saving upper-middle-income families thousands in federal taxes.
While high-tax states might be the most impacted, these changes might cause some high-income households (who earn less than $500,000) in other states to switch from taking the standard deduction to itemizing if the previous cap lowered their ability to itemize in the past, because they’ll now be able to deduct more of their state income tax.
New Exclusions and Deductions for Everyday Earnings
The act introduces several “no tax on” provisions to shield common income sources from taxation, with most effective for tax years 2025 through 2028.
- No Tax on Tips: Service workers can deduct up to $25,000 in qualified tips annually, available to both itemizers and non-itemizers. It phases out for income over $150,000 ($300,000 joint).The IRS has since published (and, in 2026, finalized) its list of roughly 68 occupations that “customarily and regularly” received tips—the deduction is only available for occupations on that list. The IRS also confirmed that married-filing-separately filers are ineligible and a valid Social Security number is required. Because 2025 W-2s and 1099s were not redesigned in time, the IRS declared 2025 a transition year: Notices 2025-62 and 2025-69 (November 2025) give employers penalty relief and show workers how to calculate the deduction from pay stubs and tip records for their 2025 returns. Separate W-2 reporting of tips and occupation codes begins with 2026 forms.
- No Tax on Overtime: Deduct up to $12,500 ($25,000 joint) in overtime pay, with similar phase-outs. Ideal for hourly workers in manufacturing or healthcare. IRS guidance clarified that only the premium portion of overtime required by the federal Fair Labor Standards Act qualifies—generally the “half” of “time-and-a-half.” Overtime paid solely under state law or union contracts beyond the federal requirement does not qualify.
- Car Loan Interest Deduction: For loans on U.S.-assembled vehicles (cars, SUVs, etc., under 14,000 lbs.) originated after 2024, deduct up to $10,000 in interest annually, phasing out over $100,000 AGI ($200,000 joint). This non-itemizer deduction lowers the cost of auto financing.
- Seniors aged 65+ get an extra $6,000 deduction ($12,000 if both spouses qualify), effective 2025 through 2028, on top of the standard senior bump, phasing out over $75,000 AGI ($150,000 joint).
- For self-employed or pass-through business owners, the qualified business income (QBI) deduction is made permanent.
Boosted Benefits for Families
Family-focused credits see meaningful upgrades:
- The Child Tax Credit (CTC) is permanently increased to $2,200 per child (under 17), effective for tax years beginning in 2025, with phase-outs starting at higher AGI levels ($400,000 joint) and inflation indexing. This partially refundable credit can reduce tax bills or provide refunds.
- The Earned Income Tax Credit (EITC) gets administrative tweaks to curb fraud, effective 2025.
- Dependent care flexible spending account contribution limits rise to $7,500, effective 2026, allowing pre-tax savings for childcare or eldercare.
New Savings Opportunity: The Trump Savings Account
When we first wrote about these accounts, many details were unsettled; the IRS has since issued formal guidance (Notice 2025-68), released Form 4547 for elections, and the accounts officially launched on July 4, 2026—the first date contributions and the government seed deposits were permitted. Several features work differently than early reporting (including ours) suggested, most importantly the tax treatment of withdrawals.
Trump Accounts (officially a new type of traditional IRA for minors, sometimes called “530A accounts”) are a tax-advantaged vehicle for children’s long-term savings. A one-time $1,000 federal “pilot program” seed deposit is available for children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number. Parents elect to open an account and claim the seed by filing IRS Form 4547 (which could be filed with 2025 tax returns) or online at trumpaccount.com. Accounts can be opened for any child under 18 (regardless of birth year), but only the 2025–2028 birth cohort receives the $1,000 seed. As of the July 2026 launch, more than 4 million children had been signed up per the IRS (over 6 million per late-June media reports), with initial accounts administered by BNY Mellon and an account app built in partnership with Robinhood.
Parents, grandparents, or others can contribute up to $5,000 annually in total (after-tax, not deductible), indexed for inflation after 2027. Employers can contribute up to $2,500 tax-free to the family, but employer dollars count toward the same $5,000 overall cap. Government and qualifying charitable contributions (including the $1,000 seed) do not count toward the cap.
Funds grow tax-deferred and must be invested in low-cost U.S. stock index funds (S&P 500-type funds with expense ratios capped at 0.10%). At age 18 the account simply becomes an ordinary traditional IRA. Withdrawals are taxed as ordinary income, and withdrawals before age 59½ are generally subject to a 10% penalty, with the standard IRA exceptions (such as higher education costs and first-time home purchases). In other words, this is best understood as a retirement account with a head start, not a flexible age-18 savings account.
Pros of the Trump Savings Account
- Assists with retirement readiness: allows contributions at an even younger age prior to earned income, which amplifies the benefits of compounding over time
- Flexibility: For those under age 18, contributions can be made to the account even if there is no earned income, unliked Traditional or Roth IRAs.
- Broad Access: No income limits for the seed money ensure all families can benefit, and employer contributions enhance participation.
- Tax deferral: Growth is not taxed until it is withdrawn, unlike UTMA or UGMA accounts which tax investment income each year.
- Free money: the $1,000 seed (plus, in some cases, private matching gifts—e.g., the Dell Foundation’s $250 contributions for eligible children) requires only that a parent make the election.
Cons of the Trump Savings Account
- After-Tax Contributions: No upfront tax deduction, which may deter some families compared to deductible accounts like IRAs. Cost basis (the amount that has been contributed) must be tracked alongside account growth over time.
- Market Risk: The money must be invested in stock index funds which could lose value, especially during market downturns, unlike guaranteed savings options. Bonds, cash and even international stocks are not allowed prior to age 18, so diversification is limited. An all-equity portfolio may be appropriate for most investors, but some families or individuals who aren’t used to investing may not be able to tolerate that level of risk.
- Locked Funds: Money is inaccessible penalty-free until age 59.5 absent any IRA exception.
- Limited Eligibility for Seed: Only children born 2025-2028 qualify for the $1,000 seed, excluding older kids.
- Another account type: Was anyone asking for this? If Congress wanted to allow flexibility for minors to contribute to a retirement account without a job, IRA contribution rules could simply have been relaxed. Instead, we now have yet another account type with its own unique set of rules for the public (or their hired professionals) to try to understand, track, and maintain.
Estate and Other Planning Implications
The estate and gift tax exemption jumps permanently to $15 million per person ($30 million for couples), effective for estates in 2026 and beyond, indexed for inflation—shielding most families from federal estate taxes and easing generational transfers.
ABLE accounts for disabled individuals see extended enhancements, effective 2025, allowing higher contributions and Saver’s Credit eligibility.
On the flip side, excess business losses for non-corporate taxpayers (e.g., sole proprietors) are permanently capped at $256,000 ($512,000 joint), effective 2026, with carryovers.
Lastly, there were some expansions regarding the definition of K-12 qualified expenses for 529 accounts (tutoring, curriculum materials, testing fees, and more), and the federal annual limit for K-12 withdrawals doubled from $10,000 to $20,000 starting in 2026. Nebraska update: in 2026 the Legislature passed LB748 to begin aligning state law with the federal changes. Withdrawals for qualified postsecondary credentialing programs (e.g., CDL, welding, IT certifications) become Nebraska-qualified effective July 17, 2026, and K-12 expenses are scheduled to become Nebraska-qualified beginning January 1, 2029. Until then, K-12 withdrawals remain non-qualified for Nebraska purposes—meaning state tax on the earnings and recapture of prior NEST deductions—so Nebraska clients should continue to reserve 529 funds for college and, after July 2026, credentialing programs, unless they’re willing to pay some state tax.
What This Means for Your Financial Plan
While this isn’t an exhaustive list of the items that impact our clients’ finances, it does cover many of the common item. For our clients, we see the following items to be the most impactful:
- Preventing the tax cuts from sunsetting (brackets remain low)
- Increasing the SALT cap limit
- Permanently raising the estate and gift tax exemption
- Senior tax deduction
If you’re a client, we’re happy to visit with you if you have any specific questions about the changes. If not, and if you’re interested in working with us, please schedule a time to talk with us. We’re happy to discuss whether we’re a good fit.