The One Big Beautiful Bill Act (OBBA) was passed into law on July 4th of this year with plenty of fanfare. Many people know that it made permanent the tax changes made in the Tax Cuts and Jobs Act of 2017 including the higher standard deduction amounts that we have gotten used to. There are, however, plenty of other changes made to tax law, many of which will impact everyday Americans.
In this blog, we will review some of the most commonly applicable changes to our clients and the community.
Tax Changes that May Affect You
These provisions are designed to help working families, retirees, and everyday taxpayers. Most of them take effect starting with your 2025 tax return:
- Standard Deduction Made Permanent
The standard deduction is now locked in at $15,750 for individuals and $31,500 for couples, effective 2025, and will adjust annually for inflation.
- Child Tax Credit Increase
The credit increases from $2,000 to $2,200 per child in 2025 and will adjust annually for inflation going forward.
- Senior Bonus Deduction
Beginning in 2025, taxpayers age 65+ earning under $75,000 ($150,000 for couples) can deduct up to $6,000 ($12,000 for couples). This bonus deduction is in addition to the standard deduction and will expire after 2028.
- Tip Income Deduction
Starting in 2025, service workers can deduct up to $25,000 in tip income from federal taxes. This provision also expires in 2028.
- Overtime Pay Deduction
Up to 250 hours of overtime pay will be exempt from federal tax beginning in 2025, with a sunset date in 2028.
- Car Loan Interest Deduction
If you buy a car assembled in the U.S. after January 1, 2025, you can deduct up to $10,000/year in loan interest.
- Charitable Giving Deduction
Starting in 2026, even if you don’t itemize, you can deduct up to $1,000 ($2,000 for couples) in cash charitable donations. This is also known as an above-the-line deduction and is only available to taxpayers that don't itemize.
Saving in a Smarter Way
- Invest America Accounts (aka “Trump Accounts”)
Beginning in 2026, children born between 2025 and 2028 will receive a $1,000 seed contribution into a new tax-deferred savings account. These accounts are designed to grow over time and help with qualified future expenses such as education, first-time home purchase, or starting a business.
- Expanded HSA and 529 Eligible Expenses
Health Savings Account (HSA) eligible expenses will include gym memberships, mental health services, and Direct Primary Care (DPC) arrangements. In addition, 529 plans can now cover tutoring and standardized testing. Some of these changes are effective immediately and some become effective 2026.
Estate Planning
- Estate Tax Exemption Raised
The exemption increases to $15 million starting in 2026. This could reduce estate taxes for high-net-worth families.
Final Thoughts
The One Big Beautiful Bill is packed with changes—many of which are already in effect or will be soon. But the most important takeaway is this: your financial plan should evolve with the law. Whether it’s updating your retirement strategy, reviewing your estate plan, or making the most of new deductions, now is a great time to take action.
If you have questions about how this bill affects you, or if you want help building a plan that takes advantage of these new opportunities, set up a free consultation today by clicking the “Schedule Appointment” tab at the top of the page or calling our office at 208-881-5505. We’re here to help you make sense of the changes and move forward with confidence.
Sources:
http://irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
https://www.investamerica.org/
https://irahelp.com/obbba-impact-on-hsas/
https://usafacts.org/visualizations/obbb-timeline/
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3 Peaks Financial does not provide tax or legal advice. Please consult a tax professional before implementing information or strategies found in this publication.
*Connor Dye is solely an investment advisor representative of 3 Peaks Financial Advisors, and not affiliated with LPL Financial.