Summary of Key Points from the OBBBA

After the codification of the One Big Beautiful Bill Act we waited for the dust to settle so we can provide you with a simple and practical summary of what it means for you.  The new legislation touches on a wide range of tax provisions, our goal here is to list the changes that we believe to be most applicable to Blue Summit clients.

Many of the changes don’t take effect until tax year 2026.  One key exception is a temporary increase to the State and Local Tax (SALT) deduction, which will apply in 2025 before phasing back down in later years (more in item #4).  The other key exception is the halt to home Energy Upgrade/Solar tax credits (more in item #6).

Key Points

1. Permanence for Many TCJA Rules

   1. Tax Brackets remain at TCJA levels

   2. Increased Standard Deduction is here to stay

   3. This helps provide more certainty in tax planning, and the standard deduction has been helpful to many taxpayers since it began in 2018

2. New Senior Deduction

   1. Taxpayers aged 65+ can claim a new $6,000 deduction. 

   2. Phase out begins at MAGI income of $75,000 single / $150,000 MFJ, disappearing entirely at $175,000 single / $250,000 MFJ.

   3. Widely beneficial if you are under the income limits

3. New Non-Itemizer Charitable Deduction

   1. A permanent charitable deduction of $1,000 (single) / $2,000 (MFJ) is now available for all taxpayers without exception. 

   2. This is helpful for those who give gifts to charities, but do not itemize.

4. SALT (State and Local Tax) Deduction temporarily increased

   1. In 2025, the cap increases to $40,000 from $10,000.  It goes up slightly each year until 2029.

   2. The higher deduction begins to phase out for households earning more than $500,000 (Single and MFJ) and disappears completely above $600,000 (Single and MFJ).

   3. In 20230, it reverts to the $10,000 cap

   4. This is helpful for those with high state and local taxes (i.e. property taxes), allowing more of those to be deductible federally.

5. Charitable Deduction Changes

   1. A new 0.5% of AGI floor applies before charitable deductions begin to count i.e. if your AGI is $100,000, your charitable gift deductions would begin after the first $500 of gifts.

   2. For taxpayers in the 37% bracket, the value of charitable deductions is capped at the 35% rate.

   3. These adjustments slightly reduce the overall benefit of charitable giving

   4. For those clients that regularly gift from Blue Summit accounts we will add this as an agenda item to help with deduction maximization over multiple years

6. Home Energy Upgrade/Solar tax credits ending in 2025

   1. Numerous tax credits will be ending – for a full summary of these click here

7. Lifetime Gift/Estate Tax Exemption increase

   1. Starting in 2026, the estate and gift tax exemption increases to $15 million (up from about $14 million today).

The Act also extends provisions related to Qualified Opportunity Zones (QOZs). These specific investments can provide tax advantages for those with sizable capital gains and will begin in 2027 for gains realized beginning halfway through 2026.  As more information is clarified through next year, we will share detailed QOZ updates on a case-by-case basis.

As always, our role is to help you align these tax changes with your overall financial situation — whether that’s making the most of new deductions, optimizing charitable giving or evaluating estate planning strategies.

We’ll continue to monitor developments and provide updates as guidance is issued.  We hope this summary is helpful and digestible.  In the meantime, please reach out if you have any questions.

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This material is provided for informational and educational purposes only and is not intended to be, nor should it be construed as, tax, legal, or accounting advice. Clients should consult with their qualified tax advisor or accountant regarding their specific circumstances before making any financial decisions.