What Important Issues Should I Consider Regarding Changes Made by the OBBBA?
What Important Issues Should I Consider Regarding Changes Made by the OBBBA?
The One Big Beautiful Bill Act (OBBBA) made sweeping changes to the federal tax code—some permanent, some new, and some that require proactive planning. This checklist walks through the key questions to ask based on your situation, helping you identify where the new law creates opportunities or where you need to be careful.
Tax Planning Issues
- Age 65 or older? The new $6,000 senior deduction per eligible person may make Roth conversions, capital gain harvesting, and other strategies more attractive. Note: phases out at $75,000 MAGI (single) / $150,000 MAGI (MFJ).
- Taking the standard deduction and charitably inclined? The new non-itemized charitable deduction of up to $1,000 ($2,000 MFJ) allows you to benefit from charitable giving even without itemizing. Cannot be combined with itemizing in the same year.
- Live in a high-SALT state? The new $40,400 SALT deduction cap may make itemizing more attractive and improve the after-tax value of Roth conversions and capital gain harvesting. Phaseout begins at $505,000 MAGI.
- Earn tips or overtime? New deductions for tip income (up to $25,000) and overtime income (up to $12,500 single / $25,000 MFJ) may reduce your taxable income. Confirm documentation with your employer. Phaseout at $150,000/$300,000 MAGI.
- Planning to buy a home with less than 20% down? PMI is now deductible. Factor this into your analysis. Phaseout begins at $100,000 MAGI.
- Planning to purchase a vehicle? Interest on loans for qualifying U.S.-assembled vehicles is now deductible up to $10,000. Phaseout begins at $100,000 MAGI (single) / $200,000 MAGI (MFJ).
- Have Marketplace health insurance? The Premium Tax Credit now has a hard “cliff” at 400% of the federal poverty level. Even a small income increase above this threshold eliminates the entire credit. Consider MAGI-reduction strategies (retirement contributions, HSA/FSA contributions).
- Have incentive stock options (ISOs)? AMT thresholds changed. Review whether it makes sense to accelerate ISO exercises under the new thresholds.
- In the 37% bracket and itemize? The effective tax benefit of itemized deductions is now capped at 35%. Factor this into planning.
- Expecting a larger refund? Consider reducing withholdings to improve cash flow throughout the year.
Child Planning Issues
- Claim children as dependents? The Child Tax Credit increases to $2,200 (inflation-adjusted) with a permanent $1,700 refundable portion.
- Pay for qualifying dependent care? The Child and Dependent Care Credit expanded to 20–50% of qualified expenses, and the Dependent Care FSA limit increased to $7,500. Evaluate which provides greater savings.
- Had or will have a child born in 2025 or later? Remember to claim the $1,000 Trump Account government credit by opening an approved account before the child turns 18—it isn’t automatic.
- Planning to adopt? The new $5,120 refundable portion of the $17,670 adoption tax credit may apply. If your tax liability is low, consider increasing taxable income to maximize the refundable credit.
Education Planning Issues
- Children or grandchildren in grades K-12? You can now withdraw up to $20,000 per child per year tax-free from a 529 plan for eligible K-12 expenses.
- Pursuing further education or career training? 529 plans now allow tax-free withdrawals for an expanded list of qualified expenses including trade programs, professional certificates, and continuing education.
- Planning to take out student loans for college? The OBBBA places new limits on federal borrowing and eliminates SAVE/REPAYE. Increase your 529 savings goals to reduce dependence on borrowing.
Miscellaneous Planning Issues
- Need to review your estate plan? The estate and gift lifetime exemption is now $15,000,000 (permanent). Consider whether this changes your estate planning approach.
- Planning large business purchases? 100% bonus depreciation (Section 168) is now permanent for purchases made after January 19, 2025. This may significantly change your depreciation strategy.
Download the OBBBA Planning Checklist
Get the complete checklist covering all OBBBA planning considerations across tax, child planning, education, and business issues. Work through it with your financial advisor to identify the changes that affect your plan and take action.