The One Big Beautiful Bill Act (OBBBA), signed into law in July, extends several critical tax provisions and introduces new deductions, credits, and planning opportunities for both individuals and businesses. These changes could significantly impact planning for 2025 and beyond. The Private Client Group at LGA has outlined below the most important updates, practical insights, and action steps.

Tax Rates Remain Lower

  • Current brackets of 10% to 37% are extended beyond 2025.
  • This avoids the scheduled reversion to a top rate of 39.6%.
  • The wider bracket structure introduced by TCJA is preserved through at least 2029.

What this means for you: Most taxpayers will continue to benefit from lower rates, but planning is still necessary to evaluate how income and deductions interact within these brackets.

Standard Deduction Extended

  • Single: $15,750 ($17,750 if age 65+)
  • Married filing jointly: $31,500 (plus $1,600 for each spouse age 65+)
  • Head of household: $23,625 ($25,625 if age 65+)

Planning Tip: Continue tracking annual expenses for medical costs, state and local taxes, and charitable giving. If itemized deductions exceed the standard deduction, additional tax savings may be available.

New $6,000 Deduction for Seniors (2025–2028)

  • Available for taxpayers age 65 and older.
  • Phases out beginning at Modified AGI of $75,000 (single) or $150,000 (joint).
  • Fully eliminated at $175,000 (single) or $250,000 (joint).

Why this exists: Congress had initially explored eliminating taxes on Social Security benefits, but when that proved unworkable, lawmakers created this deduction instead.

Why it matters: Managing adjusted gross income through strategies such as Qualified Charitable Distributions may help preserve eligibility.

Charitable Deduction Without Itemizing (2026+)

  • Taxpayers who do not itemize may deduct up to $1,000 (single) or $2,000 (joint).
  • Contributions to donor-advised funds and private foundations are excluded.

Itemized Deduction Changes

Medical Expenses

  • Deductible once expenses exceed 7.5% of AGI.
  • Includes out-of-pocket medical costs, premiums, long-term care insurance (limits apply), and medical supplies.

State and Local Taxes (SALT)

  • Cap raised to $40,000 ($20,000 MFS) in 2025.
  • Phases out as income exceeds $500,000 ($250,000 MFS). Fully reduced back to $10,000 above $600,000.
  • Caps and thresholds increase 1% annually through 2029. In 2030, the $10,000 cap returns.

Charitable Contributions

  • 60% of AGI limit retained (was set to revert to 50%).
  • Starting in 2026, contributions must exceed 0.5% of AGI to count.
  • For top-bracket taxpayers (37%), the value of deductions is capped at 35% savings.

Planning Considerations:

  • End-of-year timing may be critical.
  • Bunching deductions into one year could maximize benefits.
  • Consider using donor-advised funds before new limits apply.

New Above-the-Line Deductions (2025–2028)

Tip Income

  • Deduction up to $25,000.
  • Phases out between $150,000–$400,000 (single) / $300,000–$550,000 (joint).
  • Treasury guidance lists nearly 70 occupations that qualify.

Overtime Pay

  • Deduction up to $12,500 of the premium portion of overtime wages.
  • Fully phased out at $275,000 (single) / $425,000 (joint).

Car Loan Interest

  • Deduction up to $10,000 per year for U.S.-assembled personal vehicles under 14,000 lbs.
  • Phased out between $100,000–$150,000 (single) / $200,000–$250,000 (joint).

Takeaway: These deductions are highly income-sensitive. Strategic timing of income or deductions can preserve eligibility.

Family-Related Credits and Benefits

Child Tax Credit

  • Increased from $2,000 to $2,200 per child, with annual inflation adjustments.
  • Phases out beginning at $200,000 (single) / $400,000 (joint).
  • Refundable portion capped at $1,700 per child.

Dependent Care Benefits

  • Pre-tax FSA cap increased from $5,000 to $7,500 beginning in 2026.
  • Credit percentage and phase-out thresholds improved.
  • Reminder: FSA elections are made during year-end benefit enrollment. Missing this step could mean missing out on tax savings.

Clean Energy Incentives Ending

  • Credits for clean vehicles expire September 30, 2025.
  • Credits for energy-efficient home improvements and renewable systems expire December 31, 2025.

Action Step: Consider completing energy-related purchases before these deadlines.

Alternative Minimum Tax (AMT) Expands in 2026

  • Exemption thresholds lowered to $88,100 (single) and $137,000 (joint).
  • Phaseouts begin at $500,000 (single) and $1,000,000 (joint).

Common AMT Triggers:

  • Large capital gains
  • Exercising incentive stock options
  • High state and local tax deductions
  • Accelerated depreciation
  • Certain tax-exempt bonds

Planning Tip: Run proactive tax projections. Consider Roth conversions, harvesting investment losses, or timing deductions to minimize exposure.

Trump Savings Accounts (2026+)

  • $1,000 government-funded account for newborns.
  • Parents may contribute up to $5,000 annually, tax-deferred.
  • Rolls into an IRA at age 18.
  • Employer contributions up to $2,500 permitted and not treated as income.
  • Timing note: Accounts are legislated in 2025 but actual funding does not begin until 2026.

Business and Estate Provisions

Qualified Business Income Deduction

  • 20% deduction extended.
  • Phases out for certain high-earning service professionals.

Qualified Small Business Stock (QSBS)

  • Capital gain exclusion limit raised from $10M to $15M.
  • Holding periods shortened:
  • 3 years = 50% capital gain exclusion
  • 4 years = 75% capital gain exclusion
  • 5 years = 100% capital gain exclusion

Planning Insight: This change enhances liquidity opportunities for founders and early investors. Reviewing stock qualification status and holding periods now can help maximize tax-free gains later.

Estate and Gift Tax

  • Exemption raised to $15M per person in 2026 (indexed annually).

Excess Business Losses

  • Permanently treated as net operating losses.

Capital Investments

  • 100% bonus depreciation restored for property placed in service after January 19, 2025.
  • Section 179 limit increased to $2.5M with full phase-out at $6.5M.

Research and Development Expenses

  • Full expensing restored retroactively to 2024.
  • Businesses may accelerate previously amortized 2022–2024 costs into 2025 (or spread over 2025–2026).

What You Should Do Now

  • Review 2025 income and deductions against projections for 2026.
  • Consider whether accelerating or deferring expenses will maximize benefits.
  • Seniors: evaluate strategies to preserve eligibility for the $6,000 deduction.
  • Reassess estate and succession plans under the higher thresholds.
  • Monitor tip, overtime, and car loan interest eligibility based on income.
  • Evaluate clean energy purchases before credits expire.
  • Run tax projections to measure AMT exposure.

Final Thought

OBBBA creates both opportunities and complexities. Careful planning around deductions, credits, and timing can make a meaningful difference in your long-term tax outlook.

LGA’s Private Client Group is here to help you navigate these changes. Contact your LGA advisor today to review your 2025 strategy.