The major headline from President Trump’s One Big Beautiful Bill Act passed in July 2025, was what didn’t change. The law, also known as the OBBBA, permanently extended the 2017 individual tax rates and brackets and higher standard deduction, all of which were going to sunset at the end of 2025.
But the nearly-1,000-page One Big Beautiful Bill Act does contain some surprising changes that will affect the deductions on your tax returns…education savings… taxes you owe on your Social Security checks…car buying… charitable giving…and retirement and estate planning.
Bottom Line Personal spoke to top financial planner Robert Carlson about how to take advantage of the most relevant provisions in the OBBBA.
Important: Don’t miss out on deductions or strategies that could help you in the current tax year. While many of the One Big Beautiful Bill Act provisions begin in 2026, some are retroactive to January 1, 2025.
If You Are Over 65…
What’s new: Seniors get a $6,000 bonus deduction that will allow many to reduce or avoid taxes on Social Security benefits by bringing their income below levels that trigger taxation of those benefits.
How it works: Effective for tax years 2025 through 2028, individuals who are 65 or older may claim a deduction of $6,000 from their taxable income ($12,000 for married couples when both spouses qualify). The deduction is available whether you take the standard deduction or itemize on your tax returns. Requirements: A modified adjusted gross income (MAGI) of $75,000 or less (individuals) or $150,000 or less (married couples filing jointly). The maximum deduction starts phasing out by six cents for every dollar over those thresholds and until it is eliminated once your MAGI reaches $175,000 (individuals) or $250,000 (married filing jointly).
What to do: Older adults should determine whether to keep their income within these limits or at least consider forgoing extra income from work or retirement withdrawals to stay within the cap and take the $6,000 deduction.
If You Pay High Property Taxes and/or Live in a High-Tax State…
What to do: Evaluate whether it’s more beneficial to itemize deductions rather than claim the standard deduction when you file your federal income taxes.
If You Are Saving for Your Child’s Future…
What’s new: Starting in tax year 2026, you can withdraw double the amount of assets ($20,000) annually from 529 plans for K-12 education and qualifying expenses. In addition, 529 plan distributions made after July 4, 2025, now can be spent on post–high school credential programs offered by vocational, trade and technical schools including expenses for tuition, books, supplies and testing fees.
What to do: The One Big Beautiful Bill Act turns 529 plans into broad education savings accounts. You have the flexibility to spend the money on careers that require certification or licensing, rather than a traditional four-year college degree, including fields such as aviation maintenance, cosmetology and plumbing.
What’s new: Trump Accounts—these saving vehicles for young people follow IRA-style rules with strict contribution and investment limits.
How they work: Anyone can make contributions to a Trump Account including parents, grandparents, friends and even employers of parents, but there is a total limit of $5,000 annually that will be indexed for inflation in successive years. Contributions must be made with after-tax money. Assets in Trump Accounts must be invested in low-cost US equity index funds until the beneficiary reaches age 18. Earnings compound on a tax-sheltered basis and are taxed as ordinary income upon distribution. There are no withdrawals allowed prior to age 18, and withdrawals made before age 59½ are subject to taxation of earnings at the beneficiary’s ordinary income tax rate plus a 10% penalty. Exceptions: Funds may be withdrawn after age 18 penalty-free for first-home purchases…post-secondary education…and the birth or adoption of a child. Note: Any employer contributions are not included in the gross income of the parent/employee or child. After the child turns 18, the Trump Account becomes a traditional IRA, including being subject to RMDs at age 75.
Smarter option: If you are saving for a child’s education, it makes more sense to prioritize contributions to a 529 plan. Unlike a Trump Account, you may get a state tax break on contributions to a 529, and all withdrawals are tax-free when used for qualified educational expenses.
If You Donate Money to Charity…
What’s new: Starting in tax year 2026, taxpayers who take the standard deduction still can get a tax break for giving $1,000 (individuals) and $2,000 (married filing jointly) to qualified charities. But two other provisions will impose new limits on itemized charitable deductions for high-income donors…
The One Big Beautiful Bill Act disallows a portion of the itemized deduction equal to 0.5% of a filer’s MAGI. Example: A filer with a MAGI of $300,000 would get no deduction for the first $1,500 of charitable donations.
Your tax benefits for charitable deductions are capped at 35%, even if you are in the top marginal tax bracket of 37%.
What to do: Consider “bunching”—giving multiple years’ worth of contributions in a single tax year—to maximize the tax benefits for charitable giving. Those who take the standard deduction should consider delaying donations until 2026, when they can take the newly available deduction. High-income donors who itemize should consider accelerating donations into 2025, to avoid disallowances and caps.
If You Are Planning to Buy a Car…
What to do: You can take this deduction whether you choose to itemize deductions on your income tax return or take the standard deduction.
Alert: Under the One Big Beautiful Bill Act, tax credits for buying an electric vehicle (EV) expired September 30, 2025. That includes the $7,500 incentive for buying a new EV or $4,000 for a used one. The credit for buying and installing a home-charging station ends June 30, 2026.
If You Are Planning Your Estate…
What’s new: The lifetime estate- and gift-tax exemption is permanently increased to $15 million (individuals) and $30 million (married filing jointly) in 2026, and it will be indexed for inflation in successive years. More than 99% of people who die each year will avoid the updated estate tax.
What to do: Instead of worrying about how to remove assets from your estate while you are alive, focus on income tax planning and reducing future tax liabilities for your beneficiaries. Example: If you own assets such as stocks or property that have greatly appreciated, you will incur heavy capital-gains taxes if you sell them now. If you gift the assets now, the recipients take on the same unrealized capital-gains liability. But if your heirs inherit the assets upon your death, they do so on a stepped-up valuation basis. None of the appreciation that occurred while you owned the assets will be subject to capital-gains taxes.
If You Get Tips and/or Overtime Pay From Jobs…
What’s new: Tips and overtime pay are exempted from income taxes up to certain limits whether you take the standard deduction or itemize on your returns. For tax years 2025 through 2028, up to $25,000 of tip income is deductible for workers who “customarily and regularly” receive tips. The exemption is phased out at a MAGI of $150,000 (individuals) and $300,000 (married filing jointly). For hourly workers, up to $12,500 in overtime pay is deductible within the same MAGI parameters. The deduction for overtime pay only applies to the bonus. So if you regularly get $20 per hour, but $30 per hour when you work overtime, only $10 is part of the deduction.
What to do: Proposed regulations released September 18, 2025, list nearly 70 qualifying jobs.. Example: Waitstaff and baristas are likely to qualify, but it is unclear if jobs that attract occasional tipping will qualify. Note: Tipped workers who get the exemption still face the 7.65% combined payroll taxes that fund Social Security and Medicare.
