Key Tax Code Changes Under the One Big Beautiful Bill Act (OBBBA): What’s Staying, What’s Going, and What’s Brand New
As we are sure you have heard, the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4th. You can find all 870 pages of the text at https://www.congress.gov/bill/119th-congress/house-bill/1 if you wish to see more details or any of the non-tax code related provisions. Today, we wish to summarize only the tax code changes most relevant for our clients. Our advisors and tax team are already prepared to incorporate these tax code changes into our tax planning and projection work for you.
Our advisors and tax team are already prepared to incorporate these changes into our tax planning and projection work for you.
Permanent tax code changes
In this context and throughout this summary, “permanent” means that a provision is not subject to an expiration date and will stay in place until a future Congress changes the tax code.
Tax rates: The bill prevents the sunsetting of the tax rates enacted in 2017. This means the across the board increases of roughly 1-4% that were set to go in effect in 2026 will not happen.
Standard deduction: The increased standard deduction amounts from the 2017 law are retained. In addition, the standard deduction for this year was increased slightly to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. The standard deduction will continue to be adjusted for inflation in future years.
Personal exemptions: The bill eliminates the deduction for personal exemptions.
Child tax credit: The bill increases the amount of the nonrefundable child tax credit to $2,200 per child beginning in 2025 and indexes the credit amount for inflation. The bill also retains the $1,400 refundable child tax credit, adjusted for inflation, the increased income phaseout threshold amounts of $200,000 ($400,000 in the case of a joint return), and the $500 nonrefundable credit for each dependent of the taxpayer other than a qualifying child.
QBI deduction and 100% bonus depreciation:The bill retains the Sec. 199A qualified business income (QBI) deduction and keeps the deduction rate at 20%. The bill expands the Sec. 199A deduction limit phase-in range. Business owners with eligible property acquired and placed in service after January 19, 2025, can claim 100% bonus depreciation.
Estate and gift tax exemption amounts: The estate tax exemption and lifetime gift tax exemption will be $15 million for single filers ($30 million for married filing jointly) in 2026 with inflation adjustment in future years.
Alternative minimum tax exemption: The bill retains the increased individual alternative minimum tax (AMT) exemption amounts and reverts the exemption phaseout thresholds to their 2018 levels of $500,000 ($1 million in the case of a joint return), indexed for inflation.
Mortgage interest deduction: The bill retains the provision limiting the Sec. 163 qualified residence interest deduction to the first $750,000 in home mortgage acquisition debt. Interest on home-equity indebtedness will remain excluded from the definition of qualified residence interest but treats certain mortgage insurance premiums on acquisition indebtedness will qualify.
Casualty loss deductions: Limits the itemized deduction for personal casualty losses to losses resulting from federally declared disasters becomes permanent, but the bill expands the provision to include certain state-declared disasters.
Miscellaneous itemized deductions: The Sec. 67(g) deduction for miscellaneous itemized deductions no longer applies.
Itemized deductions limitation: A new overall limitation on the tax benefit of itemized deductions is enacted. The amount of itemized deductions otherwise allowable would be reduced by 2/37 of the lesser of (1) the amount of the itemized deductions or (2) the amount of the taxpayer’s taxable income that exceeds the start of the 37% tax rate bracket.
Moving expense deduction: Except for members of the armed forces and certain members of the intelligence community, moving expenses are not deductible.
Sec. 529 plans: The bill allows tax-exempt distributions from Sec. 529 savings plans to be used for additional educational expenses in connection with enrollment or attendance at an elementary or secondary school and “qualified postsecondary credentialing expenses.”
Charitable contribution deduction: The bill creates a charitable contribution deduction for taxpayers who do not elect to itemize, but it does not go into effect until 2026.
Temporary tax code changes
Senior deduction: For the years 2025 through 2028, the bill provides a new $6,000 additional deduction for any individual taxpayer who is age 65 or older. This senior deduction begins to phase out when a taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds $75,000 ($150,000 in the case of a joint return). Though it has been described as a reduction in taxes on Social Security, this new senior deduction is triggered solely by age and is not dependent on receiving Social Security payments. The law makes no changes to Social Security.
SALT cap: The limit on the federal deduction for state and local taxes (the SALT cap) is increased to $40,000 (from the current $10,000). In 2026, the cap will be $40,400, and then will increase by 1% annually, through 2029. Starting in 2030, it will revert to the current $10,000. The amount of the deduction available phases down for taxpayers with modified adjusted gross income (MAGI) over $500,000 (in 2025).
No tax on tips: For tax years 2025 through 2028, the bill provides a new deduction of up to $25,000 for qualified tips received by an individual in an occupation who customarily and regularly receives tips regardless of whether the individual uses the standard deduction or itemizes. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return).
No tax on overtime: For tax years 2025 through 2028, the bill provides a new deduction of up to $12,500 ($25,000 in the case of a joint return) for qualified overtime compensation received by an individual during a given tax year regardless of whether the individual uses the standard deduction or itemizes. The deduction begins to phase out when the taxpayer’s MAGI exceeds $150,000 ($300,000 in the case of a joint return).
Car loan interest: For the years 2025 through 2028, qualified passenger vehicle loan interest may be deductible regardless of whether the buyer uses the standard deduction or itemizes. The interest must be for the purchase of, and that is secured by a first line on, an applicable passenger vehicle for personal use. Among other restrictions, applicable passenger vehicles must have had their final assembly in the United States. The exclusion is capped at $10,000 per year and will phase out for taxpayers with MAGI in excess of $100,000 ($200,000 for married taxpayers filing jointly).
News & Notes
Tommy Lucas helps update CFP® certification exam: Tommy Lucas, CFP®, EA was recently invited to CFP Board’s exam item writing event held at their headquarters in Washington DC. He and 21 other subject matter experts spent two days creating new potential questions for the rigorous exam required to become a Certified Financial Planner® professional. This partnership between practicing experts and CFP Board’s examination team ensures that aspiring CFP® professionals continue to be tested on planning issues that they are likely to face. Outside of teaching and mentoring interns and new planners, this is Tommy’s favorite way to give back to the profession.
Congratulations to Connor Ryan: Connor Ryan is officially a Certified Financial Planner® professional! He works primarily from our Melbourne office assisting advisors with the development and analysis of retirement models and financial plans. He is happily married and enjoys spending time with his growing family in their newly purchased first home.
Welcome Erikah: Erikah Jean Louis has joined the firm as a Tax Associate. She supports the tax department by preparing tax returns, developing projections, and implementing planning strategies for our wealth management clients. Her work spans personal, trust, gift, estate, and closely held business tax matters. With over 3 years of experience in tax compliance across various industries, both domestic and international, Erikah brings a strong foundation in multi-jurisdictional tax issues. She is an alumna of the University of Central Florida, known for her rigorous approach and commitment to delivering thoughtful, client-focused solutions.
Tariff based scam alert: Tariffs are taxes on goods imported from other countries, paid by the entity importing those goods. One site the company found was a newly registered phishing domain positioned to lead consumers to believe they are required to make payments to a legitimate governmental entity. Red flags: unsolicited, urgent, misspellings and URLs or email addresses that don’t match that of the supposed company or entity
Developing the next generation of financial planners: Dan Moisand, CFP® spent a week in Denver serving as a mentor for the FPA Residency program. Mentors are highly experienced, respected for their financial planning knowledge, and hand-picked by the program. The five mentors worked with 32 residents on improving these newer planners’ interviewing and presentation skills. Said Dan, “There were long days, but it felt like a short week. It was incredibly gratifying to dig deep with the next generation of financial planners into how effective financial planning can profoundly impact clients’ lives. I feel blessed to be selected as a mentor and to be a part of such an iconic program within the FPA.”
Important Dates:
July 31
- Deadline for sponsors of retirement plans to file the 2023 Form 5500 (assuming a 12/31 plan year-end)
- Deadline for sponsors of retirement plans to file a Form 5558 (to extend the 2023 Form 5500 filing deadline until October 15)
September 15
- Q3 2024 estimated tax payment deadline for households
- Q3 2024 estimated tax payment deadline for sole proprietorships, single-member LLCs, C-corporations, and multi-member LLCs that elect to be treated as a corporation
- Extended 2023 income tax return (Form 1120S) filing deadline for calendar year S-corporations
- Extended 2023 income tax return (Form 1065 or 1065-B) filing deadline for calendar year multi-member partnerships and multi-member LLCs (default) July 1
September 30
- Determination date for identifying designated beneficiaries of retirement accounts whose owner died in 2023
- Deadline for employers to distribute the Summary Annual Report (SAR) to plan participants of 401(k) plans (assuming the 2023 Form 5500 filing deadline was not extended)
October 1
- First day to file FAFSA for the upcoming academic year
October 15
- Start of Open Enrollment Period for existing Medicare enrollees
- Extended 2023 income tax return (Form 1040) and gift tax return (Form 709) filing deadline
- Extended 2023 income tax return (Form 1040) filing deadline for sole proprietorships and single-member LLCs
- Extended 2023 income tax return (Form 1120) filing deadline for calendar year C-Corporations and multi-member LLCs that elect to be classified as a corporation
- Extended deadline for filing a calendar-based 2023 Form 5500
- Extended deadline for calendar-based sole proprietors and C-Corps to fund a 2023 employer contribution
Please remember to call us: When anything significant happens in your life, including changes in your finances, family, or health that could affect your financial plan, please let us know so that we can adapt our planning and portfolio work for you accordingly. Also, if you ever fail to receive a monthly statement for one of the Schwab Institutional accounts under our management, please let us know so we may assure the respective custodian delivers your statements promptly.
Yours truly,
The Team at Moisand Fitzgerald Tamayo, LLC