by Samantha Pahlow, CTFA, AWMA®
Wealth Management Chair Executive Vice President
Congress recently approved, and the President signed, new legislation affecting taxes, spending cuts and other policy changes that are particularly relevant to financial planning. There are several significant adjustments to the tax landscape that will affect individuals, families, corporations, and non-profits. The legislation formally known as the “One Big Beautiful Bill Act” (OBBB) extends many existing tax provisions, which would have expired at the end of 2025 and introduces new permanent and temporary tax rules.
Key Existing 2017 Tax Cuts and Jobs Act (TCJA) Provisions Now Permanent:
This list is not all-inclusive, and some provisions include minor adjustments or nuances not individually detailed in this overview.
Individual Rates and Brackets: The top individual tax rate is maintained at 37% and individual tax rates and brackets are now permanent, with annual inflation adjustments.
Standard Deduction: The standard deduction will be $15,750 for individuals and $31,500 for couples in 2025 and will continue to be indexed for inflation in subsequent years.
Mortgage Interest Deduction: The $750,000 cap on deductible mortgage interest has been permanently extended.
Qualified Business Income (QBI) Deduction: The 20% section 199A deduction for qualified business income is now permanent with higher phase-out income limits.
Alternative Minimum Tax (AMT): The current AMT exemptions are further increased and permanently extended. Additionally, the phase-out thresholds are now permanent and set at income of $500,000 for individuals or $1 million for couples beginning in 2026 and indexed for inflation.
Estate Tax Exemption: Extended and permanently raised the lifetime estate tax exemption to $15 million beginning in 2026, with annual inflation adjustments. The 2025 exemption is $13.99 million.
New or Significantly Modified Provisions:
State and Local Tax (SALT) Deduction Cap: Increased from $10,000 to $40,000 beginning in 2025, for those earning less than $500,000 annually. $10,000 minimum SALT deduction regardless of income. Additional increases are scheduled for each of the next four years, reverting to $10,000 in 2030.
Itemized Deduction Limit: The benefit of itemized deductions will be limited to not more than 35% beginning in 2026, for taxpayers in the 37% top tax bracket.
Senior Deduction: A temporary additional $6,000 deduction is available for seniors age 65+ earning under $75,000 individually or $150,000 as a couple. This deduction expires after 2028 and phases down for those over the income threshold.
Charitable Deduction for Non-Itemizers: Beginning in 2026, non-itemizers can permanently claim an "above the line" charitable deduction for cash donations of up to $1,000 per person. This is in addition to the standard deduction.
Tip Income Deduction: A deduction for certain tip income up to $25,000 is available from 2025 to 2028, subject to phase-out for individuals earning more than $150,000, or $300,000 as a couple.
Overtime Pay Deduction: A deduction for overtime pay is allowed, up to $12,500 for single filers and $25,000 for married couples, from 2025 to 2028. This deduction phases out for individuals earning more than $150,000, or $300,000 as a couple.
Automobile Loan Interest Deduction: Interest on automobile loans for new cars assembled in the United States is deductible for tax years 2025 to 2028, limited to $10,000, and subject to specific requirements and phase-outs for higher-income individuals.
In addition, the new law permanently reinstates 100% bonus depreciation, allows immediate expensing of U.S. R&D costs, introduces changes to green-energy tax credits, implements taxes on remittances of funds outside the U.S., establishes new savings accounts for newborns, and modifies the taxation of college and university endowments.
For additional details, we recommend reviewing the following resources:
This communication provides a general overview and does not encompass every provision of the OBBB Act. We anticipate further guidance and interpretation from the IRS and Department of the Treasury in the months ahead. We recommend consulting with your tax advisor regarding your specific circumstances and how these new rules may impact your individual tax planning. Our wealth management team and your portfolio manager are also available to develop or update your Wealth Horizon™ to review how your overall financial strategy aligns with these changes.
Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.