The One Big Beautiful Bill Act: What It Means for Your Wallet

If you’ve ever stared at your tax return and wondered if it was written in runes, the One Big Beautiful Bill Act (OBBBA) won’t fix that, but it does change a lot, starting with the 2025 tax year. Here’s what matters for planning, with the key years and income limits spelled out.

Retirees and Near-Retirees

Starting in 2025, there’s a new senior deduction of $6,000 per eligible person. It phases out starting at $75,000 of modified adjusted gross income (MAGI) for single filers and $150,000 for joint filers. That could make Roth conversions or capital-gain harvesting more appealing if you’re under those limits.

If you live in a high-tax state, the SALT deduction cap increases to $40,000 beginning in 2025, with a phase-out starting at $500,000 of MAGI. This improvement can make tax strategies such as Roth conversions or capital gains realizations more useful for middle- and upper-middle-income taxpayers.

Working Earning Tips or Overtime

For 2025, workers who earn income from tips or overtime can take a new deduction, subject to income limits. The phase-out starts at $150,000 MAGI for singles and $300,000 for married couples filing jointly. If you’re putting in extra hours or working in a tip-based job, this one’s worth a closer look when you file next year.

Cars, Credits, and Timing

If you purchase a new vehicle assembled in the United States, you can deduct up to $10,000 of interest on the auto loan, starting in 2025—the deduction phases out at $100,000 MAGI for singles and $200,000 for joint filers. Electric vehicle tax credits, however, will no longer be available for new or used EVs purchased after September 30, 2025—so 2025 may be your last year to claim one.

Health, Homes, and Hidden Cliff Edges

The Premium Tax Credit “cliff” for Marketplace health insurance coverage returns in 2026. Once your income exceeds 400% of the federal poverty level, the credit disappears entirely, so staying below that line will matter again.

Private mortgage insurance (PMI) becomes tax-deductible starting in 2026 for homebuyers who put down less than 20%. The benefit phases out at $100,000 of MAGI.

If you hold incentive stock options, be aware that changes to the Alternative Minimum Tax (AMT) take effect in 2026. It may make sense to exercise some options earlier, before the new thresholds apply.

Families, Kids, and “Trump Accounts”

For 2025, the Child Tax Credit increases to $2,200 per child, and $1,700 of that amount is permanently refundable. If you pay for dependent care, beginning in 2026, you can contribute up to $7,500 to a Dependent Care FSA, and the Child and Dependent Care Credit expands to 20% to 50%.

Children born in 2025 or later are eligible for a new “Trump Account,” which includes a $1,000 government contribution. Parents must open the account before the child turns 18 to receive the deposit.

Families adopting children benefit from an expanded adoption tax credit. Starting in 2025, the maximum credit is $17,280, with a $5,000 refundable portion. If your taxable income is low, you may want to increase it to ensure you receive the full credit strategically.

Education and Student Loans

Starting in 2026, 529 plans will become more widely used. You can withdraw up to $20,000 per year, per child, for eligible K–12 expenses. These plans can now also fund trade programs, professional certificates, and continuing education.

Also beginning in 2026, new limits apply to federal student loans, and some income-driven repayment plans are reduced or eliminated. That change may push families to rely more on private loans, which typically carry higher interest rates. The takeaway: Saving earlier will help you borrow less later.

Estate Planning and Business Moves

The OBBBA makes the estate and gift tax exemption permanent beginning in 2026, creating more stability for long-term estate planning. If you haven’t reviewed your estate plan since the previous rules were temporary, this is the time to do it.

For business owners, the 100 percent bonus depreciation for qualifying equipment purchases continues for property placed in service after January 1, 2025. That means you can deduct the full cost of eligible assets right away instead of depreciating them over several years.

The Bottom Line

Most household-related changes begin in 2025—like the new senior deduction, the SALT cap increase, the child credit adjustment, and the latest tip and overtime deductions. A second wave arrives in 2026, covering dependent care, PMI deductibility, the Premium Tax Credit cliff, education updates, and estate provisions.

It’s a lot to absorb, but timing is everything. Nearly every benefit includes phase-outs or income limits, so planning around when these rules take effect can make a meaningful difference.

The law’s name may oversell the “beautiful” part, but the opportunities it offers for careful savers, workers, and retirees are real. And if beauty is in the eye of the taxpayer, maybe that’s good enough.

The law’s name may oversell the “beautiful” part, but the opportunities it offers for careful savers, workers, and retirees are real. And if beauty is in the eye of the taxpayer, maybe that’s good enough.

WHWM is here to guide you in identifying your priorities, developing a plan, and making adjustments along the way. By choosing WHWM, you're partnering with our Founder and President, Stephen Bodwell. As a CPA and CFP® professional, Stephen is committed to helping you achieve your financial goals and aspirations. Don't hesitate to take the next step toward realizing your dreams. Schedule your complimentary, no-obligation 30-minute consultation with Stephen. 

Walnut Hill Wealth Management, LLC (“WHWM”) is a registered investment advisor offering advisory services in the State of Texas and in other jurisdictions where exempt. The information provided is as of the date indicated and is subject to change.