Planning Ahead: Tax and Policy Changes from the OBBBA

July 8, 2025

On July 4th, President Trump signed the One Big Beautiful Bill Act (“OBBBA”). This new law makes permanent the current tax brackets and introduces several new deductions and credits that may benefit many of the families we serve. Below are the highlights, with a focus on the parts we believe will be most pertinent to you. 

Author

Andy Avera

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On July 4th, President Trump signed the One Big Beautiful Bill Act (“OBBBA”). This new law makes permanent the current tax brackets and introduces several new deductions and credits that may benefit many of the families we serve. Below are the highlights, with a focus on the parts we believe will be most pertinent to you. 



A Quick Note on Terms:
  • AGI means adjusted gross income. It’s the number used to calculate your taxable income, before things like itemized deductions or credits. 
  • MAGI means modified AGI. It adds back certain types of tax-free income and deductions. 


Income Tax Changes:
  • Tax rates – The current income tax brackets are now permanent. These were set to expire in 2026, so this change avoids an automatic tax increase for many families. 


  • Standard deduction – The standard deduction increases by 10% in 2025 and will continue to grow each year. 


  • Extra deduction if you are 65 or older – If you are 65 or older and taking the standard deduction, you now get an extra $6,000. This is on top of the $1,600 you were already getting for being 65. This new deduction reduces your AGI, which can help lower the taxes you owe. This benefit starts phasing out once your MAGI reaches $75,000 (single) or $150,000 (joint), and it disappears completely at $175,000 or $250,000. As an example, if both spouses are over 65 and your joint income is below $150,000, your total standard deduction could be around $45,000. 


  • Tax on Social Security – Despite what some headlines might say, Social Security benefits remain taxable. 


  • Itemized deductions – Beginning in 2026, the value of itemized deductions is capped at the equivalent of a 35% marginal tax rate. 


  • SALT deduction – If you itemize your deductions, the state and local tax (“SALT”) deduction now increases to $40,000 and increases 1% each year. This starts to phase out once your MAGI reaches $500,000 and drops back to a $10,000 cap once your MAGI hits $600,000. 


  • Pass-through entity taxes – Even though the SALT deduction limits were increased, the law continues to allow state income taxes paid by pass-through entities to be deducted at the entity level. 


  • Charitable gifts (with itemized deduction) – Beginning in 2026, if you itemize your deductions, you can only deduct the portion of your charitable gifts that exceeds 0.5% of your AGI. 


  • Charitable gifts (with standard deduction) – Beginning in 2026, those who take the standard deduction can deduct up to $1,000 (single) or $2,000 (joint) of charitable gifts. This deduction is unaffected by your AGI. 


  • Qualified business income (“QBI”) deduction – The 20% deduction for pass-through business income has been made permanent. 


  • Tip income – If you earn tips, up to $25,000 can now be excluded from your taxable income. This deduction begins phasing out if your MAGI is over $150,000 (single) or $300,000 (joint). This only applies to W-2 employees, not the self-employed. 


  • Overtime pay – If you earn overtime, the premium portion is now deductible, up to $12,500 (single) or $25,000 (joint). The same income limits and phaseouts apply as with the tip deduction. 


  • Child tax credit – The child tax credit increases to $2,200 per child in 2025 and will grow each year. It begins to phase out once MAGI reaches $200,000 (single) or $400,000 (joint). 


  • Newborn “Trump account” – If you have a child born (or adopted) in 2025 through 2028, the government will deposit $1,000 into an investment account for that child. You can contribute up to $5,000 each year (contribution limit increases each year; last contribution allowed is in the year the child turns 17), and the money grows tax-free. Withdrawals used for college, trade programs, a first home, or starting a business are taxed at long-term capital gains rates. Withdrawals for anything else are taxed as income and may face a 10% penalty. 


Withdrawals are limited based on age: 

  • Under 18: No withdrawals allowed 
  • Age 18–24: Up to 50% of the account for qualified distributions 
  • Age 25–29: Up to 100% for qualified distributions 
  • Age 30: Up to 100% for any purpose 
  • Age 31: Entire account must be withdrawn (taxed but no penalty) 


  • Auto loan interest – If you take out a car loan between 2025 and 2028 on a vehicle assembled in the United States, you can deduct up to $10,000 in loan interest from your income. The deduction starts phasing out once MAGI exceeds $100,000 (single) or $200,000 (joint). 


Estate Tax Changes

Beginning in 2026, the estate tax exemption will increase to $15 million per person and will continue to rise with inflation. This is about $1 million more than the current amount. Just as important, it avoids the automatic 50% reduction that was set to take place in 2026. 


Student Loan Changes
  • Repayment plans –  Starting July 1, 2026, only 2 repayment options will remain. The standard plan pays off the loan in 10 to 25 years.  The new Repayment Assistance Plan requires 30 years of payments before any balance is forgiven. 


  • Borrowing caps – Limits are now in place for how much students and parents can borrow. Graduate students are capped at $20,500 per year, with a $100,000 lifetime limit. Professional degrees (such as law or medicine) have a higher limit at $50,000 per year or $200,000 total. Parent PLUS loans are now limited to $65,000 total. Graduate PLUS loans have been eliminated. 


  • Deferment, forbearance, and subsidized loans – New borrowers can no longer defer loan payments for unemployment or hardship. Subsidized undergraduate loans, where the government covers interest during school, have been eliminated for new loans. 


  • Pell Grants – They can now be used for short-term job training and credential programs, not just traditional degrees. Students enrolled less than half time will no longer qualify for Pell Grants.  




Journey Beyond Wealth (“JBW”) is an Investment Advisor registered with the SEC. All views, expressions, and opinions included in this communication are subject to change. Registration of an investment advisor does not imply a certain level of skill or training. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. Please contact us if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.


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