We’ve all heard that President Trump’s “One Big Beautiful Bill” was recently signed into law. While there are many changes to tax law within the bill, there are some provisions that remain unchanged or extended. With so much going on in one big bill, it can be difficult to decipher. Let’s take a look at the “One Big Beautiful Bill,” and what it means for you.
Tax Brackets and Deductions.
The bill contains about $4.5 trillion in tax cuts. The current tax brackets, which were set to revert to the old tax code at the end of this year, are extended. The $15,750 standard deduction (single), or $31,500 standard deduction (joint), will also stay and will continue to be indexed for inflation annually.
Special deduction for adults 65+
The bill keeps a deduction for all seniors over 65 or blind ($2,000 single, $3,200 joint) that can be taken on top of the standard deduction.
Adults 65 years old and older with a Modified Adjusted Gross Income (MAGI) of no more than $75,000 (single) or $150,000 (joint) per year can take an additional $6,000 deduction per person available from 2025 through 2028. Those who earn more than those thresholds may be able to take a partial deduction. This is available to both seniors who take the standard deduction and for those who itemize. This provision is designed to help offset the taxes on Social Security benefits for less affluent seniors.
Charitable gifting
Starting in 2026, there will be an “above the line” deduction for charitable donations up to $1,000 for single filers or $2,000 for married filing jointly. This means taxpayers who elect the standard deduction can also claim this deduction. Effectively, if a couple is in the 22% tax bracket and gives $2,000 to a qualified charity, they would save $440 in federal taxes.
For itemizers, there is a new 0.5% “floor” for deductions, meaning that they can only deduct charitable contributions over 0.5% of their Adjusted Gross Income (AGI). For someone with an AGI of $150,000, only the amount over $750 would be included as an itemized deduction. If they gave $2,000, they would get a $1,250 deduction. Additionally, itemizers in the top bracket can only claim a 35% tax deduction for charitable gifts instead of the full 37% that would otherwise apply to their income tax rate.
SALT Deduction Quadruples.
Prior to the 2017 Tax Cuts and Jobs Act (TCJA), there was no limit to the amount of State and Local Tax (SALT) you could claim as a deduction. TCJA established the $10,000 limit. Under the new bill, that rises to a $40,000 SALT deduction limit in 2025. The new maximum limit begins to phase out, or decrease, for consumers who have a Modified Adjusted Gross Income (MAGI) greater than $500,000 annually. The SALT deduction limit will increase by 1% yearly until 2029 before reverting back to the $10,000 limit in 2030.
Estate and Gift Tax
Current estate and gift tax provisions are extended, but an important change is that each person’s lifetime estate and gift tax exemption increases to $15 million under the new law starting in 2026 ($30 million for married couples). Spouses are allowed to inherit any unused estate or gift tax exemption from a deceased spouse, a continuation of the portability rules under previous law.
Child Tax Credit
Another provision of the bill is permanently increasing the child tax credit to $2,200 starting in 2025, with that figure being indexed for inflation starting in 2026.
Tips
Also falling under the tax cut umbrella is the provision for no federal taxes on the first $25,000 in tips starting in 2025 and ending in 2028. Individuals will be able to claim a deduction of up to $25,000 for qualified tips if their income does not exceed $150,000 ($300,000 for joint filers).
Overtime
The bill also stipulates no federal taxes on some overtime pay. Individual earners would be able to claim a maximum of $12,500 above the line deduction for overtime pay, and $25,000 for married couples filing jointly from 2025-2028.
Car Loans
The option to deduct interest payments on certain automotive loans is also part of the bill. This provision is a temporary tax break from 2025-2028 which allows for an above the line deduction of up to $10,000 of annual interest on new auto loans from your taxable income. To qualify for this deduction, final assembly of the car must be completed in the U.S and the vehicle must be for personal use only. There is a $100,000 AGI phase out for individuals and a $200,000 AGI phase out for those married filing jointly.
“Trump Accounts” Introduced
A brand new type of account was introduced in the bill under the name “Trump Account.” A Trump Account is a new tax advantaged savings account that can be opened for any child under the age of 18 who has a Social Security number (but not within the calendar year that the child turns 18). Children born between January 1, 2025 and December 31, 2028 will automatically receive a one-time deposit into their Trump Account of $1,000 “seed money” from the federal government.
The maximum contribution limit of $5,000 per year is non-deductible and will be invested in a diversified fund which will track a U.S. stock index. Employers may also contribute up to $2,500 for an eligible employee or an employee’s dependent children that will not be counted as income for either the parent or the child, but will count toward the $5,000 annual limit.
Contribution and distribution rules from these accounts are still being sorted through. There are limitations on how and when the funds can be used, and that impacts how the distributions will be taxed.
Keep in mind that there may be more tax-efficient ways to invest in your child’s financial future. Please talk to your Fee-only Certified Financial Planner™ Professional to discuss which options are right for you.
Energy credits and other funding are eliminated.
Under the new bill, tax credits available to builders for building new energy efficient residential builds will end for homes that are rented or sold after June 30, 2026. Tax credits available to homeowners for energy efficient home improvements and residential clean energy (such as solar panels) will expire December 31, 2025.
The tax credits available for purchasing new or used electric vehicles will not be available after September 30, 2025.
Limitations on student loans.
A whole host of limitations restricts how much money students can borrow from the federal government to pay for college tuition. The bill caps unsubsidized student loans at $20,500 per year for students and $100,000 lifetime total for graduate students. It also caps borrowing for professional degrees, such as those for doctors and lawyers, at $50,000 per year and $200,000 lifetime total. A lifetime borrowing limit of $257,000 for all federal student loans has been added (not including parent PLUS loan amounts).
Students aren’t the only ones limited by the new loan restrictions. Parent borrowing through the federal Parent PLUS loan program is capped at $20,000 per year per student and $65,000 lifetime total per dependent.
Grad PLUS loans are eliminated. These types of loans allowed graduate students to borrow their entire cost of attendance minus any federal aid.
Moving forward, there are only two repayment plan options for new borrowers: a standard repayment plan with fixed payments or an income-based repayment plan known as RAP. Deferments for unemployment and economic hardship are eliminated under the new bill.
We’re here to help.
What we’ve covered is only a brief summary of the approximately 1,000 page bill. It is a lot to digest, and you may be left with questions. We are available if you have any questions or concerns. Send us an email or give us a call, we’d love to hear from you.
