On July 4th one of the most anticipated pieces of tax legislation in recent years was signed into law by President Trump. Approaching 900 pages in length the legislation includes a host of tax law reforms and makes the tax cuts in 2017’s Tax Cuts and Jobs Act (TCJA) permanent, eliminating uncertainty for tax planning beyond 2025. Listed below are some of the more salient components of the legislation.
Permanent Extension of the 2017 Tax Cuts. Set to expire at the end of 2025, the OBBBA preserves many of the tax cuts and credits from TCJA. The current seven tax brackets are now permanent, and income levels for the brackets will be indexed for inflation going forward. Current long-term capital gains tax rates have also been permanently extended. Both tax rate extensions provide additional retirement income, income tax and estate planning opportunities.
Increased State and Local Tax (SALT) Deductions. In response to critics of the TCJA’s $10,000 cap on SALT deductions the OBBBA raises the cap to $40,000 for many taxpayers. The relief is only temporary at this point, as the SALT deduction cap reverts to $10,000 in 2030.
Increased Standard Deductions. The OBBBA extends the increased standard deduction amounts enacted by the TCJA in 2017 and enhances them for 2025. The standard deduction amount for taxpayers in the married filing jointly status is $31,500, $15,750 for single filers, and $23,625 for head of household filers.
Permanent Extension of the Estate and Gift Tax Exemptions. Before the OBBBA was signed into law, estate and gift tax exemption amounts established in 2017’s TCJA were set to expire at the conclusion of 2025. The current exemption amount of $13.9 million was set to revert to pre-TCJA levels precipitating estate planning concerns for many families. Thanks to the OBBBA, married couples have the potential to transfer $30 million tax-free to their heirs during their lifetime or at death.
Additional $6,000 Deduction for Taxpayers Over Age 65. Beginning in 2025, each taxpayer over age 65 is eligible for an additional $6,000 deduction regardless of whether they itemize deductions or not. This additional deduction is scheduled to expire on January 1, 2029 and begins to phase out for taxpayers earning $75,000 (single) and $150,000 (married filing jointly). The deduction phases out completely at $175,000 single filers and $250,000 for MFJ filers.
At almost 900 pages, there are many more details of the OBBBA that we haven’t covered. The OBBBA offers tremendous planning opportunities in the areas of tax planning, estate planning, charitable giving, and retirement income planning. Call our office at 419-878-3934 or email christina@bollinwealth.com or phil@bollinwealth.com to schedule time to discuss the planning opportunities available to you under the One Big Beautiful Bill Act.
Sources: Wall Street Journal, Kitces.com, IRS.gov.
Photo Credit: David Everett Strickler