Key Provisions in OBBBA
Written By: Brian Ellenbecker, CFP®, EA, CIMA®, AEP®, CPWA®, CLTC®
One of the main purposes of passing the One Big Beautiful Bill Act (OBBBA) on July 4th, 2025, was to remove the expiration of numerous important provisions in our tax code. This bill accomplished that by making permanent the current tax rates, most deductions and credit rules, AMT, and the estate tax exemption, to name a few. The bill also introduced new provisions, offering tax benefits for certain people.
SALT Cap
One of the new provisions that captured headlines was the increase in the deduction for state and local taxes, often referred to as the SALT cap. Prior to 2017, you could deduct your property taxes and state income taxes paid (or sales tax) without limit if you itemized your deductions. Starting in 2018, the combined deduction was capped $10,000. With the passing of OBBBA, the cap has increased to $40,000 in 2025 and expires in 2029. However, once your Modified Adjusted Gross Income (MAGI) reaches $500,000, the higher cap starts to get phased out. After your income exceeds $600,000, the cap reaches its maximum reduction and returns to the $10,000 limit we had previously.
If you find yourself near this phaseout range, be very careful about realizing additional income. Not only is your income most likely taxed at 35% in this range, but that same income also reduces the SALT deduction available to you. Because of that double hit (more taxable income, smaller deduction), your income could be taxed as high as 43% while you move through the phaseout range.
Charitable Donations
If you make donations to charity, there are three new rules to be aware of (all take effect in 2026):
1. There is a new charitable deduction for non-itemizers of $2,000 married filing jointly/$1,000 single. Previously, you had to itemize deductions in order to deduct your charitable contributions.
2. For those who itemize deductions, there will be a new 0.5% MAGI floor before charitable contributions are deductible. In other words, for every $10,000 of MAGI, the first $50 in charitable donations will not be deductible.
3. An additional cap on itemized deductions in general (which includes charitable contributions) applies to people in the top tax bracket. The top tax bracket is 37%. Under the old rules, any deductions you have first offset income taxed at the 37% bracket. Under the new rules, itemized deductions are capped at a maximum value of 35% (the second-highest tax bracket).
If you don’t itemize deductions, consider waiting until 2026 to ensure you can deduct your charitable contributions. However, if you donate more than the $2,000 married/$1,000 single cap every year, there’s no reason to push those contributions into next year, as you’ll already be maximizing the deductible amount. Alternatively, if you do itemize, you may want to accelerate those deductions into 2025 to avoid the caps on deductions that kick in next year.
Deductions for Age 65+
If you’re age 65 or older, you will be entitled to a new deduction worth $6,000 per person ($12,000 total for a married couple). This is in addition to the standard deduction (plus additional amounts for senior or blind taxpayers) or your itemized deductions. There is a phaseout that starts at $150,000 married/$75,000 single. The deduction is fully phased out once income reaches $250,000 married/$175,000 single. Because of these phaseouts, don’t forget to consider the impact your retirement tax planning strategies may have on your income. This deduction is available from 2025-2028.
New Vehicles
If you’re planning on purchasing a new vehicle and financing it, the interest on your new car loan could be deductible if you meet certain requirements. The loan must be for the purchase of a new vehicle (leases do not count). It must be for personal use only, and final assembly must occur in the United States. There is also an income phaseout, which starts at $200,000 married/$100,000 single. The deduction is fully phased out at $250,000 married/$150,000 single.
OBBBA Checklist
You can use the checklist below to walk through the majority of the new provisions in OBBBA to help determine if they apply to you.
OBBBA Webinar
If you’d like to take a deeper dive into any of the provisions mentioned above or explore some of the other aspects of this new bill, please view the recording below of our webinar from September 2025 that explored OBBBA in much more detail.
As always, if you’d like to explore how OBBBA impacts you, reach out to your Shakespeare advisor or your tax advisor to determine how you will be affected.