Washington is buzzing with talk of the “One Big, Beautiful Bill” Act (OBBB), a sweeping House tax proposal that aims to reshape the American tax landscape. Having recently passed the House, this ambitious legislation bundles numerous reforms, largely extending and modifying the 2017 Tax Cuts and Jobs Act (TCJA) provisions, while introducing new measures. While its path through the Senate and to the President’s desk remains uncertain, understanding its key components is crucial for informed financial planning, especially for our clients.

This comprehensive bill touches nearly every aspect of taxation. Below, we break down the most relevant provisions for individuals, families, and business owners, offering insights into their potential impact.

For Individuals: Rates, Deductions, and the SALT Cap

A cornerstone of the OBBB is making the individual income tax rates from the TCJA permanent. This means the current brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) would avoid reverting to higher pre-2018 rates. The bill also aims to make the higher standard deductions permanent, with an additional temporary “bonus” standard deduction for 2025-2028. Notably for seniors, an extra $4,000 deduction is proposed for 2025-2028, even for itemizers, though it phases out for higher incomes. However, personal exemptions would remain repealed.

One of the most watched provisions is the State and Local Tax (SALT) deduction cap. The OBBB proposes to permanently extend the cap but increase it from $10,000. Recent updates suggest this could be as high as $30,000 or $40,000 per household, with a phase-down for higher-income earners (e.g., starting at $400,000 or $500,000 MAGI for joint filers). This change would offer relief to taxpayers in high-tax states, though the phase-out means the wealthiest may not see the full benefit. The bill also aims to address state-level workarounds like Pass-Through Entity (PTE) taxes.

The bill also introduces some novel, temporary deductions for 2025-2028, such as making the premium portion of overtime pay and certain tip income deductible for many workers. A temporary deduction for interest on new or newly refinanced U.S.-assembled auto loans (up to $10,000, with income phase-outs) is also included.

Impact & Considerations:

• The permanence of TCJA rates and higher standard deductions would provide certainty for many.
• The increased SALT cap, even with phase-outs, could significantly benefit upper-middle-income clients in high-tax states.

The 35% cap on the tax value of itemized deductions is a new feature aimed at limiting benefits for the highest earners, potentially impacting the net value of mortgage interest or charitable contributions for those in the top 37% bracket.

For Families: Child Tax Credit and New Savings Vehicles

The Child Tax Credit (CTC) would be made permanent at $2,000 per child (indexed for inflation after 2028) and temporarily increased to $2,500 for 2025-2028. The $500 credit for other dependents would also continue.

A significant new proposal is the creation of tax-advantaged “MAGA” or “Trump Accounts” for children. As proposed, newborns from 2025-2028 could receive a $1,000 federal contribution, with families and others able to contribute up to $5,000 annually. These funds could grow tax-free and be withdrawn tax-free for qualified expenses like education, home purchase, or starting a business.

Education savings see enhancements too, with 529 plans potentially covering K-12 homeschool expenses and postsecondary credentialing or skilled trade programs. The bill also looks to enhance the Adoption Tax Credit and employer-provided childcare credits.

Impact & Considerations:

• The enhanced CTC provides continued support for families.
• “Trump Accounts” could offer a new long-term savings vehicle, complementing existing 529 plans. Wealth managers will need to analyze their optimal use in broader family wealth planning.
• Expanded 529 uses offer more flexibility for education funding.

For Your Estate: A Higher Exemption

A critical area for wealth transfer planning is the federal estate and gift tax exemption. The OBBB proposes not only to make the current doubled exemption permanent but to further increase it to $15 million per individual (effectively $30 million per married couple) starting in 2026, indexed for inflation thereafter. The Generation-Skipping Transfer (GST) tax exemption would likely mirror this increase. The step-up in basis at death is expected to remain untouched.

Impact & Considerations:

• A $30 million per couple exemption would shield a vast majority of estates from federal estate tax, simplifying planning for many and allowing more wealth to pass tax-free to heirs.
• This significantly changes the landscape for estate planning, potentially reducing the need for complex strategies for those below the new threshold.

 For Business Owners & Investors: QBI, Expensing, and More

Business owners would see significant changes. The 20% Qualified Business Income (QBI) deduction (Section 199A) for pass-through entities would be made permanent and potentially increased to 23%. The bill also aims to simplify the complex phase-out rules, particularly for specified service trades or businesses (SSTBs), potentially allowing more high-income service professionals to benefit.

Bonus depreciation (full expensing) for new equipment and machinery would be restored to 100% for property acquired from January 20, 2025, through the end of 2029. There’s also a proposed 110% bonus for certain domestic factory investments, including structures. Immediate deductibility of domestic R&D expenses would also be restored for 2025-2029. The limitation on net interest expense deductions would be temporarily eased by reverting to an EBITDA-based calculation for 2025-2029. The Section 179 expensing limits for small businesses may also be increased.

The bill also makes permanent the limitation on excess business losses for non-corporate taxpayers. Opportunity Zones would be extended and potentially enhanced.

Impact & Considerations:

• The enhanced and permanent QBI deduction offers significant tax relief for eligible business owners.
• Restored full expensing and R&D deductibility can incentivize investment and reduce current tax liabilities.
• Business owners should evaluate how these provisions affect their operational and investment decisions, as well as choice of entity.

International Tax Provisions

The bill generally aims to maintain the more business-friendly international tax rates from the TCJA. It proposes to permanently keep the GILTI deduction at 50% (effective ~10.5% rate) and the FDII deduction at 37.5% (effective ~13.1% rate), rather than letting them decrease (and thus tax rates on this income increase) after 2025. The BEAT (Base Erosion and Anti-Abuse Tax) rate would also be kept at 10% (or a similarly low rate like 10.1% as per recent discussions) instead of rising to 12.5%. These moves signal a divergence from OECD global minimum tax efforts.

Impact & Considerations:

• For clients with international business operations, these provisions could mean lower U.S. tax on foreign earnings than under scheduled law changes.
• The U.S. stance against the OECD’s global minimum tax could create complexities for multinationals operating in jurisdictions that do adopt Pillar 2 rules.

 Charitable Giving and Nonprofits

The bill proposes to reinstate a limited above-the-line charitable deduction for non-itemizers. More controversially, it includes measures to impose significantly higher, tiered excise taxes on the net investment income of large university endowments (with rates up to 21% for the wealthiest) and large private foundations (with rates up to 10%). The bill also tightens rules on executive compensation at nonprofits and expands what might be considered Unrelated Business Taxable Income (UBTI).

Impact & Considerations:

• The endowment and foundation taxes could impact philanthropic strategies and the financial health of institutions that clients support.
• Donors may need to re-evaluate their giving strategies and the vehicles they use if these provisions become law.

Health Savings Accounts (HSAs)

The OBBB includes a notable expansion of HSAs. Contribution limits could effectively double for many lower and middle-income families (phasing out for higher earners). Other changes include allowing both spouses’ 55+ catch-up contributions into one HSA, permitting contributions for Medicare Part A enrollees, and broadening eligible expenses to potentially include gym memberships and nutritional supplements.

Impact & Considerations:

• Expanded HSAs offer greater tax-advantaged savings opportunities for healthcare expenses, both current and future.
• These accounts could become even more powerful tools for long-term health and retirement savings.

Energy Tax Credits

A significant shift is proposed for energy tax policy, with many clean energy tax credits expanded by the 2022 Inflation Reduction Act (IRA) being targeted for repeal or accelerated phase-out. This includes credits for electric vehicles (new and used), EV charging infrastructure, residential clean energy (like solar), and energy efficiency home improvements, generally proposing to end them after 2025. Utility-scale clean electricity credits (45Y and 48E) would begin a phase-out schedule starting around 2029, ending after 2031, and credit transferability provisions could be curtailed.

Impact & Considerations:

• Investors in renewable energy or EV-related sectors should monitor these proposals closely, as they could significantly alter the financial incentives and growth trajectory of these industries.
• Individuals considering purchases of EVs or home energy upgrades may see a shrinking window for current tax benefits.

Political Outlook and What This Means for You

The “One Big, Beautiful Bill” has passed the House, but its journey is far from over. It faces significant hurdles and likely substantial revisions in the Senate, where Democrats have voiced strong opposition to many of its components, particularly citing its projected impact on the federal deficit and its perceived favoritism towards higher earners and corporations.

The political climate and the upcoming 2025 “tax cliff” (when many TCJA provisions expire) will heavily influence the final outcome. This bill serves as a clear indication of Republican tax priorities and could form the basis of negotiations or future legislation, especially if political alignments shift.

For our clients, this period of potential change underscores the importance of proactive and flexible financial planning. While these proposals are not yet law, understanding their potential direction allows us to:

• Review your current financial plan: How would these changes impact your tax liability, investment strategy, estate plan, and charitable goals?
• Consider timing: Are there actions to consider before year-end or before potential new laws take effect (e.g., regarding estate planning, charitable contributions, or investments)?
• Stay informed: Tax laws can be fluid. We are closely monitoring these developments and will keep you updated on changes that may affect your financial well-being.

We encourage you to reach out to your advisor to discuss how these potential tax law changes could specifically impact your financial situation and to explore strategies to navigate the evolving landscape.

Disclaimer: This blog post is for informational purposes only and should not be considered tax or legal advice. The information provided is based on the latest publicly available versions and interpretations of the proposed legislation as of May 2025 and is subject to change. Please consult with your tax and legal professionals for advice tailored to your specific circumstances.