This past July, Congress passed the One Big Beautiful Bill Act (OBBBA).  The Act addressed two main goals: extending tax breaks from the 2017 Tax Cuts and Jobs Act (TCJA) and delivering on campaign promises by the current administration.

The OBBA was quite comprehensive, so we highlighted some key changes that we believe will impact Opal clients the most.

Tax Breaks from the TCJA Made Permanent

• Tax Rates and Brackets: The seven rates and brackets created by the TCJA were made permanent, with an initial inflation adjustment in 2026 for the first two brackets (10%, 12%).
• Enhanced Child Credit: Taxpayers will continue to receive a credit of $2,200 (a $200 increase) per child in 2025, with inflation adjustments beginning in 2026. Permanent phaseout thresholds start at $200,000 (Single) / $400,000 (Married Filing Jointly)
• Lifetime Gift and Estate Tax Exemption: The exemption will increase to $15 million, with annual inflation adjustments thereafter.
• Standard Deductions: The enhanced standard deduction will increase for 2025: $31,500 for joint filers (up from $30,000), and $15,750 for single filers (up from $15,000) but personal exemptions stay eliminated.
• State and Local Taxes (SALT): The amount you can deduct has increased to $40,000 (up from $10,000) for 2025 with an increase of 1% per year through 2029. Without further legislation, it will revert back to $10,000 in 2030. There are additional phaseouts based on incomes over $500,000 ($250,000 for Married Filing Separately).
• Mortgage Interest Deduction:   The threshold you can deduct on your primary home will continue to be $750,000 ($375,000 for Married Filing Separately).

New Deductions Created

• Auto Loan Interest: Taxpayers can deduct up to $10,000 in interest on a loan used to purchase a qualifying vehicle. Certain rules apply, including: the car must be purchased (not leased) between 2025 and 2028, must be for personal use, and final assembly must have occurred in the United States.
• New deduction for seniors:   Taxpayers age 65 or older can deduct up to $6,000 per person, though income phaseout rules apply to those with a Modified Adjusted Gross Income (MAGI) over $75,000 (single) / $150,000 (joint) and the provision is only available now through 2028. 

Changes to Charitable Donations

• For those who claim the standard deduction: Starting in 2026, joint filers can claim a separate deduction of up to $2,000 ($1,000 for all other filers) for cash gifts, provided they are not made to a private foundation or donor advised fund.
• For those who itemize deductions:  Beginning in 2026, only contributions exceeding 0.5% of adjusted gross income will be deductible.
• Cash gifts to public charities will continue to be deductible up to 60% of AGI instead of falling to 50% as scheduled.
• Beginning in 2027, a new tax credit of up to $1,700 is available for charitable gifts of cash to scholarship-granting organizations that meet specific standards. Any amount claimed as a credit cannot also be claimed as a charitable contribution.

New Investment Savings Vehicle for Children

Effective: 2026-2028

A new type of savings account for children under the age of 18 was created under the bill.

• The contribution limit will be up to $5,000 per tax year (adjusted for inflation after 2027). Employers may also contribute up to $2,500 per year to an employee or dependent of an employee.
• Contributions in the account are not tax deductible until the child turns 18.
• Trump savings accounts are tax-deferred, meaning earnings on the investments inside the account are not subject to tax until withdrawn.
• Children cannot make withdrawals until they reach the age of 18.
• The federal government will make a one-time $1,000 contribution per child born from 2025-2028 to a Trump Account for U.S. citizens born during this time. An account will be automatically created by the federal government if an account is not previously created by the parents.  

Education Funding Changes

• 529 Plan Accounts: The definition of “qualified expenses” for 529 reimbursement has expanded to include non-tuition expenses for elementary, secondary, religious and private school expenses, as are expenses for acquiring and maintaining professional credentials. Beginning in 2026, a 529 account can also be used to pay up to $20,000 of elementary or secondary tuition (up from $10,000 currently).