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Understanding the Impact of the One Big Beautiful Bill Act – What the New Law Means for You

We are analyzing and monitoring the recent passage of the One Big Beautiful Bill Act (OBBBA) which President Trump signed into law on the Fourth of July. This comprehensive legislation represents one of the most significant Federal tax reforms since the Tax Cuts and Jobs Act of 2017 (TCJA) and its provisions will affect virtually every business and individual.

Some of the notable changes introduced by the OBBBA may impact your investment strategy and overall financial outlook, including the following:

Key Changes Impacting Individuals and Wealth Planning

1. Permanence of TCJA Provisions: A significant aspect of the OBBBA makes many of the individual tax provisions permanent originally enacted by the TCJA which were previously set to expire. These features include:
   • Personal Income Tax Rates and Brackets: The current tax rates and brackets are made permanent, preventing the scheduled expiration at the end of 2025.
   • Standard Deduction: The increased standard deduction amounts are made permanent. For 2025 and subsequent tax years: $15,750 for single filers, $23,625 for head of household, and $31,500 for married filing jointly, adjusted for inflation.
   • Alternative Minimum Tax (AMT): The increased AMT exemption and phase-out thresholds are made permanent, reducing the likelihood of many taxpayers being subject to AMT.
   • Child Tax Credit: The increased child tax credit and additional child tax credit are made permanent with the non-refundable credit increasing to $2,200 in 2026.
2. State and Local Tax (SALT) Deduction Limitation: The $10,000 SALT cap is increased to $40,000 ($20,000 for married separate filers) and indexed for inflation through tax year 2029. However, this increased limitation is phased down for taxpayers with modified adjusted gross income over $500,000, and it reverts to $10,000 ($5,000 for married separate filers) for tax years after 2029. This temporary increase and subsequent reversion will be crucial for tax planning, especially for clients in high-tax states.
3. Increased Estate, Gift, and Generation-Skipping Tax Exemption: The estate tax exemption is substantially increased to $15 million per individual, adjusted for inflation, and made permanent. This increase is a significant change from the TCJA’s temporary $10 million exemption, offering greater flexibility in estate planning for high-net-worth individuals and families.
4. New “Individual Trust Accounts” (Trump Accounts): The OBBBA creates a new tax-favored account designed to benefit children under age 18. These accounts have an annual contribution limit of $5,000 and can be used for education, small business investments, and first home purchases. There is also a one-time government-funded $1,000 deposit for qualifying children born between December 31, 2024, and January 1, 2029. This deposit presents a new avenue for long-term savings and wealth transfer for families.
5. Charitable Contribution Deductions: For individuals who do not itemize, a new above-the-line charitable deduction of up to $1,000 ($2,000 for married couples filing jointly) is instated starting in 2026. For itemizers, contributions are deductible only to the extent they exceed 0.5% of adjusted gross income (AGI).
6. Car Loan Interest: The OBBBA permits the deduction of interest paid on a qualified passenger vehicle loan for the years 2025 through 2028. The loan must be secured by a first lien on a passenger vehicle used for personal use which had its final assembly in the United States. The interest deduction cannot exceed $10,000 per year and will be phased out for single taxpayers with modified adjusted gross income (MAGI) more than $100,000, or married filing jointly taxpayers with MAGI over $200,000.
7. Senior Exemption: The OBBBA includes a temporary $6,000 deduction for those ages 65 and older. But this amount is phased out when a taxpayer’s MAGI exceeds $75,000 for an individual (and is completely phased out at about $175,000) or $150,000 for married taxpayers filing a joint return (and is completely phased out by $250,000). It will be in effect for the years 2025 through 2028.
8. No Tax on Overtime or Tips: Taxpayers can now deduct up to $12,500 of qualified overtime pay annually and up to $25,000 in qualified tips from 2025 to 2028, with both deductions beginning to phase out for higher earners with income exceeding $150,000 for individuals or $300,000 for joint filers.
9. 529 Plan Enhancements: The OBBBA increases the annual limit on the use of 529 plan assets for K-12 expenses from $10,000 to $20,000 beginning in 2026. The bill expands the permitted use of 529 funds to include K-12 expenses related to tutoring, textbooks, test preparation, online learning, and homeschool materials. The enhancements also allow these funds to be used for special education expenses, such as speech therapy, occupational therapy, and adaptive learning software.

Key Changes Impacting Business Owners and Investors

1. Qualified Business Income (QBI) Deduction (Section 199A): The 20% QBI deduction for pass-through businesses (S-corps, partnerships, LLCs, and sole proprietorships) is now permanent. Additionally, the limitation phase-in window is expanded to $75,000 for single filers ($150,000 for married filing jointly), offering more taxpayers the full benefit of this deduction.
2. Bonus Depreciation (100% Expensing): The OBBBA reinstates 100% expensing of qualified assets in the year they are put into service (bonus depreciation) for property acquired beginning January 20, 2025, and makes this provision permanent. This depreciation can significantly impact the cash flow and tax planning for business owners making capital investments.
3. Research and Development (R&D) Expensing: The ability for immediate expensing of domestic research costs is restored and made permanent with provisions to accelerate previously capitalized amounts. This expensing is a positive change for businesses engaged in innovation.
4. Qualified Small Business Stock (QSBS) (Section 1202): The OBBBA expands the benefits of QSBS by providing a tiered gain exclusion (50% for 3+ years, 75% for 4+ years, 100% for 5+ years), increasing the per-issuer dollar cap from $10 million to $15 million, and raising the corporate-level gross assets ceiling from $50 million to $75 million. These changes are generally effective for stock issued or acquired on or after the date of enactment, making QSBS an even more attractive investment for eligible small businesses.
5. Opportunity Zones (OZ): The OBBBA establishes a permanent OZ policy, creating rolling 10-year OZ designations and expanding tax benefits for investors. This policy could present new investment opportunities for those looking to defer and potentially reduce capital gains by investing in designated low-income communities.

What Was NOT Included

Also important to note is that the final version of the OBBBA does not include some tax items that were previously discussed, such as changes to the corporate tax rate or a higher capital gains tax rate. This provision provides some stability in these areas.

What This Means for You and Your Next Steps

The One Big Beautiful Bill Act introduces substantial changes underscoring the importance of a comprehensive financial plan integrating your investment strategy with your tax situation. We encourage you to:

• Review Your Financial Plan: We are here to help you assess how the OBBBA changes might impact your long-term financial goals and adjust your investment strategy as needed.
• Consult Your Tax Advisor: It is crucial to discuss these changes with your tax professional to understand their specific impact on your individual tax return and to explore any new tax planning opportunities.

Disclaimer: This information is for educational purposes only and should not be considered tax or legal advice. Consult with a qualified tax professional or attorney for advice tailored to your specific situation. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.