Special Release - Highlights of the One Big Beautiful Bill Act of 2025

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, representing the most comprehensive tax legislation since the Tax Cuts and Jobs Act (TCJA) was enacted in 2017. Like all bills, OBBBA is hundreds of pages long, and as they say, the devil is in the details. In addition, Treasury regulations and IRS guidance may clarify or modify the interpretation of some of bill’s provisions. With those two disclaimers aside, below are the highlights of OBBBA that may have bearing on your financial situation.

General Tax Considerations

• The individual tax brackets of 10%, 12%, 22%, 24%, 32%, 35%, and 37%, scheduled to sunset in January 2026 along with many other provisions of TCJA, have been made permanent.
• The standard deduction has been increased and made permanent. The standard deduction for 2025 is $15,750 for an individual, $23,625 for a head of household, and $31,500 for joint filers.
• One of the most notable provisions of OBBBA, particularly for those in high-tax states, the State and Local Income Tax (SALT) deduction limit was raised to $40,000 (increasing 1% per year) for individuals and joint filers, phasing out on earnings over $500,000. This is a temporary provision that begins in 2025 and ends in 2030, when it will revert to $10,000.
• From 2025-2028, tipped wages up to $25,000 can be deducted for single tax filers with income below $150,000 and joint filers with incomes of less than $300,000. For overtime wages, the deduction is capped at $12,500 per individual or $25,000 per couple with the same income limits. While these provisions may seem less relevant, they could impact family members working in service industries, investment in businesses with significant tipped or overtime compensation structures, and estate planning considerations for family businesses in affected sectors.
• A temporary provision provides a deduction for auto loan interest up to $10,000 on cars with final assembly in the U.S. and applies to single taxpayers with a modified adjusted gross income of $100,000 or less ($200,000 or less for people who are married filing jointly). The EV credit for purchases of new or used electric vehicles will not be available for purchases made after September 30, 2025.
• Home energy improvement projects must be completed by December 31, 2025 to be eligible for clean energy home improvement credits.
• Beginning in 2026, the benefit of itemized deductions is capped at 35% for those in the 37% bracket and capped at 32% for the expanded deduction for state and local taxes for those individuals.

Senior Considerations

• For tax filing years 2025 to 2028, OBBBA introduces a $6,000 tax deduction for individuals 65 years of age or older with income up to $75,000, or $12,000 for couples with incomes up to $150,000.
• The estate and lifetime gift tax exemptions under TCJA have been made permanent. In addition, the cap will rise to $15 million for individuals and $30 million for joint filers and will be adjusted for inflation. 

Considerations for Children

• The use of 529 plans accounts has expanded to allow for the payment of testing fees, tutoring and educational therapies for students with disabilities. Trump accounts have been introduced allowing up to $5,000/year in after-tax contributions by a taxable entity until a child turns 18. In addition, children born between 2025 and 2028 are eligible for $1,000 in federal seed money to get started. At age 18, the funds can be used for education, to buy a home, or to start a business. Withdrawals for these purposes will be subject to long-term capital gains rates as opposed to ordinary income, but taxes and penalties may apply if the funds are used for other purposes.
• The child tax credit increases to $2,200 per child starting in tax year 2025, adjusted for inflation going forward, and is permanent.
• Eligibility for Achieving a Better Life Experience Accounts (ABLE) would be expanded.

Business and Investment Implications

For clients with business interests:

• Section 199A: The bill extends Section 199A, the 20% deduction for qualified business income, with a slightly slower limitation phase-in.
• Bonus Depreciation: The bill enacts 100% bonus depreciation permanently.
• Research and Development: The bill repeals research and development amortization, returning to immediate expensing.

Other Considerations

• To help pay student loans, the extension of employer-provided educational assistance programs would be made permanent.
• HSA access and utilization is expanded in three significant areas: telehealth, Bronze and Catastrophic level plans through the Exchange, and Direct Primary Care.

The OBBBA represents a significant shift in tax policy, with both opportunities and challenges for individuals and corporations. The permanent extension of many TCJA provisions provides some level of planning certainty, and the enhanced SALT and senior deductions offer immediate, though short-lived, benefits. As always, please contact your Relationship Manager to further discuss what these provisions may mean for you.

Sources: 
https://www.congress.gov/bill/119th-congress/house-bill/1/text
https://www.fidelity.com/learning-center/personal-finance/one-big-beautiful-bill
https://taxfoundation.org/blog/one-big-beautiful-bill-pros-cons/

West Financial Services, Inc. (“WFS”) offers investment advisory services and is registered with the U.S. Securities and Exchange Commission (“SEC”). SEC registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the firm has attained a particular level of skill or ability. You should carefully read and review all information provided by WFS, including Form ADV Part 1A, Part 2A brochure and all supplements, and Form CRS.

The information contained herein does not constitute investment advice or a recommendation for you to purchase or sell any specific security. You are solely responsible for reviewing the content and for any actions you take or choose not to take based on your review of such content.

This information is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.

Certain information contained herein was derived from third party sources as indicated. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any information presented. WFS has not and will not independently verify this information. Where such sources include opinions and projections, such opinions and projections should be ascribed only to the applicable third party source and not to WFS.

Certain statements herein reflect projections or opinions of future financial or economic performance. Such statements are “forward-looking statements” based on various assumptions, which may not prove to be correct. No representation or warranty can be given that the projections, opinions, or assumptions will prove to be accurate.