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A ONE BIG BEAUTIFUL ACT BREAKDOWN: CHANGES THAT MIGHT IMPACT YOU
The last time we had significant tax reform from Congress was the 2017 Tax Cut and Jobs Act of 2017. Most of the major provisions of the 2017 act were set to sunset beginning in 2026, which means many individuals who benefited from the lower tax rates and higher standard deductions would see higher overall taxes beginning next year. The One Big Beautiful Act, recently passed by Congress, includes changes to the tax system that will impact most of us. Rather than waiting until April to see how these changes will affect you, let’ s take a look at a few of the changes below.
Tax Rates The tax brackets and enhanced standard deductions that we’ ve become accustomed since the 2017 Tax Cuts and Jobs Act( TCJA) are now permanent. Before the One Big Beautiful Act was signed into law these brackets were scheduled to revert back to their pre-2017 levels.
“ No” tax on tips and overtime
Tax relief on tips and overtime pay are part of the bill, but they are temporary. For the tax years 2025 through 2028 there will be additional deductions available for qualified tips and overtime. For qualified tip income, there will be an additional deduction up to $ 25,000. Individuals with overtime pay will be able to take an additional $ 12,500 deduction. Both of these new deductions have income thresholds of $ 150,000 for an individual and $ 300,000 for joint filers.
Deduction for Auto Loan Interest
Interest paid on certain auto loans is now eligible for a tax deduction. Up to $ 10,000 per year can be deducted for interest paid for the purchase of a new personal vehicle that was assembled in the U. S. This deduction is subject to income phaseouts of $ 100,000 for single filers and $ 200,000 for joint filers.
Charitable Contributions
Charitable deductions could previously only be claimed if you itemized instead of taking the standard deduction. Beginning in 2026 single filers can now deduct $ 1,000 and joint filers $ 2,000 of charitable contributions even when claiming the standard deduction. State and Local Tax deduction( SALT) There is a temporary increase in the SALT deduction limits. The limits increase to $ 40,000 until 2030 then fall back to $ 10,000. This is only applicable to those who itemize rather than take the standard deduction.
“ No” Tax on Social Security The bill did not officially eliminate taxes on Social Security benefits. It does add an additional $ 6,000 deduction for taxpayers over 65 years old with income under $ 75,000 for single filers and $ 150,000 for joint filers.
Trump Accounts for children The OBBB creates a new type of investment account for children under 18. Contributions are limited to $ 5,000 per year, children born between 2025 and 2028 will have a $ 1,000 government contribution made to their account. These accounts feature tax free growth if used for education, housing or healthcare.
Child Tax Credit
The Child Tax credit has now increased to $ 2,200 per qualifying child
Estate and Gift Tax Exclusion
The OBBB permanently establishes the higher estate gift tax exemption established in the 2017 Tax Cut and Jobs Act of $ 15 million per individual.
Alternative Minimum Tax changes
Increased income limits for the Alternative Minimum Tax Exemption. Previously, those with income above $ 88,100 for those filing single and $ 137,000( old 2025 limits) for those married filing jointly were subject to the Alternative Minimum Tax. The income thresholds have been increased to $ 500,000 for single filers and $ 1,000,000 for those filing jointly.
If you have questions on specific changes not covered in this article, please contact our office and we’ d be more than happy to discuss the bill in more detail.
Brian M. Cartier, CFP ® Financial Advisor
Brian is a fully licensed Financial Advisor at Justabout Wealth Management. He earned his CERTIFIED FINANCIAL PLANNER™ in 2019 and specializes in the comprehensive financial planning process
Brian @ Justaboutwealth. com 724.754.1440
Just moved in at 1350 Old Pond Road, Bridgeville 15017.
For further information: Justabout Wealth Management, 1350 Old Pond Road, Bridgeville 15017 Office: 724.754.1440 justaboutwealth. com
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