Tax Planning Opportunities Under the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA) introduces a host of tax changes beginning in 2025. While some provisions are temporary and others phased in, there are important planning implications for individuals and families to be aware of. Understanding not only what changes are coming, but also how to coordinate them with your broader financial strategy, is key to maximizing their benefit.

Tax Planning Opportunities Under the One Big Beautiful Bill Act

Stability in Tax Brackets and Standard Deduction

The current tax brackets (10%–37%) remain in place through 2028, creating a predictable planning environment for the next several years. For high-income earners and retirees, this stability supports longer-term strategies like timing Roth conversions, harvesting gains, or accelerating deductions with more confidence about marginal tax rates. Meanwhile, the standard deduction will continue to rise with inflation, retaining its position as a straightforward option for most taxpayers.

Expanded SALT Deduction Cap (with Planning Pitfalls)

From 2025–2029, the State and Local Tax (SALT) deduction cap increases from $10,000 to $40,000 for all taxpayers (both single and MFJ) earning under $500,000 in MAGI. Once MAGI exceeds $500,000, the expanded cap phases out until MAGI reaches $600,000 when the cap returns to $10,000. On the surface, this provides meaningful relief for many households in high-tax states.

Planning Takeaway: The sharp phase-out between $500,000 and $600,000 of MAGI creates a significant trap—losing the benefit could increase taxable income dramatically. Careful coordination of income (e.g., Roth conversions, IRA withdrawals, bonuses, or capital gains) will be critical to avoid falling into the $500,000-$600,000 phase-out range. Families may also want to bunch property taxes or state estimated payments into years when they remain under the $500,000 MAGI threshold so they can take full advantage of the expanded SALT deduction cap.

Additional Deduction for Seniors

Between 2025–2028, seniors age 65+ may claim an extra $6,000 deduction ($12,000 for couples), with a phase-out beginning at $75,000 single/$150,000 joint.

Planning Takeaway: This creates another factor to consider when deciding how much income to draw from IRAs, pensions, or annuities each year. Coordinating this deduction with Social Security taxability, Medicare IRMAA brackets, and Roth conversion timing is essential to avoid unintended tax costs.

Enhanced Child Tax Credit

In 2025, the child tax credit rises to $2,200 per child, and from 2026 onward it will be inflation-indexed.

Planning Takeaway: Families should integrate this higher credit into cash flow and withholding strategies, especially in years with other deductions fluctuating (such as the SALT deduction or the charitable deduction) as the credit begins to phase out at certain income levels. For those considering Roth conversions or capital gains realization, factoring in the credit can help soften the tax impact.

New Deduction for Auto Loan Interest

For cars purchased between 2025–2028, taxpayers may deduct up to $10,000 of interest on U.S.-assembled vehicles, subject to income limits ($100,000 single / $200,000 joint).

Planning Takeaway: Households within the income threshold may want to consider financing rather than paying cash for a vehicle purchase, especially when rates are relatively high—since deductible interest effectively reduces the cost of borrowing.

Charitable Giving: New Rules and New Strategies

Two major changes take effect:

• Beginning in 2025, non-itemizers can deduct modest charitable contributions ($1,000 single / $2,000 joint), although gifts to donor-advised funds and non-operating private foundations do not qualify.
• Beginning in 2026, itemizers can only deduct contributions above 0.5% of AGI.

Planning Takeaway: The new “floor” in 2026 means small, annual donations that once generated a tax benefit for itemizers may no longer generate a tax benefit unless those donations are grouped together (“charitable bunching”). Combining gifts into one tax year, using donor-advised funds, or pairing with high-SALT years may enhance deductions. Additionally, since unused contributions can be carried forward five years, multi-year giving strategies gain importance.

Limitation on Itemized Deductions for High-Income Taxpayers

Starting in 2026, itemized deductions for individuals in the top tax bracket (37%) will be limited to 35% of their value. A $50,000 deduction would effectively be worth $1,000 less in tax savings.

Conclusion

The OBBB presents both valuable opportunities and important planning challenges. While some changes provide straightforward tax relief, others create hidden cliffs that require careful navigation. Thoughtful planning—especially around timing of income, deductions, and charitable giving—can turn these tax law changes into real financial benefits.

At Core Wealth Management, we view tax planning as an essential part of your broader financial plan. If you’d like to explore how the new tax law changes apply to you, we welcome the opportunity to help craft a strategy to support your long-term financial goals.