Here at River’s Edge, we view it as our obligation to remain up to date on tax law changes so that our financial planning recommendations to clients are as informed as possible. On July 4th, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, implementing a host of important and relevant changes. Some of these changes are effective immediately, while others phase in over the next couple years; some changes are permanent, while others are merely temporary. This is an extremely large and dense bill, so our goal in this article is to highlight some of the most important items. With the passage of this Act, there are a number of things that will remain the same (that were expected to sunset at the end of this year) along with several new additions to current legislation. We have identified 10 items (there are many others) from the bill that are relevant to financial planning, 5 of which represent existing legislation being made permanent, and 5 more that are brand new.
What Remains the Same
1. The 7 federal income tax brackets
The federal income tax system works on a tiered schedule, meaning that households “bump up” into higher marginal tax brackets as their taxable income increases. The 7 tax brackets in our current system were originally established in 2017 and are lower than what existed previously. While the original expectation was that tax brackets would revert back to pre-2017 levels at the end of 2025, the OBBBA makes permanent these 2017 changes. The 7 federal income tax brackets will remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
2. Standard Deductions
Taxpayers can elect to deduct the greater of their itemized deductions or standard deduction when filing taxes. With the passage of the Tax Cuts and Jobs Acts of 2017, the standard deduction was significantly increased relative to previous levels. The original language of the 2017 Act indicated that this elevated standard deduction was to end by 2026, but the OBBBA will allow the standard deduction to permanently remain at increased levels. In 2025, the standard deduction for single filers is $15,750 and $31,500 for those married filing jointly.
3. Gift / Estate Tax Exemption
Congress sets a limit on the amount of assets that can be gifted during one’s lifetime or passed on at death without being subject to tax. This total amount is known as the “exemption” amount and was nearly doubled in 2017 with the passage of the Tax Cuts and Jobs Act. What was established in 2017 will now remain permanent, allowing larger transfers of wealth to occur without the creation of any tax liability. In 2025, the combined gift and estate tax exemption is $13.99 million for single individuals and $27.98 million for those married filing jointly.
4. Child Tax Credit
A tax credit is a dollar-for-dollar reduction in one’s tax bill. Current legislation allows families to receive a credit in the amount of $2,000 per child under the age of 17. The child tax credit was increased to this level in 2017 through the Tax Cuts and Jobs Act and was expected to sunset at the end of 2025. However, the OBBBA makes this elevated tax credit permanent and even increases the credit amount to $2,200 per child under 17, effective immediately here in the 2025 tax year.
5. Qualified Business Income (QBI) Deduction
For owners of businesses that are considered “pass-through entities,” such as sole proprietorships, LLCs, S corporations, and others, up to 20% of their qualified business income can be deducted for tax purposes. This rule was established in 2017 and was expected to be removed at the end of 2025. However, the OBBBA has now allowed for this special deduction for self-employed individuals to remain in effect permanently.
What Changes
6. “SALT” Cap
For those electing to itemize their deductions for tax filing, state, local, and property (SALT) taxes paid can be deducted from their federal income tax calculation, capped at $10,000 per year. The passage of the OBBBA has now increased this cap to $40,000 per year, subject to phaseouts for those with income of $500,000 per year or greater. Notably, the elevated SALT cap deduction will only last through the 2029 tax year, at which point it will revert back down to $10,000 per year.
7. Student Loans
Public Service Loan Forgiveness (PSLF) is not going away, but current borrowers and those working toward PSLF will need to reevaluate their income-driven repayment (IDR) plan. Moving forward, only 2 IDR options will remain. The first will be an Income-Based Repayment (IBR) plan and the second will be a new plan called RAP (Repayment Assistance Plan). Existing plans like PAYE, SAVE, and ICR will be phased out in 2028, with the exact timing depending on the plan. Future borrowers will have fewer options, likely limited to the RAP plan and the standard 10-year repayment plan. In addition, federal borrowing limits will be significantly reduced.
8. “Bonus” Deduction for Older Adults
An additional tax deduction of $6,000 per year will be available for senior citizens age 65 and older. Rumors had circulated that tax on Social Security benefits would be eliminated entirely through the passage of the OBBBA. Although this did NOT happen, the bonus deduction for senior citizens is seen as the alternative. Single filers with modified adjusted gross income above $75,000 and married filing jointly households with modified adjusted gross income above $150,000 will begin to experience a phaseout of this benefit. Additionally, the bonus deduction is effective immediately in 2025 but will only persist through tax year 2028.
9. Trump Accounts
Children born in the years 2025 – 2028 will automatically qualify to receive a 1-time contribution of $1,000 from the federal government to a “Trump Account” in their name. Designed to be an alternative method to save for a child’s future, these Trump Accounts will allow parents to invest up to $5,000 per year and will even allow employers to contribute up to $2,500 per year, without that amount being added to the employee’s taxable income. Savings within these accounts will grow tax-deferred, and distributions for qualified withdrawals will be taxed according to the more favorable long-term capital gains rates.
10. Charitable Deduction for Non-Itemizers
Prior to the passage of the OBBBA, individuals or households that make charitable donations throughout the year were not able to benefit from a tax perspective unless they also itemized their deductions. Now, however, those that elect to take the standard deduction will also be permitted to take a charitable deduction. Effective for tax year 2026 and beyond, single, non-itemizing filers will be able to take a deduction of up to $1,000 for charitable contributions made, while those married filing jointly and non-itemizing can take a charitable deduction of up to $2,000.
This is a large bill with many nuances that would require a much longer article to be summarized in full. While we certainly have not covered everything, we invite you to reach out to us with any questions on how the terms of the OBBBA will impact your financial planning situation.