2025 Tax Law Changes: What the New OBBB Act Means for Deductions, Credits, and Your Financial Plan

On July 4, 2025, Congress passed a sweeping piece of legislation: the One Big Beautiful Bill Act (OBBB). This new tax law reshapes major parts of the tax code and provides long-awaited clarity on whether the 2017 Tax Cuts and Jobs Act (TCJA) would be extended, expire, or be replaced.  The OBBB Act includes a mix of permanent tax changes and temporary tax breaks, with key provisions affecting income tax brackets, standard deductions, child tax credits, small business owners, charitable giving, and retirement planning. It also introduces new tax deductions and credits, many of which are set to expire after 2028.  If you’re wondering how this impacts your taxes or financial plan, here’s a breakdown of the most important 2025 tax law updates, plus strategies to consider before year-end.

Key 2025 Tax Provisions Extended from TCJA:

• Federal Income Tax Brackets and Rates remain unchanged (10% to 37%), with annual inflation adjustments.
• Standard Deduction stays elevated: $15,750 for single filers and $31,500 for joint filers.
• Child Tax Credit increases to $2,200 per child and maintains the $500 credit for other dependents. Income phaseouts start at $200,000 (single) and $400,000 (joint).
• Qualified Business Income (QBI) Deduction is preserved, with expanded phaseout thresholds starting in 2026: $150,000 (single) and $300,000 (joint) for specified service businesses (SSTBs).
• Estate and Gift Tax Exemption increases to $15 million per person ($30 million per couple) beginning in 2026.
• Alternative Minimum Tax (AMT) thresholds are preserved, but phaseouts begin at $500,000 (single) and $1,000,000 (joint), creating a steep 42% marginal rate in the phaseout zone.

 Tax Credits Ending Soon:

• Electric Vehicle Credit: Up to $7,500 (new) or $4,000 (used). Ends September 30, 2025.
• Solar and Renewable Energy Credit: 30% of installation costs. Ends after December 31, 2025.
• Home Energy Efficiency Credit: Up to $3,200 for insulation, windows, HVAC upgrades. Ends after 2025.

 New Above-the-Line Tax Deductions (2025–2028):

These deductions are available even if you don’t itemize, but they phase out with income:

For each $1,000 over the phaseout threshold, the deduction is reduced by $100 until it disappears.

Charitable Contribution Rules: What’s Changing:

Starting in 2026, itemized charitable contributions must exceed 0.5% of your AGI to be deductible. This new “floor” works similarly to the medical expense deduction threshold.  Additionally, for taxpayers in the top tax bracket (37%), the value of itemized deductions is capped at 35% of the deduction amount. This impacts the after-tax benefit of large donations and should be factored into charitable giving strategies.

New: Trump Accounts for Children Born 2025–2028:

The OBBB Act introduces a new tax-advantaged account—Trump Accounts—for children born between 2025 and 2028.

• $1,000 Federal Contribution at Birth (opt-in, with Social Security number).
• Annual Contribution Limits: $5,000 personal + $2,500 employer (before age 18).
• Investments: Limited to low-cost U.S. index funds with no leverage.
•  Withdrawals: Prohibited before age 18; after that, functions like a traditional IRA with early withdrawal penalties and RMD rules.
• These accounts are not aggregated with other IRAs and may offer long-term savings opportunities for education or retirement.

Other Notable Tax Updates:

• 1099 Reporting Threshold: Raised from $600 to $2,000, reducing tax paperwork for small sellers.
• Dependent Care FSA: Annual contribution limit increases from $5,000 to $7,500 for eligible childcare expenses.
• 529 Plans: Expanded to include K–12 tutoring, therapies for students with disabilities, and professional credentialing.

Tax Planning Takeaways:

Many of these tax benefits depend heavily on your adjusted gross income (AGI). As phaseouts kick in, strategic planning becomes more important—especially for Roth conversions, charitable giving, and bunching deductions.  Here are three key considerations:

• Monitor Your AGI: Hitting a phaseout threshold could mean losing access to a valuable deduction or credit.
• Time Your Income and Deductions: Consider whether income should be accelerated or deferred to maximize tax benefits.
• Evaluate Charitable Strategies: High earners may benefit from bunching donations or using donor-advised funds before limitations apply.

Next Steps: Let’s Talk About Your Plan

We’re meeting with clients throughout the year to model how these tax changes could affect your income, investments, and financial goals.  If you’d like to review your tax strategy or explore opportunities available under the new OBBB law, reach out to schedule a planning session.

 John Miller, CFP® of Longview Advisors provides comprehensive wealth management and financial planning services on a purely fee-only (fiduciary) basis. The company has offices in Wichita and Newton and serves clients throughout Kansas and the United States. Prospective clients can hire the company for wealth management services on an annual retainer, which includes ongoing investment management and financial planning. This includes tax and estate planning, portfolio analysis, retirement planning, and additional planning as needed. The firm also offers hourly financial planning.

DISCLAIMER:

This summary is intended for informational and educational purposes only and does not constitute tax, legal, or financial advice. The provisions outlined above represent an initial interpretation of the One Big Beautiful Bill Act (OBBB) as enacted in July 2025. Not all provisions take effect in 2025, and many include phase-ins, sunsets, or require further clarification from the IRS or Treasury Department. Before making any tax planning decisions, please consult with a qualified tax professional to assess how the law applies to your individual circumstances.