Understand the One Big Beautiful Bill Act

The "One Big, Beautiful Bill" (OBBBA) introduces significant tax changes that can impact various financial strategies. Understanding its implications is crucial for everyone, from low-income families to wealthy investors.

Income Tax, Deductions & Credits

The OBBBA makes lower income tax brackets permanent with new adjusted thresholds. You'll continue benefiting from a higher standard deduction, adjusted annually for inflation. The Child Tax Credit has been modified, affecting refundable and nonrefundable amounts based on income levels.

If you've purchased a U.S.-assembled vehicle, a new $10,000 car loan interest deduction might be of interest to you. Furthermore, there's a temporary tax break on up to $25,000 in tip income with an upcoming list of eligible occupations. Also, the increase in the SALT deduction cap, up to $40,000, may offer relief, although high earners might face phaseouts.

Wealth Transfer, Investment & Retiree Provisions

Introducing a temporary $6,000 “Senior Bonus” deduction, available based on income. The act also increases estate, gift, and generation-skipping transfer tax exemptions to $15 million. Investors might find relief with inflation-adjusted capital gains brackets helping remain in lower tax ranges.

Permanent relief from the Alternative Minimum Tax (AMT) is now in place, but higher earners may experience a quicker phaseout.

Other Noteworthy Changes

Significant Medicaid changes involve $1 trillion in funding cuts and new work or volunteer requirements, with tighter eligibility. The creation of “Trump Accounts” for eligible children adds tax-advantaged growth options with set contribution limits.

Be aware that clean energy and EV tax credits will phase out soon. If you're considering such purchases, acting quickly is advised. Overall, the OBBBA affects diverse taxpayers, making it essential to review your tax strategy now. Consult a financial advisor or tax professional for personalized insights.