20 Tax Impacts of One Big Beautfiul Bill

On July 3^rd, Congress passed sweeping new tax legislation through the One Big Beautiful Bill Act. Significant new developments surrounding your financial planning and taxes now exist. Here’s what passed and the most important things for you to know:

1. Tax Brackets: The lower marginal tax brackets from the 2017 Tax Cuts and Jobs Act (TCJA) are now permanent – 10%, 12%, 22%, 24%, 32%, 35%, 37%. Without legislation, these were going to sunset back to the old, higher marginal brackets. For most people, this means lower taxes stay in effect.
2. Standard Deduction: The standard deduction elevates to $15,750 for single filers, $23,625 for head of household, and $31,500 for Married Filing Jointly (MFJ). These will inflate yearly.
3. SALT Expansion with an Income Cap: The State and Local Tax (SALT) deduction, previously capped at $10,000, increases to a $40,000 cap for those with Adjusted Gross Income (AGI) < $500,000. At $500,000 AGI, this deduction starts to phase out.  The SALT deduction drops back to $10,000 for those with AGI > $600,000. This SALT expansion is effective this year, 2025.
4. Bonus Deduction for Age 65+: Each taxpayer 65 or older receives a new $6,000 additional deduction. This deduction is effective immediately in 2025. It begins to phase out for AGI above $150,000 for MFJ and $75,000 for all other filers. AGI over $250,000 has the deduction completely phased out.
5. Pass Through Entity Tax Elections (PTET): Despite much discussion and possibility this would go away, PTET was not eliminated and remains available for business owners. PTET essentially allows business owners to pay their state and local taxes (SALT) through their business instead of personally. Business owners are able to deduct those SALT payments federally.
6. Qualified Business Income (QBI) Deduction: A huge win for business owners and self-employed individuals that there’s no real changes here. The QBI deduction of 20% on business income is permanently extended. Starting in 2026, the phaseout range for QBI increases to $150,000 for MFJ and $75,000 for all other filers. There was a possibility that Specified Service and Trade Businesses (SSTB) would be eliminated to allow for QBI inclusion, but that did not happen.
7. Expanded Qualified Small Business Stock (QSBS) Exclusion: QSBS is a wonderful planning tool when utilized. It requires significant planning ahead to get the capital gain exclusion. Expanded QSBS will be fantastic for tech employees, founders, C Corp owners, etc. QSBS will now be available for more types of businesses and more impactful. Gross assets of business eligible for qualification increase to $75 million from $50 million. The amount of capital gain exclusion raises from $15 million to $10 million. Partial exclusions for capital gains now start at 3 years (50%), 4 years (75%), and 5 years (100%).
8. Lifetime Estate and Gift Tax Exemption: The current $13.9 million in 2025 lifetime estate and gift tax exemption was set to sunset and possibly be cut in half. This legislation stops that. In fact, the lifetime exemption increases to $15 million in 2026 and will be indexed each year at inflation.
9. Increased Child Tax Credit: The child tax credit increases from $2,000 per child to $2,200 per child, effective for 2025. It will now be adjusted for inflation each year.
10. Trump Accounts: A brand-new form of investment account created for minors. Children born between 12/31/2024 and 1/1/2029 are eligible. The accounts are used for future education, starting a small business, or first-time home purchase. It comes with a $1,000 initial contribution from the U.S Treasury. Parents and family members may contribute up to $5,000 annually to a Trump account.
11. New Charitable Deduction: This new deduction is available for those who do not itemize. Starting in 2026, Married Fling Joint (MFJ) filers will be able to deduct $2,000 of charitable contributions and all other tax filers a $1,000.
12. Auto Loan Interest Deduction: A brand-new deduction for auto loans originated in 2025 through 2028. The maximum amount of interest deductible for a year is $10,000. The deduction starts to phase out as Modified Adjusted Gross Income (MAGI) > $200,000 for MFJ filers and $100,000 for all other tax filers. Eligibility for the deduction completely phases at $250,000 for MFJ and $150,000 for all other filers.
13. Dependent Care FSAs: The contribution limit increases, effective for 2026. The limit will increase 50% to $7,500 for married filing jointly. The limit had been $5,000.
14. Increased HSA Availability: Health Savings Accounts (HSA), a triple-tax benefit account, are now available for more health plans. The Bronze and Catastrophic health insurance level plans are now included.
15. Tips and Overtime Pay Deduction: This one can be confusing. It’s more of a deduction of tips and overtime pay than the promoted “no tax on tips and overtime.” Consequently, It’s a deduction because there’s a phaseout for those with $300,000 AGI (MFJ) and $150,000 (for other filers). There’s a new deduction for tips and separately, overtime to exclude up to $25,000 (MFJ) and $12,500 (for other filers).
16. Section 179 Expansion: The Section 179 deduction expands to $2.5 million from $1 million. As the property cost exceeds $4 million, the section 179 deduction reduces. The expansion is effective for 2025.
17. Bonus Depreciation: The return of 100% bonus depreciation is a great win for business owners, real estate investors, holders of fixed assets, etc. Businesses can deduct 100% of the cost of eligible property in the tax year it is acquired and placed in service, accelerating tax savings. Plus, the qualified assets placed into service January 20, 2025 or later are eligible.
18. AMT: The higher AMT exemption becomes permanent. However, the phaseout levels of $500,000 for individuals and $1 million for MFJ filers from 2018 return.
19. Electric Vehicle Tax Credits: Tax credits on purchasing electric vehicles are ending after September 30, 2025.
20. 529 Expenses: The list of qualified expenses from a 529 expanded for K-12 schooling. Starting in 2026, beyond the previous $10,000 limit for K-12 tuition, 529 plans can be used for curriculum materials, books, online education resources, tutoring, standardized test fees (SAT, ACT, etc.) homeschooling expenses, and vocational training programs.

Whether you’re a fan or not, this is the new tax law. It must be accounted for in your financial and tax planning for this year and next 4 years minimum. Plan accordingly.

Embark Financial Partners and LPL Financial do not provide specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.