How the Big Beautiful Bill Will Affect Your Taxes
On July 4th of this year, President Trump signed into law what’s been dubbed the “One Big Beautiful Bill” (OBBBA). This sweeping piece of legislation makes several important changes to the U.S. tax code, many of which could have a direct impact on your personal and family finances.
Let’s break down some of the most significant updates you should know about:
Permanence of Key TCJA Provisions
One of the main purposes of the OBBBA is to make permanent several provisions from the Tax Cuts and Jobs Act (TCJA), including:
Tax brackets remain nearly unchanged, preserving the lower rates many have benefited from (10%, 12%, 22%, 24%, 32%, 35%, 37%). (1)
Higher standard deductions made permanent, helping reduce taxable income for most households. (1)
SALT Deduction Expansion
A long-awaited change for many taxpayers: the state and local tax (SALT) deduction cap has been raised from $10,000 to $40,000. This is particularly good news for families in high-tax states who itemize their deductions.
New Tax Deduction on Tips and Overtime
The Big Beautiful Bill introduces two separate above-the-line tax deductions for tips and overtime income:
· Tip Income: Workers in roles that “customarily and regularly” receive tips may deduct up to $25,000 of qualified tip income—as reported on W-2s, 1099s, or Form 4137—from taxable income. This deduction is available regardless of whether the taxpayer itemizes. It phases out gradually for individuals with MAGI above $150,000 (and $300,000 for joint filers). (5).
· Overtime Pay: Employees may deduct the premium portion of overtime compensation (the extra half-time over regular pay required under the FLSA), with limits of $12,500 for most filers and $25,000 for married filing jointly. The deduction also begins phasing out at the same income thresholds of $150,000 (individual) and $300,000 (joint). (5)
Each deduction is intended to provide targeted relief: one for service industry workers reliant on tips, the other for employees earning overtime—but they operate under distinct eligibility rules.
Enhanced Benefits for Seniors
Taxpayers 65 and older may now qualify for an additional $6,000 standard deduction ($12,000 for married couples both over 65). However, this benefit phases out at $75,000 of income for singles and $150,000 for joint filers.
Estate Tax Exemption Made Permanent
Prior to the OBBBA, the higher estate tax exemption was set to drop significantly in 2026. This bill locks in the current exemption permanently, an important win for multigenerational families focused on wealth preservation.
Introduction of “Trump Accounts” for Children
The bill introduces a new type of tax-advantaged account for children, informally known as “Trump Accounts.” Here’s how they work:
- The government contributes $1,000 for every child born this year and the next few years.
- Parents may contribute up to $5,000 annually until the child turns 18, regardless of whether the child has earned income.
- Employers can also make small contributions for minor employees.
- At age 18, the account begins functioning in many ways like an IRA
(The details of these accounts are still evolving, so more guidance will be forthcoming.)
Child Tax Credit Increase
The Child Tax Credit has been raised from $2,000 to $2,200, giving families with children an additional tax benefit. (2)
Expanded List of Qualified Education Expenses
The list of eligible expenses families can deduct from 529 accounts has expanded to include expenses for materials (textbooks), tutoring and standardized testing fees, while increasing the annual limit from $10,000 to $20,000. (1)
In addition to individual provisions, the OBBBA also includes new opportunities and deductions for small businesses, which we will cover in a future post.
While the long-term economic effects of this bill remain to be seen, the immediate benefits for individuals, families, and small businesses are significant.
As always, before making any financial or tax decisions, it’s wise to consult with a qualified professional who understands your unique situation.
At The Cornerstone Financial Group, our mission is to help families build strong foundations for generational impact. If you’d like to learn how these changes may affect your family’s tax and estate planning, we’d be happy to guide you.
Endnotes
1. Henry-Moreland, B. (2025, July 17). Breaking down the “One big beautiful bill act” (OBBBA). Nerd’s Eye View | Kitces.com. https://www.kitces.com/blog/obbba-one-big-beautiful-bill-act-tax-planning-salt-cap-senior
2. -deduction-qbi-deduction-tax-cut-and-jobs-act-tcja-amt-trump-accounts/
3. Brucker, S. (2025, August 7). How does the One Big Beautiful Bill Act impact the Child Tax Credit?. Jacksonhewitt.com. https://www.jacksonhewitt.com/tax-help/questions-and-answers/how-does-one-big-beautiful-bill-impact-child-tax-credit/
4. One big beautiful bill act of 2025 provisions. Internal Revenue Service. (n.d.). https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions
5. IRS. (2025b, July 14). One, big, beautiful bill act: Tax deductions for Working Americans and seniors. Internal Revenue Service. https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
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