The Impact of the One Big Beautiful Bill Act on Your Finances

The "One Big, Beautiful Bill" (OBBBA) introduces both permanent and temporary tax changes that can significantly impact your financial strategies. It's essential to understand that this is more than just a political talking point—it’s a law with real implications for people across various income brackets, ages, and occupations. If you find these changes confusing, don't worry—you're not alone, and it's important to take proactive steps to understand how these changes affect you.

Income Tax, Deductions & Credits

• You might benefit from the now-permanent lower income tax brackets originally from the TCJA, which have also been adjusted with new thresholds.
• The higher standard deduction remains in place and will be adjusted annually for inflation, providing you with a potentially bigger tax break.
• The Child Tax Credit has seen changes. Understand the refundable and non-refundable portions, as well as the income-based phaseouts, to see how you can optimize your tax refund.
• If you have a car loan, pay attention to the new $10,000 car loan interest deduction, particularly if your vehicle was assembled in the U.S.
• For those earning tip income, there’s a temporary tax break on up to $25,000. Keep an eye out for the list of eligible occupations to see if you qualify.
• In high-tax states, you may find relief with the updated cap on the SALT deduction now going up to $40,000; however, note that there are phaseouts for high earners.

Wealth Transfer, Investment & Retiree Provisions

• Check if you're eligible for the temporary $6,000 “Senior Bonus” deduction, based on income.
• The increase in estate, gift, and generation-skipping transfer tax exemptions to $15 million can be advantageous for wealth transfer planning.
• With inflation-adjusted capital gains brackets, you might find it easier to stay within the lower tax ranges on your investments.
• Thanks to permanent relief from the Alternative Minimum Tax (AMT), you may see an overall tax reduction, though high-income earners might experience a quicker phaseout.

Other Noteworthy Changes

• The OBBBA includes significant Medicaid changes, such as $1 trillion in funding cuts, the introduction of work/volunteer requirements, and tighter eligibility standards you should be aware of.
• If you have children, look into creating “Trump Accounts”. These accounts offer tax-advantaged growth, have contribution limits, and are structured for investments.
• Clean energy and EV tax credits are set to phase out soon, so if you're thinking about making a purchase or upgrading your home, consider acting quickly.

Taking Action

The OBBBA impacts a wide spectrum of taxpayers, from low-income families to affluent investors and retirees. Don’t wait until tax season to assess the effects on your financial situation. It's time to start evaluating your tax strategy now, considering both the permanent and temporary changes. Consult a financial advisor or tax professional to receive guidance tailored to your specific circumstances.