Episode 264 – The One Big Beautiful Bill Act: Key Provisions to Know

The One Big Beautiful Bill Act (OBBBA) – a sweeping piece of tax legislation that impacts everything from deductions to child savings accounts – has been passed. Do you know what it means for your financial plan?

In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by John Williams, CFP®, to break down key provisions of the new law and highlight the biggest planning opportunities.

In this episode, you will learn:

• How the new $40,000 SALT deduction cap works, who benefits, and why the phaseout rules could make itemizing worthwhile again for taxpayers in high-tax states.
• What the Senior Standard Deduction offers to those age 65 and older, how the phaseout thresholds apply, and how it compares to existing deduction strategies in retirement.
• Why the newly introduced Trump Accounts — government-seeded investment accounts for children — could become a powerful savings tool alongside 529 plans and Roth IRAs for kids.
• How changes to charitable contribution rules — including the new deduction cap, minimum “floor,” and standard deduction adjustments — may influence when and how you give.
• Plus: new above-the-line deductions for tips and overtime, expanded 529 plan uses, car loan interest deductions, the repeal of EV and residential energy credits, and more.

Resources: 

The One Big Beautiful Bill Act Checklist | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call

​​Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.

Welcome back to The Agent Wealth Podcast, this is your host Mark Bautis. Today I’m joined by John Williams, CFP®, and we’re going to talk about the One Big beautiful Bill Act (OBBBA). After years of anxiety over the scheduled sunset of the Tax Cuts and Jobs Act (TCJA) at the end of 2025, the widely anticipated legislation extending and replacing TCJA was signed into law on July 4, 2025.

In today’s episode, we’ll cover what’s inside the 870-page bill and the planning opportunities it presents. There’s a lot of tax jargon in the legislation, and we’ll do our best to break it down in simple terms.

This is a massive bill — we could talk about it for hours. So, we’ve pulled out what we think are the most important areas and where the biggest planning opportunities lie. John, let’s start with state and local taxes, often called SALT. What changes have we seen here?

State and Local Taxes (SALT)

This was a big one. Under the TCJA, the SALT deduction was capped at $10,000, which had a huge impact on people in high-property-tax states like New Jersey, New York, and California. Here in Montclair, for example, property taxes are notoriously high.

Under OBBBA, the SALT deduction cap has been raised to $40,000. That’s a big jump. There are some phaseouts — which I’ll explain — but the increase will allow many people to go back to itemizing their deductions instead of taking the standard deduction.

Back in 2017, when the SALT cap dropped to $10,000, Congress doubled the standard deduction. That led to about 90% of taxpayers using the standard deduction, since it was more advantageous. Now, with the SALT cap at $40,000, there will be more opportunities for taxpayers to itemize again.

Here are some of the details:

• The change begins in 2026 and runs through 2030, after which it reverts back to $10,000 (unless extended by new legislation).
• The cap will increase by 1% annually from 2027 to 2029.
• For single filers, the phaseout begins at $250,000 of AGI; for married filing jointly, it starts at $500,000.

The phaseout works differently than others: your deduction is reduced by 30% for income above the threshold, with a minimum deduction of $10,000. So, depending on your income, there’s a “sweet spot” where itemizing might make sense.

That’s a good point. You also mentioned AGI and MAGI, which are important for understanding these phaseouts. Let’s define those quickly.

AGI vs. MAGI

AGI stands for Adjusted Gross Income — basically, all your income (wages, dividends, rental income, etc.) minus certain adjustments, like retirement contributions or student loan interest. Your AGI is the starting point for determining your taxable income.

MAGI, or Modified Adjusted Gross Income, adds certain items back to AGI. For example, tax-exempt municipal bond interest and retirement contributions get added back in. MAGI is used to determine eligibility for certain deductions and credits.

It’s important to note that sometimes tax rules are based on AGI, and other times on MAGI. You have to be careful which one applies.

Related Reading: How AGI and MAGI Affect Your Taxes (Guide)

Tips and Overtime Deduction

Next up: tips and overtime income. Starting in 2025, there’s a new above-the-line deduction of up to $25,000 for tips and overtime pay.

This deduction phases out:

• For single filers, it starts at $150,000 MAGI.
• For married filing jointly, it starts at $300,000 MAGI. 
• For every $1,000 above those limits, you lose $100 of the deduction.

An above-the-line deduction is subtracted from gross income before AGI is calculated. That’s a big advantage, because reducing AGI can make you eligible for other deductions and credits.

Examples of above-the-line deductions include contributions to IRAs or HSAs, student loan interest, and part of self-employment tax.

Below-the-line deductions, on the other hand, reduce taxable income after AGI is calculated, but only if you itemize.

So, if you earn tips or overtime, this is a new way to reduce taxable income — as long as you fall under the income limits.

Senior Standard Deduction

Another new feature in the bill is the Senior Standard Deduction.

Here’s how it works:

• The standard deduction remains in place ($12,750 for single filers, $31,500 for married filing jointly).
• If you’re 65 or older, or blind, you can add an additional $2,000 if single or $1,600 per spouse if married filing jointly.
• Starting in 2025, anyone 65 or older gets an additional $6,000 standard deduction ($12,000 for married filing jointly).

This new benefit phases out at higher incomes:

• $75,000 for single filers.
• $250,000 for married filing jointly.

The deduction is reduced by 6% for every dollar above those thresholds.

“Trump Accounts”

Now let’s talk about the so-called Trump Accounts. These are government-funded investment accounts designed to give children a head start.

Here are the basics:

• Every baby born between January 1, 2025 and December 31, 2028, who is a U.S. citizen, is eligible for a $1,000 government contribution.
• Parents (or others) must open the account at a qualified financial institution to claim the $1,000. If they don’t, the government will open one automatically, but parents will still need to meet certain requirements to access it.
• Annual contribution limit: $5,000 per child. Contributions are after-tax (no deduction). Employers can contribute up to $2,500.
• Investments must be in low-cost index funds (like S&P 500 trackers). No individual stocks, crypto, or alternatives.
• Money cannot be accessed until the child turns 18. At that point, the account functions like an IRA. Contributions can be withdrawn tax-free, but earnings are taxable at withdrawal. Early withdrawals before 59½ face a 10% penalty unless used for qualified expenses (education, first home, etc.).

Planning opportunities here include:

• Taking advantage of the free $1,000.
• Considering how this account fits with 529 plans, Roth IRAs for kids, and other savings vehicles.
• Family members can contribute, subject to annual gift tax limits.

Related Episode: Episode 255 – How to Create and Grow a Roth IRA For Your Children

This could even become a new type of employee benefit, with companies contributing to employees’ Trump Accounts when a baby is born.

Charitable Contributions

OBBBA also makes significant changes to charitable deductions:

1. Deductions are capped at 35% regardless of your tax bracket. This mainly affects those in the 37% bracket.
2. A “floor” is introduced: you can only deduct charitable contributions above 0.5% of your AGI. For example, if your AGI is $100,000, you must donate more than $500 to receive any deduction.
3. For those not itemizing, single filers can deduct $1,000 and married couples $2,000 as above-the-line deductions.

Planning opportunities include bunching charitable contributions — giving multiple years’ worth in one year to exceed the standard deduction threshold.

Standard Deduction and Bunching Strategy

The new standard deduction amounts are:

• $15,750 for single or married filing separately.
• $23,625 for head of household.
• $31,500 for married filing jointly or qualifying widower.

Because of these increases, even more taxpayers will use the standard deduction. But bunching strategies, especially when combined with the new SALT cap and charitable rules, can make itemizing worthwhile in some years.

Other Key Provisions

• Child Tax Credit: Increased from $2,000 to $2,201 per child. Phases out at $400,000 for joint filers — still one of the highest thresholds of any tax credit.
• 529 Plans: The annual K–12 education expense limit rises from $10,000 to $20,000. Expenses now include books and online learning materials, but not application fees or travel.
• Car Loan Interest Deduction: Interest on new car loans originated between 2025–2028 can be deducted (up to $10,000 annually). This only applies to personal-use vehicles assembled in the U.S. The deduction phases out at $100,000–$150,000 for single filers and $200,000–$250,000 for joint filers.
• Electric Vehicle and Residential Energy Credits: These have been repealed, showing a shift in incentives.

We covered a lot today, and this was just a portion of what’s in the bill. Everyone’s planning opportunities will differ.

If you’d like to discuss how OBBBA impacts your specific situation, schedule a free consultation with us.

We’ll also include resources in the show notes, including our checklist that highlights key provisions of the bill so you can quickly identify what applies to you.

Thanks for joining us today, and thank you, John, for walking through these changes.

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Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.