The recently enacted One Big Beautiful Bill Act (OBBBA) ushers in a new era for tax and estate planning, bringing both permanent changes and temporary provisions that will significantly impact individuals and businesses. Understanding these updates is crucial for optimizing your financial strategies, especially as many provisions take effect in 2025. This overview, presented by Annie Tran, CPA, highlights key modifications to lifetime exemptions, the SALT deduction, standard deductions, charitable contributions, and QBI, offering insights and planning opportunities to consider for your financial future.

Lifetime Estate, Gift, and Generation-Skipping Transfer (GST) Exemptions: Amounts will increase to $15M for single/$30M for joint filers in 2026 and will increase each year thereafter, indexed for inflation.

Individual, Corporate, and Estate Tax Rates: Remain at reduced TCJA (Tax Cuts and Jobs Act) levels.

Standard Deduction Permanently Increased for 2025: Adjusted – Married Filing Jointly $31,500; Single or Married Filing Single $15,750; Head of Household $23,625 and indexed for inflation thereafter.

Extra Standard Deduction for Taxpayers Aged 65 or Older:

» For 2025, the normal extra deduction is $2,000 for single or head of household and $1,600 if married (filing joint or separately) per qualifying individual.

» Additional (temporary 2025-2028) new bonus deduction is $6,000 for single or head of household and $12,000 if married and both are over 65, subject to income limitations and available regardless of itemization or taking the standard deduction, subject to a phase-out.

Temporary (2025-29) Increase of State and Local Tax (SALT) Deduction Cap:

From $10,000 to $40,000 for taxpayers itemizing. Subject to a phaseout of 30% of Modified Adjusted Gross Income (MAGI) over $500,000 and is reduced back down to the statutory $10,000 at $600,000 of MAGI.

Increased Child Tax Credit: Per child, to $2,200 for the 2025 tax year.

Changes to Charitable Contributions: Go into effect in the 2026 tax year.

» Above-the-line charitable deductions for non-itemizers: $1,000 for single filers or $2,000 for married couples.

» New floor on charitable deductions for itemizers: Charitable deductions can only be claimed to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI).

Qualified Business Income (QBI) (Sec. 199A) Deduction: Made permanent at 20%.

» Added minimum deduction of $400, inflation-indexed, for taxpayers with $1,000+ of QBI.