The One Big Beautiful Bill Act (OBBBA)

As you look back on 2025 and start planning your financial strategies for 2026, here's a brief overview of provisions in the OBBBA that you may want to consider in that planning.

Personal Taxes

OBBBA retains the reduced federal income tax brackets introduced in 2017, which were scheduled to expire in 2026, and sets the 2026 standard deduction at $15,750 for single filers and $31,500 for married couples filing jointly, with inflation adjustments expected in subsequent years. For 2025, the federal child tax credit increases to $2,200 per child. It will be indexed for inflation in 2026 and later. This credit begins phasing out for single/head of household taxpayers and married filing jointly at $200,000 and $400,000 modified adjusted gross income (MAGI). As for your estate planning, the estate tax exemption rises to $15 million for 2026 (from $13.99 million in 2025) and will be indexed for inflation in future years. A new deduction for interest paid on auto loans could let you write off a portion of your car loan interest. The deduction has income limits and strict rules on which cars qualify. The cap on state and local tax (SALT) deductions is temporarily increased from $10,000 to $40,000 from 2025 through 2029, with the cap rising 1% annually until it reverts to the previous $10,000 limit in 2030. The expanded cap phases out for filers earning more than $500,000 ($250,000 married filed separately).

Investor Highlights

The OBBBA creates federally managed tax-advantaged savings accounts for children born in the US from 2024 to 2028, seeded with $1,000 from the federal government. You can contribute up to $5,000 per year to your child's account until they turn 18. The accounts are designed to help families build long-term savings for education, homeownership, or retirement. The Qualified Small Business Stock (QSBS) gain exclusion rules are significantly enhanced to make them more accessible and impactful for early-stage investors. For QSBS acquired at original issuance after July 4, 2025, the exclusion is tiered: 50% for stock held for at least three years, 75% for stock held for four years, and 100% for stock held for five years. The per-issuer exclusion cap is expanded from $10 million to $15 million, indexed for inflation (beginning in 2027). Other requirements apply. And the corporate gross asset limitation is increased from $50 million to $75 million, also inflation-indexed (starting in 2027), which broadens the range of companies eligible to issue QSBS.

For Businesses

OBBBA makes permanent the 20% small business deduction for pass-through entities such as partnerships and sole proprietorships. It makes permanent the lower corporate tax structure and rates set to expire in 2025, as well as 100% bonus depreciation and full expensing for business investments. For more specific information on how the Act may affect you, talk with your trusted financial professional.