Let’s be honest — politics can be exhausting. In today’s climate, it’s tempting to tune it all out. But if you’re nearing or in retirement, there’s one piece of legislation you shouldn’t ignore: the tax overhaul passed on July 4, 2025, known as the One Big Beautiful Bill Act (OBBBA).
The centerpiece of the bill? A major win for taxpayers: the extension — or “permanent” continuation — of the historically low tax brackets first introduced in 2017. These rates were set to expire at the end of 2025, but OBBBA keeps them in place for the foreseeable future — at least until Congress decides otherwise. That gives individuals and families a valuable planning window to take advantage of today’s lower rates.
Forget red or blue — this is about green. Your money. Your future. And how to make the most of this extended tax environment while it lasts.
Standard Deduction vs. Itemizing: The New Math
Starting in 2025:
Filing Status | Standard Deduction | “Senior Bonus” (65+, 2025–2028) | Total Deduction |
Single | $15,750 | + $6,000 | $21,750 |
Married Filing Jointly | $31,500 | + $12,000 | $43,500 |
While the BBB didn’t include a reduction or elimination in Social Security tax, seniors still will see a significant benefit. The Senior Bonus begins to phase out at $75,000 (Single) and $150,000 (MFJ), reducing by 6% of income over those limits. It expires after 2028.
Even with the larger standard deduction, itemizing may still make sense if you have significant:
· Mortgage interest (up to $750,000 of acquisition debt)
· State and local taxes (SALT cap raised to $40,000 for those earning under $500,000, reverting to $10,000 in 2030)
· Charitable contributions
· State sales tax
Charitable Giving:
In 2025, individuals can deduct $1,000 (or $2,000 for MFJ) above the line for charitable cash donations — even if they take the standard deduction. There’s no AGI floor and deductions can apply up to the full 37% tax rate.
Starting in 2026, that changes:
· Itemized deductions face a new 0.5% AGI floor
· The maximum deduction benefit is capped at 35%, even if you're in the 37% bracket
What You Can Do Now:
· Front-load charitable gifts into 2025 using a donor-advised fund (DAF).
· Donate appreciated stock instead of cash to avoid capital gains and increase tax efficiency.
New Above-the-Line Deductions (2025–2028 Only)
These deductions are available even if you take the standard deduction — and can benefit working retirees or modest earners:
Deduction Type | Annual Cap | Phaseout Threshold (AGI) | Notes |
Tips | $25,000 | $150K Single / $300K MFJ | No payroll tax relief, but income deductible |
Overtime Pay | $12,500 ($25K MFJ) | Same as above | Encourages part-time or shift work in retirement |
Auto Loan Interest | $10,000 | $100K Single / $200K MFJ | Vehicle must be assembled in the U.S. |
Real Estate, Energy & Investment Breaks
· Bonus Depreciation returns to 100% for business/rental assets placed in service after Jan 19, 2025, through 2029.
· EV Tax Credits end September 30, 2025
· Home Energy Credits end December 31, 2025
· SALT Cap increases to $40,000 (with phaseout over $500K income) through 2029, then reverts to $10,000
Family & Education Updates
· Child Tax Credit increases to $2,200 per child and is inflation-adjusted moving forward
· Newborn Savings Accounts ("Trump Accounts"):
o Babies born from 2025–2028 receive $1,000 in federal seed money
o Parents or relatives can contribute up to $5,000/year
o Funds convert to IRA-like accounts at age 18
· 529 Plan Expansion: Now covers tutoring, test prep, homeschool expenses, and education therapies for students with disabilities
Other Notable Updates
· HSA Eligibility Expanded: Starting in 2026, individuals on bronze or catastrophic health plans can contribute to HSAs
· Estate Tax Exemption increases in 2026 to $15M per individual / $30M per couple, indexed for inflation
· Repeal of Personal Exemption made permanent, continuing post-2025
· Student Loan Repayment Benefit: Permanently extended; $5,250/year in employer-provided student loan assistance remains tax-free and now indexed for inflation
· Dependent Care Assistance: Pre-tax deferral limit increased to $7,500/year per employee ($3,750 MFS)
· Employer Childcare Tax Credit:
o Increases from 25% to 40% of up to $500,000 in expenses
o Small businesses get 50% of up to $600,000, with added flexibility to pool resources or use third-party providers
2025 Planning Checklist
1. Project your taxable income through 2028 to strategically fill low tax brackets (e.g., Roth conversions)
2. Compare standard vs. itemized deductions under the new rules
3. Front-load charitable giving into 2025 using a donor-advised fund
4. Accelerate purchases or upgrades for EVs and home energy improvements before credits expire
5. Review estate and gifting strategies in light of the higher estate exemption
6. If working part-time, use the new tip, overtime, and auto interest deductions to reduce taxable income
7. Talk to your employer about changes to dependent care, education assistance, and student loan benefits
Final Thought
Whether you agree with the politics or not, the One Big Beautiful Bill Act has created one of the most favorable tax planning environments we’ve seen in years. Many of the changes are temporary. Some are permanent — for now. Either way, the window is open, and smart planning means taking advantage while it lasts.
If you’re unsure where to start or want help maximizing the impact of these changes for you and your family, we’re here to help.
The rules have changed. Smart planning hasn’t. Now’s the time to act.
Disclosures
This material has been prepared for informational purposes only and should not be construed as a solicitation to effect, or attempt to effect, either transactions in securities or the rendering of personalized investment advice. This material is not intended to provide, and should not be relied on for tax, legal, investment, accounting, or other financial advice. You should consult your own tax, legal, financial, and accounting advisors before engaging in any transaction. Asset allocation and diversification do not guarantee a profit or protect against a loss. All references to potential future developments or outcomes are strictly the views and opinions of Richard W. Paul & Associates and in no way promise, guarantee, or seek to predict with any certainty what may or may not occur in various economies and investment markets. Past performance is not necessarily indicative of future performance.