One Big Beautiful Bill Act: How Does the New Law Impact You?

Lawmakers passed and signed into law the One Big Beautiful Bill (OBBB) Act on July 4 after several weeks of debate. The law includes changes to the tax code, federal spending and lifts the debt ceiling by $5 trillion. Most of the provisions that will impact individuals and families come into effect on January 1, 2026, in the form of tax code and child savings account changes.

Tax Code Changes

Current marginal tax brackets will become permanent.

The standard deduction for 2025 will be $15,750 for single filers and $31,500 for married couples.

Those 65 and older may be able to claim an additional $6,000 deduction per filer. However, the deduction begins phasing out for married filers with income between $75k and $150k. This increased senior deduction is in place through 2028.

Overtime and tip income, within certain limits, will receive a tax deduction. Up to $25,000 of tips may be deducted if an individual filer’s income is below $150,000 and a married couple’s income is below $300,000. The overtime pay deduction is capped at $12,500 per individual and $25,000 for married filers with the same income limits as tip wages. This provision is also in effect through 2028.

Filers who are unable to itemize due to the high standard deduction are now able to claim $1,000 in charitable contributions as a single filer and $2,000 as a married filer.

The State and Local Income Tax (SALT) deduction was increased to $40,000 and will increase 1% per year. This provision will be in force through 2030 and will revert to $10,000 in 2031. The SALT deduction will begin phasing out for those with income over $500,000.

Starting in 2026, filers in the 37% bracket can only itemize up to 35% of their income while the SALT deduction is also capped at 32% of $40k for filers in the 37% bracket.

The Child Tax Credit (CTC) will increase to $2,200 per qualifying child in 2025 and will increase with annual inflation starting in 2026. The phaseout limits will be permanently set at $200,000 for single filers and $400,000 for married filers.

The estate and lifetime gift tax exemption will increase to $15 million per person and will be inflation adjusted annually. This change will be permanent.

Taxpayers may claim up to $10k of loan interest on cars with final assembly in the US purchased between 2025 and 2028.

Electric Vehicle (EV) and clean energy home improvement credits end in 2025. EV credits will be allowed for new or used cars purchased before September 30, 2025, and the clean energy home improvements are eligible for projects completed by December 31, 2025.

For business owners, the Qualified Business Income pass-through deduction of 20% was made permanent.

Trump Accounts

OBBB created a new savings account for children called Trump Accounts.

Children born between 2025 and 2028 are eligible for a $1k deposit made by the federal government into these accounts regardless of the parent’s income.

The accounts can be opened for any child under age 18 and up to $5k can be contributed annually.

Accounts must be invested in a low cost stock index funds tracking a major index like the S&P 500.

Employers are eligible to contribute $2,500 of the $5,000.

Capital gains are paid on earnings when withdrawals are made for qualified expenses (college tuition, first time home, business loans) once your child is 18.

If withdrawals are not for the listed qualified expenses, there is a 10% penalty in addition to capital gains tax.

Half of the account can be withdrawn once the child reaches age 18. The entire account can be withdrawn by age 25, and the entire account must be withdrawn at age 31.

Funds cannot be withdrawn prior to a child’s 18th birthday.

529 Plan Changes

The cap on K-12 tuition costs has been expanded. Now, 529 account owners may use up to $20k per year on qualified education costs for K-12 education. Increasing the limit from $10k and removing the restriction that 529 savings can only be used for K-12 tuition.

Qualified education expenses now cover credentialling programs, trade schools and certificate programs recognized by the federal government (e.g., the CFP program).

The lifetime rollover of 529 plan assets to a Roth IRA in the beneficiary’s name remains $35k (529 plan must have been open for 15 years).

Health Savings Account Changes

High-Deductible Health Plans (HDHP) along with Health Savings Account (HSA) funds may now be used for telehealth services. This is a permanent change.

HSA eligibility has expanded to individuals who purchase Bronze or Catastrophic health plans after December 31, 2025.

Dependent Care Flex Spending Accounts (FSA) increased the maximum contribution to $7,500 per year per household starting in 2026.

Important Disclosure Information Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from SGK. SGK is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.sgkwealthadvisors.com. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.