Understanding the New Tax Law: What the OBBBA Could Mean for You

On July 4th, the One Big Beautiful Bill Act (OBBBA) was signed into law. This wide-reaching $3.8 trillion tax and spending package includes several significant changes that could impact everything from your paycheck to your long-term financial planning. While the bill brings opportunities for many individuals and families, it also comes with complexities, especially when it comes to tax planning and federal debt.

Here’s a breakdown of what’s changing and what it might mean for you or your loved ones.

Tax relief and incentives for families and workers

Starting in 2025, the standard deduction is getting a boost, going up by $750 for individuals and $1,500 for couples. This benefits those who don’t itemize on their taxes.

If you have children, the Child Tax Credit increases from $2,000 to $2,500 per child through 2028. This could make a noticeable difference for growing families.

For workers, there’s some temporary relief as well. From 2025 to 2028, taxpayers may deduct up to $25,000 in tips and $12,500 in overtime pay. These deductions could be especially helpful for service industry and shift-based workers.

Support for seniors and estate planning

Seniors will see a temporary “bonus” deduction: From 2025 through 2028, individuals aged 65+ with income below $75,000 ($150,000 for couples) can deduct an additional $6,000 per person from their taxable income.

The estate tax exemption was also raised, from $13.99 million to $15 million per person, indexed for inflation. For high-net-worth families, this change may provide additional flexibility in legacy and estate planning.

Changes to SALT and education funding

The cap on state and local tax (SALT) deductions increases significantly, from $10,000 to $40,000 in 2025, with annual increases until 2029. This could be meaningful for households with high property taxes or living in states with significant local taxes.

On the education front, the law introduces borrowing caps for federal student loans, aiming to reduce long-term debt burdens. It also introduces “Trump Accounts,” an investment account for children born between 2025 and 2028, seeded with $1,000 by the Treasury, and allowing up to $5,000 in annual contributions.

Planning ahead: what’s going away

One of the bigger shifts is eliminating green energy tax credits, such as those for energy-efficient home upgrades or electric vehicle purchases after 2025. If these were part of your near-future plans, you may want to accelerate your timeline.

The bigger picture: debt & cost considerations

While the bill includes many tax breaks and incentives, it also comes with a cost. The base cost is estimated at $3.4 trillion, but when factoring in interest from increased borrowing, the total may rise to $4.1 trillion over the next decade. This means future fiscal decisions, especially around taxes, interest rates, and public programs, may be affected.

What should you do next?

These changes may bring financial benefits, or challenges, depending on your situation. If you’re unsure how this affects your retirement plan, estate strategy, or tax outlook, now is a great time to revisit your financial plan with a trusted advisor.

At Goodwin Investment Advisory, we’re here to help you:

• Understand how the new law impacts your personal finances
• Strategize for tax efficiency in light of changing deductions and credits
• Adjust your estate plan to reflect updated exemptions
• Make informed choices about timing large purchases or investments

Let’s talk about what these updates mean for you. Whether you’re a retiree, business owner, parent, or working professional, we’ll help you create a clear plan that supports your goals, protects your wealth, and gives you peace of mind in a shifting policy landscape.

Disclosure:

This summary is based on our current understanding, but due to the complexities, there may be some errors. We have highlighted a few aspects that would be applicable to our typical clients, but these may not be applicable to your situation, and we may have omitted some aspects that will affect you. Please consult with your financial advisor and your tax professional to seek guidance regarding the new law’s impact on your unique situation and any specific questions you may have.

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Disclosure:

All investment carries risk, and we cannot guarantee performance or results. Past performance does not guarantee future results. GIA does not earn any compensation from any of the non-GIA links provided in these resources. The market insights, podcast, blogs, book recommendations, self improvement thoughts, food recipes and activities are based on our perspectives and experience, and may not apply to your unique situation or be appropriate for your health and wellness. We are not aware of any conflicts of interest relating to any testimonials or endorsements. Please contact us for any questions relating to the content above, or to discuss how we can support you in your specific situation, and help you to reach your financial and personal goals.