The One Big Beautiful Bill: Beauty is in the Eye of the Client

As we should all know by now, on July 4, the One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump. For the most part, the OBBBA is largely an extension, and in some cases, an expansion of existing key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which would have otherwise sunset at the end of 2025. As trusted advisors to your clients, it is important to know how the new rules and changes from the OBBBA will impact planning in 2026 and beyond. The following are some of the important changes and considerations under the OBBBA that may or may not be attractive to your clients depending on their individual circumstances.

For Clients Who Don’t Itemize

• Permanent Increase in the Standard Deduction: The standard deduction is permanently increased to $15,750 for single filers ($31,500 for joint filers) and adjusted for inflation beginning in 2026. For clients who want to itemize in a certain year, they should consider accelerating or “bunching” charitable gifts in that year to exceed the standard deduction threshold.


• Universal Charitable Deduction: Starting in 2026, clients are allowed an “above the line” income tax charitable deduction up to $1,000 (or $2,000 for joint filers) in addition to the standard deduction, starting in 2026. However, gifts to donor advised funds, supporting organizations, or private foundations do not qualify for the universal deduction. This makes gifts to public charities like the American Heart Association even more appealing for nonitemizers who wish to take advantage of this new deduction which extends tax benefits to millions of individuals who do not itemize.


• Qualified Charitable Distributions (QCDs): QCDs (aka IRA Charitable Rollovers) were not impacted by the OBBBA. Clients who are 70 ½ years or older can still make tax free QCD rollovers from their IRA up to108K in 2025, then indexed for inflation annually. For clients 73 and older, QCD gifts can count toward RMD requirements. Also, QCD clients can make a one-time only distribution of up to $54,000 in 2025 (indexed for inflation) for a charitable gift annuity (CGA) or charitable remainder trust (CRT). Although it is not limited to a single gift, it must be completed in a single year and only once during the lifetime of the IRA owner. Keep in mind that married couples can each make QCD gifts up to the individual threshold limits.

For Clients Who Do Itemize

• Increased State and Local Taxes (SALT) Deduction: The SALT deduction temporarily increases to $40,000, reverting to $10,000 in 2030. The deduction is phased down to 10K for high-income clients. Additionally, the SALT deduction is preserved for state and local taxes paid by pass through entities. Clients in high tax states should find this attractive given that the SALT deduction would have otherwise totally expired in 2026.


• 0.5% Floor for Charitable Deductions: Clients can only deduct charitable gifts if total gifts exceed .5% of their AGI. For example, a client whose AGI is $100,000 must give more than $500 in a year to charity before the gifts can be deducted. Clients should consider bunching donations into 2025 to avoid this limitation.


• Extension of Section 199A Qualified Business Income (QBI) Deduction: The 20% QBI deduction has been made permanent but is phased out for specific service trades and business.


• 60% AGI Limitation on Charitable Deductions: Clients can continue to make cash donations up to 60% of their AGI permanently. The limitation would have otherwise reverted to 50% in 2026. The 30% AGI limitation on deductions for gifts of long-term capital gain property remains in place.

For Itemizers and Non-Itemizers

• New Deduction for Seniors: Effective for tax years 2025 through 2028, those who are 65 and older may claim an additional deduction up to $6,000 ($12,000 joint filers) on top of the standard deduction. The deduction begins to phase out for clients with modified adjusted gross income over $75,000 ($150,000 for joint filers) with no deduction available for those with incomes over $175,000 (single) and $250,000 (joint).


• 100% School Choice Tax Credit: Beginning in 2027, this credit is a powerful incentive for clients to make gifts to K-12 scholarship granting organizations (SGOs) and receive a tax credit up to $1,700 per year.


• Trump Accounts for Minors: Beginning in 2026, the OBBBA creates a new tax deferred investment accounts for minors. Family members can contribute in aggregate up to $5,000 per year to a minor’s Trump Account. No withdrawals are allowed before the minor turns 18. In addition, for children born between 2025 and 2028 the government will contribute $1,000 per child to their account.


• Increased Child Tax Credit: The current $2,000 child tax credit is expanded to a permanent $2,200 tax credit per child. Note that the credit is reduced and phased out for higher earning households.


• Phase Out of Solar, Wind and Energy Credits: The $7,500 credit for new electric vehicles and $4,000 credit for used electric vehicles phases out after September 30, 2025. Many of the clean energy credits, such as for solar panel and energy efficient home improvements, will phase out by the end of 2027. This leaves a short period of time for clients to take advantage of these credits before they expire.


• New Deduction for Overtime Pay and Tip Income: Effective 2025 through 2028, qualified overtime compensation may be deducted up $12,500 ($25,000 joint filers) and qualified tip income received in occupations listed by the IRS may be deducted up to $25,000. Phases out for clients with MAGI over $150,000 ($300,000 for joint filers).


• New Deduction for Car Loan Interest Paid: Effective for 2025 through 2028, clients may deduct up to $10,000 in interest paid on a loan used to purchase (not lease) most vehicles for personal use and that are assembled domestically.

For High and Ultra High Net Worth Clients:

• Permanent Increase in Estate, Gift, and GST Tax Exemption: Permanently increased to $15 million ($30 million joint) beginning in 2026. Clients with net worth exceeding the new exemption amounts should consider making gifts during their lifetimes to remove assets from their estates or plan for charitable bequests and beneficiary designations to avoid being subject to the 40% estate tax rate. It is also worthy to note that no changes were made to the rules allowing a step-up in cost basis for capital assets transferred at death.


• Qualified Small Business Stock (QSBS) Expansion: The OBBBA expanded the Sec. 1202 definition of “qualified small businesses” from $50 million to $75 million such that certain shareholders can exclude more capital gains realized from a sale of the business – as much as $750 million for businesses owned for 5 years or more. Clients should know that the increased QSBS benefit is only available for clients who invest in C-Corporations after July 4, 2025. For your business owner clients who are charitably inclined and unable to take full advantage of the QSBS election, keep in mind that low-basis, highly appreciated gifts of closely held business interests can be a compelling way to give due to triple tax benefits: FMV income tax deduction, avoidance of capital gains, and removal of the asset from the estate.


• 35% Cap on Itemized Deductions: Clients in the 37% tax bracket will be subject to a 35% cap on their itemized deductions including charitable contribution deductions. In other words, for high-income clients in this bracket each dollar itemized would be capped at 35 cents. This change is meant to replace the pre-TCJA “Pease limitation” on deductions for high earners. Clients in the 37% tax bracket should consider accelerating major gifts in 2025 to maximize their deductions.


• Qualified Opportunity Zones: The OBBBA permanently extends qualified opportunity zones with modifications to zone criteria and creation of zones in rural areas. Clients can defer, or even exclude in some cases, capital gain income by re-investing those funds into low-income communities and rural areas.

Whether or not your clients perceive any beauty in the OBBBA, as trusted advisors and counselors, now is the time for you to leverage the new tax changes to motivate your clients to take action today and plan for 2026 and beyond. Please consider our vital mission to fight heart disease and stroke when speaking to your clients who are inclined to support the American Heart Association.

About the Author

Gunnar M. Crowell, JD
Senior Charitable Estate Planning Advisor, American Heart Association

Gunnar is based in Madison, Wisconsin and serves IA, IL, IN, KY, KS, MI, MN, MO, ND, NE, OH, SD, and WI.