Understanding the One Big Beautiful Bill Act: What Wealthy Individuals and Families Should Know

While most were celebrating America’s birthday on July 4th, President Trump was signing into law the “One Big Beautiful Bill Act” that finally made its way through both the House and Senate.  The OBBBA tackles two main goals for the current administration: extending tax breaks from the 2017 Tax Cuts and Jobs Act (TCJA) and delivering on many of President Trump’s 2024 campaign promises. This legislation brings long-awaited clarity to the tax code and introduces new planning opportunities.

Below is a summary of key changes, although specific planning opportunities are best explored with your Crown CFO, who can leverage a full wealth planning team and advanced tax modeling tools to tailor any strategies unique to your goals.

Changes to TCJA-Related Income, Taxes and Credits

One of the most significant outcomes of the OBBBA is the extension of the current income tax rates and brackets, originally enacted under the 2017 Tax Cuts and Jobs Act (TCJA). These rates, which were set to expire at the end of 2025, will now remain in place – avoiding a 1–4% increase across most income levels. In addition, the OBBBA extends several key TCJA provisions:

• Lifetime Gift and Estate Tax Exemption: Instead of reverting to $7 million in 2026 following the TCJA sunset, the exemption will increase to $15 million, with annual inflation adjustments thereafter.
• Enhanced Child Credit: Taxpayers can receive a credit up to $2,200 (a $200 increase) per child in 2025, with inflation adjustments beginning in 2026.
• Alternative Minimum Tax: While most provisions remain unchanged, new thresholds beginning in 2026 will expand the number of taxpayers subject to the AMT. As a result, couples with income over $1 million are more likely to owe additional tax under these rules beginning next year.
• Qualified Business Income (QBI) Deduction: Owners of pass-through businesses can continue to exempt a portion of their income from tax; in 2026, the phaseout range will expand slightly, allowing even more taxpayers to qualify for the deduction.

Changes to TCJA-Related Deductions

The OBBBA makes several important updates to deductions originally introduced under the TCJA:

• Standard Deductions: The enhanced standard deduction will not only remain in place but will increase for 2025: $31,500 for joint filers (up from $30,000), and $15,750 for single filers (up from $15,000).
• Itemized Deductions: Starting in 2026, high earners in the top 37% tax bracket who itemize will see the value of their deductions capped at a 35% tax benefit.
• State and Local Taxes (SALT): One of the biggest focuses throughout the budget reconciliation process has been the deduction for state and local taxes (SALT). The OBBBA has increased the limit to $40,000 (up from $10,000) for 2025 with an increase of 1% per year through 2029. Without further legislation, it will revert to $10,000 in 2030. There are additional phaseouts based on income and tax filing status.
• Mortgage Interest: The mortgage interest deduction limits are unchanged from current rules (homeowners can only deduct interest on qualifying loans up to $750,000). However, the deduction for private mortgage insurance (PMI) returns in 2026, subject to income qualifications.
• Casualty Losses: Deductions for casualty losses are still only allowed for declared disaster areas, but the definition will expand in 2026 to include certain state-declared disasters along with federal designations.
• Business Losses: Non-business taxpayers can continue to deduct a portion of their business losses ($626,000 for couples). This provision was scheduled to expire in 2028 but is now permanent.

New Deductions Created by the OBBBA

The OBBBA introduces three new deductions for 2025 through 2028, each with specific eligibility requirements and income limits. While each of the deductions can be used by taxpayers who use the standard deduction or itemize, they are not considered adjustments and do not lower the adjusted gross income.

• Tip Income: Taxpayers in traditionally tipped occupations can deduct up to $25,000 in qualified tip income. These “traditionally tipped occupations” will be defined by the IRS within the next 90 days. Deductible tip income must be reported on a form provided by the employer or contractor and will still be subject to employment taxes.
• Overtime Income: Joint filers can deduct up to $25,000 of qualifying overtime ($12,500 for single filers). The deduction applies only to the additional pay received above the standard rate and must be reported on the employee’s W-2. It will also be subject to employment taxes.
• Auto Loan Interest: Taxpayers can deduct up to $10,000 in interest on a loan used to purchase a qualifying vehicle. Certain rules apply, including: the car must be purchased (not leased) between 2025 and 2028, must be for personal use, and final assembly must have occurred in the United States.

Additionally, the OBBBA introduced a new deduction for seniors to partially address on the President’s campaign promise to make Social Security benefits tax-free. Taxpayers aged 65 or older can deduct up to $6,000, though income phaseout rules apply and the provision is only available now through 2028.

Charitable Giving Changes Created by the OBBBA

The OBBBA introduces several updates to charitable giving rules, offering new opportunities and limitations depending on how taxpayers file:

• For those who claim the standard deduction: Starting in 2026, taxpayers can claim a separate deduction of up to $2,000 ($1,000 for all other filers) for cash gifts, provided they are not made to a private foundation or donor advised fund.
• For those who itemize deductions: The OBBBA has now introduced a floor for charitable contributions. Beginning in 2026, only contributions exceeding 0.5% of adjusted gross income will be deductible.
• Cash gifts to public charities will continue to be deductible up to 60% of AGI instead of falling to 50% as scheduled.
• Beginning in 2027, a new tax credit of up to $1,700 is available for charitable gifts of cash to scholarship-granting organizations that meet specific standards. Any amount claimed as a credit cannot also be claimed as a charitable contribution.

Education Funding Changes Created by the OBBBA

The OBBBA expands education-related tax benefits, offering greater flexibility for planning:

• 529 Plan Accounts: The definition of “qualified expenses” for 529 reimbursement has expanded: non-tuition expenses for elementary, secondary, religious and private school expenses are now allowed, as are expenses for acquiring and maintaining professional credentials. Beginning in 2026, a 529 account can also be used to pay up to $20,000 for elementary or secondary tuition (up from $10,000 currently).
• Employer Educational Assistance: Employers can provide up to $5,250 of educational assistance to employees tax-free. While the inclusion of student loan payments was scheduled to expire after 2025, the bill has made that inclusion permanent. The $5,250 limit will also be adjusted for inflation after 2026.

Family-Related Changes Created by the OBBBA

The OBBBA introduces several updates aimed at supporting families and dependent-related expenses:

• Employer Assistance for Dependent Care: Employers can currently provide dependent care assistance of up to $5,000 to an employee tax-free. In 2026, that amount will increase to $7,500.
• Child and Dependent Care Expenses: The tax credit for working parents will increase from 35% to 50% of qualifying expenses, with a new phaseout schedule with a floor of 20%.
• Adoption Expenses: The tax credit for expenses was modified to let $5,000 of the maximum $10,000 credit refundable, meaning the portion of the credit is available to those whose tax liability is less than $5,000.

New Investment Savings Vehicle for Children

In addition to the family-related changes noted above, the OBBBA has created a new type of IRA savings account for children under age 18, named “Trump accounts.”

• Beginning in July 2026, accounts can be opened for those under age 18 with a maximum contribution of $5,000 per year (with annual inflation adjustments after 2027). Contributions are not tax-deductible but have no impact on the ability to make contributions to any other type of IRA.
• These accounts may also be funded by select third parties.
  • Employers can contribute up to $2,500 for an eligible employee or their dependent – the contribution will count towards the annual $5,000 limit but is not considered taxable income.
  • The federal government will make an initial $1,000 contribution to accounts for individuals born in 2025 through 2028.
  • General funding contributions can also be made by state, local or tribal governments or charitable organizations, based on eligibility requirements.
• Before the child turns 18, there are limitations to what the account can be invested in. Distributions are also generally not allowed.
• After the child turns 18, the account is treated like a Traditional IRA.