President Trump recently signed the One Big Beautiful Bill Act, a sweeping tax and spending law that brings significant changes for both short- and long-term tax planning. We’ve reviewed the legislation and are actively assessing how to integrate opportunities and manage risks within our clients’ strategies. Every financial situation is different, requiring a nuanced approach to taxes. The Pathview team incorporates this into every plan. We’ve highlighted some of the bill’s provisions here that may affect you.
Tax Planning: Income Tax and Deductions
With new and higher deductions, taxpayers must strategically plan their itemized deductions, while permanent tax brackets may simplify long-term planning.
- The Tax Cuts and Jobs Act Extended: The tax brackets introduced in 2017 will become permanent. The brackets will remain at 0,10%,12%, 22%, 24%, 32%, 35%, and 37%. The increased standard deduction was also made permanent and includes an increase to the standard deductions, which will now be $15,750 for single filers and $31,500 for joint filers. Personal exemptions remained repealed.
- The State and Local Tax (SALT) Deduction Cap: The deduction, which allows eligible taxpayers to deduct some state and local taxes, will temporarily increase to $40,000 until 2030. This may potentially incentivize itemized deductions. This deduction begins to phase out with income over $500,000, with the floor remaining at $10,000.
- Seniors 65+: Eligible seniors will receive an additional $6,000 standard deduction until 2028. However, this phases out after $75,000 in income. This could impact IRA, Roth, and retirement planning.
- U.S. Auto Loan Interest Deduction: Based on income, this new deduction allows eligible taxpayers to deduct the interest on loans up to $10,000 on U.S.-made vehicles. The deduction is allowed when final assembly occurs in the U.S. and applies through 2028.
- Mortgage Interest Deduction: The deduction, capped at $750,000 on loans taken after 2017, remains in place. Taxpayers who pay mortgage insurance premiums can now receive a deduction again, potentially offering relief for homeowners.
- Overtime and Tips Deduction: Family members working in service or hourly positions may deduct a portion of their tips (up to $25,000) and overtime income (up to $12,500 or $25,000 MFJ). However, income limitations apply to both these deductions.
- Charitable Contribution Deductions: A permanent above the line deduction will be available starting in 2026 for taxpayers who do not itemize. The deduction will allow for up to $1,000 of contributions for single filers and $2,000 for married filing joint filers. In addition to this, if you itemize, there will now be a limitation placed on charitable contributions. Taxpayers who itemize who make charitable contributions will only be able to claim a tax deduction to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI).
- Green Tax Incentives: The electric vehicle credit will expire September 30, 2025. You must take possession of the vehicle by that date to be eligible for the credit. The home energy improvement credit will expire by the end of the year. Therefore, any improvements to the home must be placed in service by December 31, 2025 to receive these credits.
Tax-Efficient Planning for Families: Estate Planning and Education
Various provisions may provide relief to families with dependents, broaden education opportunities, and affect gifting and wealth transfer strategies for those with ultra-high-net-worth.
- The Estate and Gift Tax Exemption: The federal exemption will become permanent and increase to $15 million for single taxpayers and $30 million for married taxpayers filing jointly. This could significantly affect gifting and wealth transfer strategies for ultra-high-net-worth families. Families will still need to plan strategically around state estate taxes.
- Child Tax Credit: The credit has increased to $2,200 per child for qualifying households, phasing out at $200,000 for single filers and $400,000 for married filing jointly.
- 529 Plans: These plans have expanded to include more K–12 and homeschooling expenses, as well as professional credentialing. For example, obtaining a Certified Public Accountant (CPA) license and other certifications is now included.
Tax Planning for Business Owners
Eligible business owners can benefit from a permanent deduction in addition to new domestic research and development tax incentives.
- Qualified Business Income: The 20% qualified business income deduction will become permanent and expand to business owners with incomes of $75,000 over the standard income thresholds. Thus, more taxpayers gain access to the benefit.
- U.S.-Based Research and Development (R&D) Deduction: To encourage domestic innovation and job creation, this deduction allows business owners to deduct 100% of qualified R&D expenses in the year they occur (beginning in 2025). For expenses before that, they can deduct 100% in 2025 as well. Alternatively, they can spread the deduction out over 2025 and 2026, or continue to amortize under the current schedule. This gives them more control over their taxes and cash flow.
- 1099 Reporting Requirements: The reporting threshold for freelancers and contractors will increase from $600 to $2,000 annually.
- Employer-Provided Childcare Credit: The credit will increase to $500,000 for employers, with an additional credit for first-time providers.
- Foreign Workers: Business owners should plan for additional fees for documents and processing associated with hiring or sponsoring foreign workers.
Pathview Wealth Advisors: Personalized Tax Planning in San Diego and Beyond
We understand taxes can be complex, especially if you own a business or multiple properties, or are preparing to transfer your wealth, among other situations. Because taxes affect many aspects of our financial lives, we’ve made tax strategy an integral part of our planning. Our goal is to remove the guesswork so you can make more informed, confident decisions. Rest assured, our team of fee-only advisors is staying on top of evolving laws and their potential impacts. We will continue to share updates as they occur.
If you have questions about how these changes may affect your plan, we’re here to help guide you through them. Contact us today.
The One Big Beautiful Bill Act is a 2025 tax law that permanently extends many provisions from the 2017 Tax Cuts and Jobs Act while introducing new deductions, credits, and phaseout rules. It impacts income tax brackets, deductions, retirement planning, business taxes, and education strategies starting in tax year 2025 and beyond.
Yes. The current federal income tax brackets (10% through 37%) are now permanent, removing the scheduled expiration after 2025 and simplifying long-term tax planning decisions.
The state and local tax (SALT) deduction cap increased from $10,000 to up to $40,000 through 2029, with phaseouts for higher-income taxpayers. This change may make itemizing deductions more beneficial for many households.
It depends on your income and expenses. The higher standard deduction remains permanent, but the increased SALT cap and other deductions may push some taxpayers back toward itemizing. A personalized analysis is essential.
Yes. Eligible taxpayers age 65+ may claim an additional $6,000 deduction, subject to income phaseouts starting around $75,000 for single filers. This provision is temporary and runs through 2028.
Yes. Eligible workers can deduct up to $12,500 of overtime income (or $25,000 for joint filers) and up to $25,000 in qualifying tips, subject to income limits. These deductions apply from 2025 through 2028.
Yes, in certain cases. Interest on qualifying vehicle loans with U.S. final assembly may be deductible, up to specified limits, depending on income eligibility.
Yes. Non-itemizers will gain an above-the-line charitable deduction (starting in 2026), while itemizers may face new limitations that require contributions to exceed a percentage of adjusted gross income before claiming a deduction.
Many clean energy incentives are being phased out. Electric vehicle credits expire in 2025, and home energy credits end by late 2025, creating a limited planning window.
The federal estate and gift tax exemption increases to $15 million per individual ($30 million for married couples) and becomes permanent under current law. This change creates significant long-term wealth transfer opportunities.
Yes. The child tax credit increases to $2,200 per qualifying child and adjusts for inflation, though income phaseouts still apply.
529 plans now cover a broader range of expenses, including vocational programs, licensing, and professional certifications such as CPA exams, making them more flexible for education and career planning.
Business owners benefit from:
– A permanent 20% Qualified Business Income (QBI) deduction
– Immediate expensing of domestic R&D costs
– Expanded depreciation incentives
These provisions help improve cash flow and long-term tax efficiency.
Yes. Reporting thresholds for certain contractor payments increased, which may reduce administrative burden for small businesses and freelancers.
Most provisions apply starting in tax year 2025 (filed in 2026), while some begin or phase in during 2026 and beyond.
You should review your income, deductions, and long-term financial goals. The new law introduces more planning opportunities but also adds complexity, making proactive tax planning more important than ever.
A financial advisor can analyze how the new tax rules apply to your specific situation, optimize deductions, coordinate with your CPA, and build a long-term tax-efficient plan aligned with your goals.