Jason Salmon, CFP®, Wealth Planner
jsalmon@haverfordquality.com

Unpacking the One Big Beautiful Bill Act

After months of negotiations, the One Big Beautiful Bill Act (OBBBA) was officially passed and signed into law on July 4, 2025. At over 900 pages, it is the most comprehensive tax and spending bill since the Tax Cuts and Jobs Act of 2017 (TCJA).  

OBBBA makes permanent many of the provisions originally enacted under the TCJA. The legislation also includes new provisions that should prompt individuals, families, and small business owners to reassess their financial strategies. 

There’s been no shortage of commentary about OBBBA’s long-term economic implications. In this article, we highlight planning considerations most relevant to our clients so you can move forward with confidence and clarity. 

More of the Same  

Many American households—and their advisors—have been anxious about the impending 2026 sunset of the current tax code, which would have resulted in one of the largest tax hikes in recent memory. 

With income tax brackets remaining largely unchanged under the OBBBA, individuals whose income remains steady can reasonably expect their tax liability to stay consistent. However, it’s important to note that upcoming adjustments to both standard and itemized deductions may affect Taxable Income.

For those looking to deduct qualified medical expenses or mortgage interest, remember that these benefits apply only to taxpayers who itemize. If you fall into this group, be sure to keep thorough records of all eligible medical expenses. Additionally, to qualify for the mortgage interest deduction, the loan must meet IRS criteria, including the $750,000 cap and classification as “acquisition indebtedness.”

Working with a qualified tax advisor can help ensure you’re maximizing deductions and staying compliant with evolving tax rules. 

Changes Effective in 2025 

Several new provisions taking effect this year may offer meaningful tax relief for homeowners in high-tax states such as California, New York, and New Jersey. For those who qualify, itemizing may result in a significantly lower taxable income compared to taking the standard deduction.

Social Security income is still subject to federal tax. However, the newly introduced Age 65+ deduction of $6,000 for individuals (or $12,000 for joint filers over 65) is expected to reduce that burden. In fact, it’s estimated that only about 12% of Social Security recipients will owe taxes on their benefits this year.

Given the increase in both itemized and non-itemized deductions compared to the previous year—and with tax brackets holding steady for 2025—now may be a strategic time to consider Roth conversions. Since conversions increase your taxable income, it’s essential to weigh the benefits carefully. Consult with a qualified tax advisor or wealth planner to evaluate how this strategy fits within your broader retirement and tax planning goals.

Planning Considerations for 2026

Starting with education planning, recent revisions to 529 plan distributions have introduced greater flexibility around qualified expenses. Additionally, some states offer income tax deductions for contributions, and when combined with tax-free growth, 529 account holders can enjoy a powerful trifecta of tax advantages. New “Trump Accounts” may also provide additional savings vehicles for minors; however, it’s important to assess the overall goal—alternative investment strategies may be more appropriate depending on the timeline and purpose of the savings.

The lifetime gift and estate tax exemption has increased to $15 million per individual, shielding many ultra-high-net-worth families from the 40% estate tax at death. This does not diminish the importance of thoughtful estate planning. Avoiding probate, establishing medical directives, and maintaining up-to-date powers of attorney are still foundational steps. Trust planning remains essential. The passage of OBBBA has added long-term certainty for families seeking to protect and pass down generational wealth.

For charitably inclined individuals, 2026 brings both opportunities and added complexity. If you itemize deductions and are in the 37% tax bracket, be aware of the new “2/37 rule,” which effectively limits the benefit of aggregated deductions to the 35% bracket. For those who do not itemize, cash donations to qualified charities remain a viable way to reduce Adjusted Gross Income—just be sure the contributions meet eligibility requirements. Depending on your 2025 income outlook, it may be advantageous to accelerate charitable giving into this year to maximize the tax benefit. Consult a licensed tax advisor to determine the best course of action for your situation. 

While change often brings complexity, it also presents new opportunities. Many individuals and families will benefit from different provisions of the new bill, depending on their unique financial situations. It’s important to make sure your strategy reflects the current circumstances while keeping you on track towards your goals. As always, if you have any questions or would like to discuss further, please reach out to your portfolio manager. 

 

The information provided is not intended to be and should not be construed as legal or tax advice or a legal opinion. Haverford does not provide legal or tax advice. You should contact your legal or tax advisor regarding your specific tax situation prior to taking any action based upon this information.