Key Tax Changes in the One Big Beautiful Bill Act

The “One Big Beautiful Bill Act” is making headlines for numerous reasons, including solidifying provisions from the 2017 Tax Cuts and Jobs Act, and notably increasing the SALT deductions that were dramatically reduced in 2017. Here are some of the most impactful provisions from this sweeping legislation:

A New Era for Tax Rates and Deductions

The Act makes the lower tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) and brackets from the last major overhaul permanent, so families and business owners can plan ahead with confidence. For those in the 10%, 12%, and 22% brackets, there is an extra year of inflation adjustment, meaning your brackets will rise a bit faster to keep up with the cost of living.

Standard Deduction: Bigger and Here to Stay

• The standard deduction gets a permanent boost, starting in 2025:
  • $31,500 for joint filers
  • $23,625 for heads of household
  • $15,750 for all others
• These amounts will be indexed for inflation.

Personal Exemption: Gone for Good

The personal exemption, or the ability to deduct income based on the number of dependents in your household, which had been suspended under the 2017 Tax Cuts and Jobs Act, is now permanently eliminated. The elimination of the personal exemption is balanced by several provisions aimed at providing tax relief and benefits to different groups of taxpayers. They include an increased standard deduction, enhanced child tax credits, deductions for seniors, and more.

Senior Deduction

• From 2025 through 2028, seniors (those 65 and older by the end of the calendar year) can claim an extra $6,000 deduction—whether they itemize or not.
• The full deduction is available to individuals with modified adjusted gross income (MAGI) up to $75,000 for single filers and $150,000 for joint filers
• The deduction begins to phase out at a rate of 6% for every dollar above those income thresholds.
• The deduction is fully phased out at MAGI of $175,000 for single filers and $250,000 for joint filers

Homeowners and SALT: What’s Changing

Mortgage Interest Deduction – Effective in tax years beginning after 2025

• The $750,000 principal limit for deducting mortgage interest is now permanent.

SALT Deduction Cap Update - Commencing in tax year 2025

• The cap on state and local tax deductions jumps to $40,000 in 2025, then grows by 1% each year through 2029.
• There is a phaseout for incomes above $500,000.
• After 2029, the cap returns to $10,000.
• No changes were made to the Pass-Through Entity Tax (PTET) deductions, despite much debate.

Charitable Contributions – Effective in tax years beginning after 2025

• There’s now a 0.5% floor on itemized charitable deductions.
  • For example, if a taxpayer has $250,000 of adjusted gross income (AGI), the 0.5% floor would be $1,250, meaning the first $1,250 of charitable donations would not be deductible for an itemizing taxpayer. The floor does not apply to the above-the-line deduction for non-itemizers.
• Permanently provides an above-the-line charitable deduction for non-itemizers: $1,000 for singles, $2,000 for joint filers.

Estate and Gift Tax: Bigger Exemptions

• The estate and lifetime gift tax exemption rises permanently to $15 million for single filers and $30 million for joint filers, starting in 2026
• The exemption is indexed for inflation.

In Summary:

The One Big Beautiful Bill Act introduces lasting changes to tax rates, deductions, and credits, creating new opportunities for individuals, families, and seniors. At Alesco Advisors, we help clients make sense of these changes through adaptive financial planning and culminating with the implementation of durable investment portfolios aligned with their long-term goals.

In today’s increasingly complex investing landscape, maintaining broad global diversification remains one of the most effective ways to manage risk tied to any single country’s policy decisions. We invite you to learn more about Alesco’s investment philosophy and the comprehensive planning framework we offer to help you navigate an ever-evolving financial world with clarity and confidence. For specific tax filing or compliance matters, we recommend consulting a qualified tax professional

The content in this blog is provided for informational purposes only and should not be construed as personalized investment advice.