By Akemi Kondo Dalvi, CPA/PFS, CFP
On Friday, July 4, President Trump signed a large new tax provision called the “One Big Beautiful Bill” Act (also known as H.R. 1). The bill narrowly passed with a 218-214 vote in the House and a 51-50 vote in the Senate, with the tie-breaking vote cast by Vice President JD Vance.
Broadly speaking, the One Big Beautiful Bill Act (OBBBA) extends many of the provisions that were set to expire from Trump’s Tax Cuts and Jobs Act (TCJA) of 2017. Additionally, the OBBBA accomplished many of Trump’s campaign promises such as eliminating income tax on certain tips and overtime pay, increasing immigration and border funding, and increasing the State and Local Tax (SALT) deduction. Here are a few highlights from the new bill.
Extended Existing Provisions
Tax Brackets: The existing brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) stay in place with a slight adjustment to the income levels for the 22% bracket. These TCJA tax brackets were set to expire at the end of 2025, which would have increased tax rates for most Americans.
Standard Deduction: Remains at higher TCJA levels with inflation adjustments at all levels. (Married Filing Jointly up to $31,500).
Itemized Deductions: Limits remain the same and deductions for moving expenses, personal exemptions, and miscellaneous items continue to be repealed.
Updated Provisions
State and Local Tax (SALT) Deduction: Raised from $10,000 to $40,000, with income-based phase-outs starting at $500,000 (for Married Filing Jointly).
Alternative Minimum Tax (AMT): The tax floor on high net worth taxpayers will revert to 2018 levels and seven years of inflation adjustments will be removed, meaning more high-income earners will be subject to AMT starting in 2026.
Green Energy Credits: Some credits remain available through 2025 for clean vehicle and residential energy upgrades, with phased expiration timelines. The bill terminated the following: Clean Vehicle Credit, Previously Owned Clean Vehicle Credit, Commercial Clean Vehicle Credit, Alternative Fuel Refueling Property Credit, Residential Clean Energy Credit, Energy Efficient Home Improvement Credit, and New Energy Efficient Home Credit.
New Provisions
Senior Deduction: For 2025-2028, an extra $6,000 deduction per qualifying individual age 65+ (phased out at higher incomes).
“No Tax on Tips” Deduction: For 2025-2028, up to $25,000 of qualified tips can be deducted, with income-based phase-outs ($300,000 for Married Filing Jointly), available for W-2 and independent contractors who claim the standard deduction or itemize deductions.
Overtime Deduction: From 2025-2028, a $25,000 deduction (Married Filing Jointly) for overtime income, with phase-out at $300,000 (Married Filing Jointly) for W-2 or independent contractors, available to non-itemizing taxpayers.
Car Loan Interest: Deduction up to $10,000 on new U.S.-assembled car loans (not leases), with qualifying limitations and income thresholds.
Charitable Deduction for Non-Itemizers: Up to $2,000 for married couples giving cash, beginning in 2026. Additionally, in order to deduct charitable contributions, gifts must exceed 0.5% of AGI starting in 2026.
“Trump Accounts”: A new tax-free savings account for minors in the form of an IRA (not Roth IRAs), with strict contribution and investment limits. Initial $1,000 seed for children born 2025–2028. Contributions capped at $5,000 a year, and adjusted for inflation after 2027.
Other Notable Items
Medicaid Eligibility – Not to be confused with Medicare, Medicaid is the joint federal and state program in the U.S. that provides health insurance to low-income individuals. Starting in 2027, Medicaid enrollees will have to regularly file paperwork proving that they are working, volunteering, or attending school at least 80 hours a month, or that they qualify for an exemption, such as caring for a young child.
Immigration Spending – Allocates approximately $170 billion to immigration enforcement and border security. The bill apportions ~$45 billion for immigration detention centers; ~ $30 billion to ICE for hiring, transportation costs, and facilities maintenance; and ~$47 billion for border wall construction.
Estate Tax Exemption: Increased to $15 million per person in 2026, with portability and inflation adjustments. The current lifetime gift tax exemption is $13.99 million per person under the 2017 TCJA and was set to expire, or revert to approximately $6 million in 2026.
Social Security Taxation: SSI benefits remain taxable up to 85%. No exclusion or credit was enacted, per campaign promises.
Federal Deficit – Nonpartisan Congressional Budget Office (CBO) estimates the OBBA will increase federal spending by ~$90 billion, decrease revenues by ~$20 billion, and therefore increase the deficit by about ~$110 billion.
The One Big Beautiful Bill Act brought many changes, some temporary and some permanent. If you have questions about how these changes might affect your financial journey, consult your Certified Financial Planner or CPA Personal Financial Specialist for personalized financial advice. Whether you are exploring charitable gifting strategies, preparing for retirement, or navigating new deduction rules, we’re here to help you make sense of it all.
The opinions expressed above are solely those of Kondo Wealth Advisors, Inc. (626-449-7783, info@kondowealthadvisors.com), a Registered Investment Advisor in the state of California. Neither Kondo Wealth Advisors, Inc. nor its representatives provide legal, tax or accounting advice.