Below is an overview of the primary (non-exhaustive) changes that will take effect in the coming tax cycle – 2025 tax year. As always, please feel free to reach out for clarification or to discuss your own situation.

Loss of Clean Energy Credits

Of note to many of our clients, the bill had the unfortunate impact of accelerating the sunset of key tax credits enacted during Biden’s term under the Inflation Reduction Act.  See our blog post that highlighted these credits here. If you are considering any of the below improvements, note the new expiration date for the credits (which were originally set to expire as late as 2035):

• $7,500 (max) for new EVs and $4,000 for used EVs – these credits will now expire September 30, 2025!
• $1,000 (max) for an EV-charging station installed in your home – these now need to be placed in service before June 30, 2026.
• 30% (max) for residential clean energy improvements including solar, geothermal heat pumps, wind or fuel cell equipment – all expenditures must be paid by December 31, 2025;
• $1,200 (max) for Residential Energy Efficiency Improvements including windows and doors, efficient HVAC like heat pumps and insulation – items must be placed in service (not just purchased) by December 31, 2025

Permanent Extension of 2017 Tax Brackets and Standard Deduction

In 2017 (during Trump’s first presidency) another significant piece of tax legislation, the Tax Cuts and Jobs Act (TCJA), was passed that was due to expire at the end of this calendar year. That legislation increased the standard deductions for non-itemizers and lowered the top tax rate for each income bracket with the very highest bracket lowered to 37% down from 39.6%.  A significant piece of the OBBBA legislation makes these TCJA tax cuts “permanent” so that if you earned the same income in 2017 as in 2025 and going forward, your annual tax obligation will be less than it was in 2017 and even lower for the lowest two income brackets.  This is the costliest part of the bill as it impacts all taxpayers. However, it may feel nearly invisible as it merely extends brackets that have been in place for the last 8 tax years. This provision alone is the primary force behind the much higher government deficits that arise from this legislation.

Permanent Extension of Other TCJA Tax Cuts

Other TCJA elements that were made permanent by the OBBBA include the QBI deduction for small businesses (see our discussion here) and the very high estate tax exemption, increased now to  $15 million per individual (beginning in 2026 – up from $13.9 million currently), making all but the very very wealthy not subject to Federal estate taxes (state laws vary widely). This threshold was set to drop by 50% at the end of 2025 prior to this new legislation.

In addition, the $2K per child (under age 17) tax credit stays in place and will increase to $2,200 in 2025 rather than being reduced to $1,000 as previously scheduled.  This amount will now be indexed to inflation. This credit does begin to phase out for higher earners.

Temporary $6K Deduction for Seniors based on Income (2025-2028 only)

Buckle up for the explanation of this one!

One of President Trump’s campaign promises was to deliver no tax on social security.  That promise, however, would have required much more significant legislation changes than this bill was able to deliver.  As a work around, the OBBBA offers taxpayers who are 65 years or older (regardless of whether you have yet claimed social security), an additional $6,000 deduction per taxpayer IF your MAGI (modified adjusted gross income) is less than $150,000 for married filing jointly (MFJ) or less than $75,000 for single and other filers.

CAVEATS:

• MAGI is higher than Taxable Income – but it’s not shown on your return. Locate your AGI (adjusted gross income) on your tax return (line 11 for the 2024 Form 1040).  For many people MAGI and AGI are equivalent so use AGI as a proxy and reach out to your tax preparer if your AGI is close to the threshold for more guidance.
• The deduction is only in place through 2028 for a total of four tax years
• The deduction is phased out for income levels above the thresholds at the rate of $6 per $100 in earnings until it completely disappears
  • A single person with MAGI of $100,000 would lose $1,500 of the $6,000 and would lose the deduction altogether at a MAGI of $175,000.
  • A married couple filing jointly (with two taxpayers age 65) with MAGI of $200,000 would start from a $12,000 deduction and lose $6,000 total at $200K in MAGI and lose the deduction altogether at a MAGI of $250,000.
• This deduction is available as an add-on to the standard deduction or as an increase to itemized deductions.

Temporary $40K increase to the SALT Deduction based on Income (2025-2029 only)

When the TCJA increased the standard deductions in 2017, this was partially in response to the loss of one of the most valuable deductions for homeowners with high property taxes – the so-called “SALT” (state and local tax) deduction. TCJA limited this deduction to $10,000 per tax return which was far less than the sum of state income tax and property taxes that many wealthier clients paid.

Under OBBBA, there is a temporary increase to the SALT deduction of up to $40,000 (with the exception of married filing separately which is ½ that amount) only through 2029.  In 2030, this deduction is set to revert back to $10,000.

Like the temporary $6K deduction for seniors discussed above, this one is actually even more complicated.  Highlights are below, but discuss with your accountant if your income is above the threshold as there can be some knock-on effects.

• Again, MAGI is the number that matters for applicability;
• Single and MFJ filers are subject to the SAME MAGI amount (marriage penalty) of $500,000 or less to get the full $40,000 deduction
• Between $500,000 and $600,000 the deduction is greatly reduced;
• Once MAGI reaches $600,000, the deduction is fully reduced to $10,000 again

Other Temporary Deductions (2025-2028)

• Deductions of up to $25K for “qualified” tip income and overtime wages (both phase out with MAGI above $150K single and $300K MFJ).
• Deductions of up to $10K of interest paid on auto loans (for cars with final assembly done in the US only). Loans must have originated Jan 1, 2025 or later. The deduction phases out for MAGI above $100K for single filers and $200K for MFJ.

Other items in the bill that we can’t cover here include:

• Moderately higher likelihood of paying the alternative minimum tax based on earnings and types of income;
• Expanded limit (up to $20,000) and use of 529 accounts for K-12 expenses (note, some states have their own limitations) and for certain professional education;
• Expanded (slightly) definition of high-deductible health plan (HDHP) for those contributing to Health Savings Accounts (HSAs);
• “Trump” savings accounts for kids including a $1,000 contribution from the Federal Government. (This one is particularly complex to evaluate vis-à-vis a 529 for education savings – seek out a complete explanation of this benefit from a reliable source)
• Extension of qualified opportunity zones providing investment incentives to invest in designated low-income areas;
• A new permanent deduction for non-itemizers who make cash charitable contributions directly to a 501(c)3 organization – this does not begin, however, until 2026 and will be capped at $2,000 for MFJ.

There is a lot to digest and most of it is only explained at a high level here.  For more detailed guidance on those elements that will impact your personal return, contact your tax advisor or feel free to reach out to your Envest advisor and we can connect you to more detailed explanations.