The Advisor’s 2026 Guide to OBBBA Planning
Navigate the complexities of the One Big Beautiful Bill Act with actionable strategies for clients.
The passage of the One Big Beautiful Bill Act, or OBBBA, in July 2025 introduced both permanent clarity and temporary complexity to the US tax code. As trusted advisors, our role is to move beyond mere compliance and guide clients through the strategic implications of these changes, particularly focusing on the temporary provisions. We need to understand the new deduction caps and income phaseouts and maximize wealth transfer opportunities for our clients. Let’s take a look at these.
Navigating the Temporary OBBBA Provisions (2025-29) With Caps
The most urgent planning items revolve around provisions that are scheduled to expire, especially those that might have an impact in 2025.
Elevated SALT Deduction Cap: Expires 2030
The temporary increase of the state and local tax deduction cap to $40,000 (for married joint and single filers) begins in 2025. Note that this benefit is sharply limited by the taxpayer’s modified adjusted gross income, or MAGI.
| Advisor Action | Client Advice (Focus on Limits) |
|---|---|
| Model Itemization Versus Standard Deduction: Run tax projections for 2025-29 to determine if the higher SALT cap makes itemizing more beneficial than taking the standard deduction. For 2025, the standard deduction is $31,500 for married couples and $15,750 for singles. | Beware the MAGI Phaseout: The $40,000 cap begins to phase out for MAGI over $500,000 (for marrieds and singles), reducing the deduction by 30% of the excess income. The deduction is capped back at the original $10,000 when MAGI reaches $600,000. |
| Review Pass-Through Entity Tax Usage: For clients claiming the state-level pass-through entity tax workaround (which is preserved under OBBBA), the increase in the SALT cap might be less beneficial. | Strategic Income Management (The “SALT Torpedo”): Be cautious with realizing large amounts of income (for example, with Roth conversions or large capital gains) if MAGI is near the $500,000 threshold. |
Maximizing New Targeted Deductions: 2025-28
The new temporary, above-the-line deductions are available to all taxpayers, regardless of whether they itemize, but they are subject to strict caps and income limitations designed to target middle-income workers. Advisors should work to ensure that clients maximize potential tax benefits.
| Deduction | Cap/Limit | MAGI Phaseout | Client Advice (Focus on Limits) |
|---|---|---|---|
| Qualified Overtime Pay | Max deduction of $25,000 married filing jointly and $12,500 single | Begins at $300,000; fully phased out at MAGI of $550,000 married and $275,000 single | Track The Premium Portion: Only the extra “half-time” portion of time-and-a-half pay qualifies for the deduction, not the full overtime hour rate. |
| Qualified Tips Income | Max deduction of $25,000 per tax return (married filing jointly or single) | Begins at $300,000 married and $150,000 single; fully phased out at MAGI of $550,000 married and $400,000 single | Ensure Proper Reporting: The deduction is only available for tips reported to the employer on a Form W-2 or appropriate 1099. |
| Auto Loan Interest | Max deduction of $10,000 | Begins at $200,000 for married and $100,000 for single; fully phased out at a MAGI of $250,000 married and $150,000 single | Verify Vehicle Criteria: Only interest on new, personal-use vehicles with final assembly in the US qualifies. Leases are excluded. |
| Deduction for Seniors (65 and older) | Max deduction of $12,000 married filing jointly ($6,000 per eligible spouse), $6,000 single | Begins at $150,000 married and $75,000 single; fully phased out at MAGI of $250,000 married and $175,000 single | Time Roth Conversions: For seniors near the $150,000 MAGI limit, a large Roth conversion could eliminate this entire deduction, requiring careful modeling. |
Permanent Wealth Transfer Clarity
The OBBBA’s permanent extensions provide a clear runway for long-term strategies in estate planning and business structuring.
The permanence of the significantly increased estate and gift tax exemption ($15 million per individual in 2026, indexed for inflation) offers a rare window of certainty.
| Advisor Action | Client Advice (Focus on Limits) |
|---|---|
| Revisit Gifting Strategies: For high-net-worth clients, move forward with large wealth transfers now, using techniques like Grantor Retained Annuity Trusts or sales to Irrevocable Grantor Trusts to lock in the high exemption. | ‘Use It or Lose It’: The high exemption is permanent, but a future Congress could lower it. Use this gift exemption now (especially for gifts above the pre-OBBBA exemption amounts) to lock in the benefit before any potential future legislative changes. |
| Address Retirement Planning: Use the clarity from the permanent tax rates to refine Roth conversion modeling and retirement withdrawal strategies for maximum tax efficiency over the long haul. | Establish Trump Accounts: Advise parents/grandparents to establish the new tax-advantaged accounts to receive the initial government contribution and begin tax-deferred saving. (Note: Contribution limits apply to these accounts and must be monitored.) |
Conclusion
The OBBBA is a major legislative event that requires advisors to adopt a granular, limit-focused planning approach. Because of the various phaseout limitations of temporary provisions and the long-term clarity in estate planning, individualized planning will be necessary to ensure that each client makes the most of their applicable tax benefits. Due to the complexity, it might be best to work with clients’ CPAs.
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United States