The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, is the biggest tax law since the 2017 Tax Cuts and Jobs Act. The IRS now refers to it as the Working Families Tax Cuts, so you’ll see both names.
For new planners, it’s a chance to add value fast. Many clients have heard about “no tax on tips” or the senior deduction, but few know whether they qualify. Here are the 10 changes to know, with 2026 figures.
The 10 changes at a glance
| # | Provision | 2026 rule | Years |
|---|---|---|---|
| 1 | Tax brackets | 10% to 37% brackets made permanent | Permanent |
| 2 | Standard deduction | $32,200 MFJ, $16,100 single, $24,150 HOH | Permanent, indexed |
| 3 | Senior deduction | Extra $6,000 per person 65+; phases out above $75,000 MAGI single / $150,000 joint | 2025–2028 |
| 4 | No tax on tips | Deduct up to $25,000 of qualified tips; phases out above $150,000 / $300,000 MAGI | 2025–2028 |
| 5 | No tax on overtime | Deduct the premium portion of overtime, up to $12,500 single / $25,000 joint | 2025–2028 |
| 6 | Car loan interest | Deduct up to $10,000 on new loans for U.S.-assembled personal vehicles; phases out above $100,000 / $200,000 MAGI | 2025–2028 |
| 7 | SALT cap | $40,400, reduced for MAGI above $505,000 (never below $10,000) | 2025–2029, then back to $10,000 |
| 8 | Charitable giving | $1,000 / $2,000 deduction for non-itemizers’ cash gifts; 0.5% of AGI floor for itemizers | Starting 2026 |
| 9 | Estate and gift exemption | $15 million per person, indexed | Permanent |
| 10 | Trump Accounts | New child savings accounts; $1,000 federal seed for children born 2025–2028 | Contributions began July 4, 2026 |
The Child Tax Credit also rose to $2,200 per child for 2026.
Client conversations these changes create
Retirees: the senior deduction. A married couple, both 65 or older, can deduct an extra $12,000 on top of the standard deduction and the existing additional deduction for age. It’s available whether or not they itemize. Watch the phaseout: Roth conversions or large IRA withdrawals that push MAGI above $150,000 (joint) shrink the deduction. That makes 2025–2028 a window to plan income carefully.
Service workers and hourly employees: tips and overtime. These deductions are claimed on the return; they don’t reduce payroll taxes. Overtime only counts the premium half of time-and-a-half pay. Tips must come from an occupation the IRS lists as customarily tipped, and both deductions require a valid Social Security number.
High-tax states: the SALT cap. The $40,400 cap is a big win for homeowners in high-tax states, but it shrinks by 30% of MAGI above $505,000. By about $606,000 of MAGI, a client is back to the $10,000 floor. That creates a high effective marginal rate in the phase-down range, so timing bonuses, capital gains and deferrals matters.
Charitable clients: bunching is back. The new 0.5% of AGI floor means the first slice of giving yields no deduction for itemizers, and 37% bracket taxpayers get a deduction worth at most 35%. For regular givers, a donor-advised fund that “bunches” several years of gifts into one year often beats giving the same amount annually. Non-itemizers’ new $1,000 / $2,000 deduction applies only to cash gifts to public charities, not donor-advised funds.
New parents: Trump Accounts vs. 529 plans. Trump Accounts take after-tax contributions of up to $5,000 a year and become traditional IRAs at 18. A 529 plan still offers tax-free withdrawals for education, and OBBBA expanded qualified uses to include credential programs and more K–12 costs. For most college-focused families, the 529 remains the first stop; the $1,000 federal seed is worth claiming regardless.
Wealthy families: from estate tax to basis. With a permanent, indexed $15 million exemption ($30 million per couple), far fewer families face estate tax. The planning focus shifts to income tax, especially holding appreciated assets until death to get a step-up in basis rather than gifting them away.
Why this matters for the CFP® exam
Tax Planning is 14% of the CFP® exam, and new law shows up once CFP Board updates the tax year it tests. Learn these rules as you study, but check CFP Board’s exam guidance for the tax year in effect for your exam window.
Stay current with PlannerPrep
PlannerPrep’s study guide is written for 2026–2027 and covers OBBBA changes, including the new SALT cap, charitable floor and expanded qualified small business stock rules. [View membership plans] or [try our free sample questions].
This post is general education, not tax advice. Figures are for tax year 2026 unless noted.
Sources: IRS – Working Families Tax Cuts Provisions for Individuals and Workers · IRS – 4 Million Children Signed Up for Trump Accounts · Fidelity – One Big Beautiful Bill