The One Big Beautiful Bill Act (OBBBA) of 2025 passed with a significant impact on individuals and families. It permanently raises the estate tax exemption, locks the TCJA income tax brackets in place, broadens the permissible uses of 529 plans, overhauls federal student loan programs, and reshapes charitable giving deductions. The summary below highlights ten key provisions and planning opportunities—along with several important rules that remain unchanged.
1. Estate Tax Exemption Locked at $15 Million per Person
OBBBA raises the lifetime estate and gift tax exemption to $15 million per individual and $30 million for married couples permanently starting in 2025, indexed annually for inflation.
This change removes the end-of-2025 “use it or lose it” urgency for large gifts, since the higher exemption will continue beyond 2025. Keep in mind that a future Congress could always legislate a lower exemption, so retaining flexibility in your estate plan remains prudent.
2. Income Tax Brackets Under TCJA Made Permanent
The legislation permanently extends the TCJA’s seven-bracket rate structure of 10%, 12%, 22%, 24%, 32%, 35%, 37% for ordinary income. It also adds an extra year of inflation adjustment to the three lowest brackets of 10%, 12%, and 22%. This avoids the scheduled reversion to the pre-TCJA top rate of 39.6% in 2026.
Nonetheless, always stay alert to future tax changes, as “permanent” simply means no set expiration – rates could still change with new legislation.
3. SALT Deduction Cap Raised to $40,000 (with Income Phaseouts)
The State and Local Tax deduction cap increases from $10,000 to $40,000 per tax return starting in 2025. This higher cap will be adjusted up slightly (by 1% a year) through 2029, then ‘snap back’ to $10,000 in 2030.
For higher-income households (those earning over ~$500,000 AGI), the available SALT cap begins to phase down (but not below $10,000)
4. Standard Deduction Temporarily Increased
Starting in 2025, the standard deduction is raised to $15,750 for single filers (from $15,000) and $31,500 for joint filers (from $30,000). These amounts will continue to be indexed for inflation each year after 2025.
In addition, from 2025 to 2028, taxpayers age 65 or older will receive an extra $6,000 temporary standard deduction per person, which is phased out for high-income seniors (MAGI above $75,000 single or $150,000 joint). The extra $6,000 is treated as a personal deduction and is available whether the senior itemizes or not.
If you or your spouse will be 65+ in 2025-2028, the extra deduction can offset more income – potentially suggesting strategies like converting IRA funds to Roth (up to the amount of the extra deduction) with minimal tax.
5. 529 Plans: Expanded K–12 and Career Education Uses
529 education savings plans are made more flexible under OBBBA. Funds can now be used not only for college expenses but also for a wide range of K–12 and special education costs and certain job-training expenses. Qualifying uses have been expanded to include homeschooling expenses (e.g. curriculum materials, educational software), tutoring services, standardized test prep fees, and educational therapy for students with disabilities.
Additionally, the annual limit on K–12 tuition that can be paid from a 529 is doubled to $20,000 per year (previously $10,000). OBBBA also allows 529 money to cover costs of postsecondary credentialing and career programs – for example, trade school or certificate program tuition, licensing exam fees, and registered apprenticeship programs approved by the Department of Labor.
Families now have much more flexibility in how they can deploy 529 savings. If you’re saving for a child’s education, you could use a 529 to pay for private K–12 schooling or even tutoring and homeschool costs tax-free, whereas before only K–12 tuition (and only up to $10k) was allowed. This means you might consider funding a 529 earlier and more aggressively if you anticipate significant K–12 or special education expenses – allowing those funds to grow tax-free before being used for those purposes. Similarly, if your child may pursue vocational training instead of college, a 529 is now still useful since it covers trade schools, career training, and apprenticeships.
6. Auto Loan Interest Deductible (Up to $10,000)
To encourage domestic auto sales, OBBBA creates a temporary above-the-line deduction for interest on new vehicle loans (personal autos). Taxpayers may deduct up to $10,000 of interest paid on loans for new cars assembled in the U.S tax years 2025 to 2028. The auto loan interest deduction begins phasing out for taxpayers with MAGI over $100,000 (single) or $200,000 (joint).
Note that only the interest portion of car payments are deductible. For many buyers, interest over a typical 4–5 year loan might not hit the $10k cap, but you’ll be able to write off what you do pay. If you’re considering financing a new car, doing so during 2025–2028 could yield some tax savings
7. Student Loan Changes
OBBBA brings significant reforms to federal student loan programs, affecting both repayment options and borrowing limits for future students:
Massive Simplification of Repayment Options
- Starting for new borrowers after July 1, 2026, the array of existing income-driven repayment plans will be consolidated into just two plans
- Standard plan: the traditional fixed-payment plan, with loan terms of 10 to 25 years depending on the loan balance
- Repayment Assistance Plan (RAP): a new income-driven repayment program with stricter terms. RAP requires a higher minimum percentage of income as payment and can extend repayment up to 30 years for those with larger balances
- All current income-driven plans (e.g. SAVE, PAYE, REPAYE, IBR, etc.) will be phased out by 2028, and borrowers still on those plans will be transitioned into RAP at that time
Student Loan Borrowing Caps
OBBBA imposes new, much lower limits on federal student loans for graduate and professional students (for those enrolling after July 1, 2026)
- Graduate: annual borrowing capped at $20,500, with a lifetime aggregate cap of $100,000 for graduate unsubsidized loans. (This roughly aligns with the current Stafford loan limit of $20,500/year for grad school, but now there is a hard aggregate limit, whereas previously grad students could borrow more via Graduate PLUS loans.)
- Professional Degrees (e.g., law/medical): annual borrowing capped at $50,000, with a lifetime aggregate cap of $200,000 for professional school federal loans
- Overall Lifetime Cap: Including undergraduate loans, the total federal loan limit for any student will be around $257,000 (combining the typical undergraduate max ~$57k with the $200k professional cap for someone who goes to college and then professional school).
- PLUS Loans Eliminated:
- The undergraduate PLUS loan: Starting July 1, 2026, parents may borrow no more than $20,000 per year per undergraduate child, up to a lifetime maximum of $65,000 per student. This represents an end to the prior unlimited-cost Parent PLUS model and is consistent with the intention of “ending” the old Parent PLUS as an open-ended financing tool.
- The graduate PLUS loan: ends for new borrowing as of July 1, 2026. From that date on, graduate and professional students’ parents cannot take PLUS loans beyond the Stafford/unsubsidized limits
These caps mean federal loans may no longer cover the full cost of pricey programs (for example, medical school tuition often exceeds $200k). Families with aspiring grad/professional students should plan ahead: increased savings (529 plans, etc.), scholarships, employer tuition assistance, or private loans might be needed to fill gaps. While borrowing less could reduce future debt burdens, it also puts more onus on up-front planning for education costs.
8. 1% Remittance Tax on Outbound Money Transfers
Starting January 1, 2026, a new 1% tax will apply to certain money transfers from the U.S. to other countries. This is an excise tax on outbound transfers (often called remittances).
What Transfers Are Taxed
- The 1% tax applies in when someone in the U.S. sends money abroad using cash, money orders, cashier’s checks, or similar non-bank methods. In practice, this targets cash remittances sent through wire transfer services or couriers. (i.e. western unions)
- Not all transfers are affected. If you send moneythrough a bank account or with a U.S issued credit/debit card, you will not pay this tax.
Who Is Affected
- This tax is based on how the money is sent, not on who you are. It applies to everyone sending money out of the U.S. via the taxed methods – regardless of citizenship or immigration status. Being a U.S. citizen doesn’t automatically exempt you from the tax if you use a covered method, and non-citizens are equally subject to it.
How to Avoid the Tax:
You can avoid this 1% fee by sticking to traditional banking or card payment channels when sending money abroad. In other words, send funds directly from your bank or use your U.S. debit/credit card for international transfers. By using these methods, you won’t incur the new remittance tax. The law is essentially encouraging people to use formal banking systems instead of cash-based transfers, so planning your transfers through banks or card services will help you bypass the 1% tax entirely.
9. Child Tax Credit and Newborns
Higher Credit for Children
- The Child Tax Credit (CTC) gets a modest increase. For tax years 2025–2028, the CTC is raised from $2,000 to $2,200 per qualifying child
- OBBBA also maintains the higher income phase-out thresholds that were set by the TCJA – meaning the credit continues to begin phasing out at $200,000 of income for single filers and $400,000 for joint filers (thresholds that are much higher than pre-TCJA levels)
Newborn “Trump Accounts” (Child Savings Accounts)
- Automatic $1,000 Seed Investment: for children born after Dec 31, 2024 and before Jan 1, 2029, OBBBA creates tax-deferred “Trump Accounts” seeded with $1,000 by the federal government.
- $5,000 Annual Contributions: starting 2027, family and friends may contribute up to $5,000 per year per child into these accounts, which can be used for investment and future expenses.
- Tax-Deferred Growth: these accounts work much like a retirement or education account: the money grows tax-free until withdrawn. Earnings are either taxed as capital gains (for qualified withdrawals) or ordinary income (for non-qualified use)
- Qualified: higher education, first-time home purchase, small business or farm startup
- Importantly, funds generally cannot be accessed until age 18, and the account must be used by roughly age 30 (encouraging the money to jump-start early adult goals).
10. Charitable Deductions
OBBBA reshapes charitable giving incentives in two ways:
- Non-itemizers get a charitable deduction: Starting in 2026, taxpayers who take the standard deduction can also deduct some charitable donations – up to $1,000 for single filers or $2,000 for joint filers each year. This “universal charitable deduction” is permanent and effectively gives all taxpayers at least a small tax benefit for giving, even if they don’t itemize.
- Itemizers face a 0.5% AGI floor on deductions: if you do itemize, you must give above a threshold to get a deduction. Only charitable contributions exceeding 0.5% of your AGI are deductible. For example, with $2,000,000 AGI, the first $10,000 of donations (0.5%) yields no tax write-off; only giving beyond that $10k would be deductible. Amounts below the threshold can be carried forward 5 years to potentially use later.
High-income donors should consider “bunching” gifts into certain years so that they exceed the 0.5% floor and maximize deductions. Tools like donor-advised funds can help you aggregate donations in one year (getting over the hurdle) and then grant to charities over time.
Individual-Tax Rules OBBBA Left Exactly as They Were
It’s worth noting several tax provisions did not change under OBBBA, despite being previously debated. The law leaves these individual tax rules exactly as they were, which in itself provides planning certainty that prior law continues to apply.
1. Long-Term Capital Gains and Qualified Dividend Brackets Remain at 0%, 15%, and 20%.
2. Carried-Interest Treatment is Unchanged.
Despite political attention, the taxation of carried interest for investment fund managers is unchanged. Profits interests in private equity or venture capital funds can still qualify for long-term capital gains tax rates, provided the three-year holding period is met.
3. Top Ordinary-Income Rate Remains 37% (No “Millionaire’s Surtax”).
As noted, the top rate stays at 37%, and OBBBA did not add any additional surtax on ultra-high incomes. Some prior proposals had floated a surtax on incomes above $1–5 million, but it did not make it into the law.
4. Step-Up in Basis at Death is Preserved.
OBBBA left the stepped-up basis rule intact. Appreciated assets passed to heirs at death will still receive a step-up in cost basis to fair market value, allowing those gains to escape income tax for past appreciation. There was no move to tax unrealized gains at death or repeal step-up (ideas previously considered in other proposals).
“Hold until death” remains a viable tax strategy for appreciated assets. Estate planners can continue to utilize techniques like grantor trusts with swap powers and gifting of low-basis assets to have them included in the estate for a basis step-up, since the fundamental step-up benefit is unchanged.
5. 3.8% Net Investment Income Tax and 0.9% Medicare Surtax Survive Intact.
These Affordable Care Act taxes on high earners were untouched by OBBBA. The 3.8% NIIT still applies to investment income for singles with MAGI over $200k ($250k joint), and the 0.9% Medicare wage surtax still applies on earned income above those thresholds.
High-income individuals should remember these taxes effectively make the top rate on investment income 23.8% and on wages 37.9%, and plan for estimated taxes accordingly.
6. Retirement-Account Architecture is Untouched.
OBBBA made no direct changes to retirement savings vehicles. Contribution limits for 401(k)s, IRAs, etc., were not cut (they’ll continue to rise only with inflation as scheduled).
Tactics like the back-door Roth (making a non-deductible IRA contribution and converting to Roth) and mega back-door Roth (after-tax 401k contributions rolled to Roth) remain untouched.
The age for Required Minimum Distributions (RMDs) (recently raised to 73 by Secure Act 2.0) was not changed further. The post-death 10-year rule for inherited IRAs remains as is (no new changes to “stretch” provisions).
In short, all the retirement account strategies and rules you’ve been using carry on under OBBBA
7. Section 899
The House version of OBBBA would have created new Section 899, layering a 5-percentage-point annual surcharge (capped at +20 p.p.) on the normal dividend, interest, and branch-profits withholding rates paid to residents of a “discriminatory foreign country.
However, the Section 899 was stripped out during Senate negotiations, no new dividend or withholding surcharge made it into the enacted OBBBA. Foreign investors owning U.S. stocks remain subject to the familiar 30 % statutory rate (or lower treaty rates), with no additional layer.
DISCLOSURES
The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of Leo Wealth. Neither Leo Wealth nor the author makes any warranty or representation as to this information’s accuracy, completeness, or reliability. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Leo Wealth be liable to you or anyone else for damage stemming from the use or misuse of this information. Neither Leo Wealth nor the author offers legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.
This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.
A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at least one 529 plan. Before buying a 529 plan, you should inquire about the particular plan and its fees and expenses. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or application fee savings are available depends on your state of residence. For tax advice, consult your tax professional. Non-qualifying distribution earnings prior to 2024 are taxable and subject to a 10% tax penalty. Beginning in 2024, unused 529 plan funds may be rolled into a Roth IRA assuming the following conditions are met: 1) must have owned the 529 plan for 15 years, 2) can only convert funds that have been in the 529 plan for at least 5 years, 3) rollover amount cannot exceed $35,000 and 4) rollovers must be made to a beneficiaries Roth IRA.
Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
