Congress recently passed sweeping tax provisions as part of the 2025 budget reconciliation bill —the One Big Beautiful Bill Act (OBBBA)—that extends many Tax Cuts and Jobs Act of 2017 (TCJA) provisions and introduces new rules that may affect your tax planning, giving strategies, and long-term goals.
While not every provision will apply to every household, several updates may be especially relevant for Sage clients to consider with their 2025 tax planning and beyond.
Key Takeaways for Individuals & Families
- Lower tax rates made permanent
The current seven-bracket system—with a top rate of 37%—is now permanent, avoiding the automatic rate increases that were set to begin in 2026. - Standard deduction expanded
Beginning in 2025, the standard deduction increases to $15,750 (single) and $31,500 (joint), with ongoing inflation adjustments. Seniors will receive an additional $6,000 deduction from 2025 through 2028, subject to phase-out ranges beginning at $75,000 in adjusted gross income (AGI) for single filers and $150,000 for joint filers. - Temporary SALT deduction relief
The cap on state and local tax (SALT) deductions rises to $40,000 from 2025 through 2029, from $10,000. However, this benefit begins to phase out for households with Adjusted Gross Income (AGI) above $500,000, and fully phases out at $600,000. In 2030, the SALT deduction limit returns to $10,000. - Mortgage interest deduction
The ability to deduct mortgage interest on up to $750,000 ($375,000 filing separately) in mortgage debt will be made permanent.
- Charitable deduction limits for high earners
Beginning in 2026, there is now a new 0.5% AGI floor (itemizers will only be able to deduct contributions exceeding 0.5% of AGI). Taxpayers in the highest 37% tax bracket will be limited to a deduction of 35% of the contribution. Non–itemizers will be able to deduct up to $1,000 ($2,000 if filing jointly) in cash donations. Finally, there is now a federal credit up to $1,700 for qualified cash contributions made by the taxpayer to a scholarship-granting organization. - Child tax credit and newborn savings accounts
The doubling of the child tax credit from TCJA is made permanent and increases modestly to $2,200 per child. For children under age 18, Trump accounts, a new individual retirement account type, allow parents, family members, and employers to contribute up to $5,000 annually, indexed for inflation after 2027. Additionally, each child born between 2025 and 2028 will receive $1,000 seed money in a Trump Account. Various investment and other conditions apply to Trump accounts.
Updates for Business Owners & Investors
- Estate tax exemption expanded
The lifetime gift and estate tax exemption rises to $15 million per individual ($30 million per couple), indexed for inflation, and is no longer set to sunset. - Enhanced 20% pass-through deduction
Makes permanent the 20% QBI deduction, increases phase-out ranges to $75,000 ($150,000 for joint filers) for specified service trades or businesses (think law, healthcare, consulting, accounting, etc). The bill also adds a minimum deduction of $400 for taxpayers with at least $1,000 of QBI from an active trade or business, adjusted for inflation. - 100% bonus depreciation returns
Businesses can again fully expense the cost of machinery, equipment, and eligible real estate up front. U.S.-based factory construction also qualifies. - Increased small business stock exclusion
Investors may now exclude up to $15 million in gains from qualifying small business stock, with partial exclusions available for shares held for as little as three years. - Qualified Opportunity Zone (QOZ) Investments
The bill makes permanent QOZ investments, with ten-year rolling designations for eligible tracts starting on January 1, 2027. For investments made after December 2026, there is a new rolling five-year deferral period, offering a maximum 10% step-up in basis for invested capital gains. For rural QOZ projects, there is a maximum 30% basis step-up available for invested capital gains.
Additional Provisions to Note
- Expanded 529 plan uses
Tax-free withdrawals from 529 plans may now be used for a wider range of educational expenses, including tutoring and professional certification programs. - EV and energy home improvement tax credits ending
The $7,500 federal electric vehicle credit will expire after September 30, 2025. The residential clean energy credit and energy efficient home improvement credits will expire after December 31, 2025. This could impact the timing of certain vehicle purchases and home improvements. - College endowment tax revised
Institutions with fewer than 3,000 students are now exempt from the endowment tax. Larger institutions may face higher tax rates—up to 8% on net investment income—based on per-student endowment size. - Affordable Care Act (ACA) and health insurance marketplace subsidies
The bill does not extend enhanced subsidies, which were set to expire at the end of 2025, for the Marketplace ® exchange or its state-run counterparts. Additionally, repayment limits on premium tax credits tied to subsidy amounts were eliminated under this bill, so it is expected that the after-tax cost for health insurance premiums on these exchanges will increase.
What This Means for You
For many Sage clients, the new legislation may present both opportunities and tradeoffs. While the permanent extension of lower tax rates, a higher standard deduction, and an expanded estate exemption offer meaningful planning advantages, other changes—such as limitations on charitable deductions and a phased-out SALT benefit—may reduce overall tax efficiency, particularly for high-income households and retirees.
If you have questions about how this new legislation may affect your unique situation, please reach out to your Sage advisor. As always, we are here to help.
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Disclosures
Sage Financial Group is neither a law firm nor a certified public accounting firm, and no portion of this communication should be construed as legal or accounting advice. This communication is provided for informational purposes only and does not constitute legal, tax, or financial advice. Clients are urged to consult with qualified legal and tax professionals regarding their specific situations before taking any action based on the information provided. Tax laws are complex, change frequently, and depend heavily on individual circumstances. A copy of Sage Financial Group’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
