The OBBBA Planning Window:
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What Is the OBBBA?

The One Big Beautiful Bill Act was signed into law on July 4, 2025. It resolved the two biggest uncertainties that had been paralyzing financial planning for years:

1. Will the TCJA tax rates expire? → No. They're permanent.
2. Will the estate tax exemption sunset? → No. It's $15 million per person. Permanent.

But those were just the headlines. Underneath, the bill created entirely new deductions, raised existing ones, and set time-limited windows that make the next 2 to 3 years a critical planning period.

Tax Planning: The 15 Changes That Matter Most

1. TCJA Tax Rates: Permanent

The seven individual income tax brackets (10% through 37%) that were scheduled to expire December 31, 2025 are now permanent. This eliminates the entire category of "sunset planning" that dominated financial planning for the last 8 years.

What it means for you: Roth conversion math is now more predictable. You can plan multi-year strategies without guessing what rates will be in 2027 or 2028.

2. Standard Deduction: Permanent

The higher standard deduction is permanent and adjusted for inflation each year. For 2026 it is $16,100 if you are single or married filing separately, $32,200 for a married couple filing jointly, and $24,150 for a head of household. For most taxpayers, itemizing no longer makes sense unless you have significant mortgage interest or state taxes.

3. SALT Cap: $40,400 for 2026 (Temporary)

For families in New York, New Jersey, California, and Connecticut, this is the single biggest dollar-for-dollar change. If you itemize, pay $25,000+ in state and local taxes, and have modified adjusted gross income under $505,000, your SALT deduction is $15,000 or more larger than it was.

For 9/11 families: Many beneficiaries are NY-based. If you received a large distribution and are managing investment income above the standard deduction threshold, the $40,400 SALT cap changes your itemization math significantly.

4. Child Tax Credit: $2,200 Per Child

Up from $2,000. Inflation-adjusted going forward. Refundable portion: up to $1,700.

5. Senior Bonus Deduction: Brand New

This is a completely new deduction, available whether or not you itemize. It is taken after adjusted gross income is figured, so it lowers taxable income but not AGI, and it does not help with income-tested items like Medicare IRMAA surcharges. For many of the older 9/11 family members and retired first responders, it reduces taxable income by up to $12,000.

6. No Tax on Tips

A deduction of up to $25,000 a year of qualified tips, for tax years 2025 through 2028, shrinking above $150,000 of modified AGI ($300,000 joint). Most relevant for: service workers and part-time employees. Not directly applicable to most of our niche communities, but worth noting for family members in service industries.

7. No Tax on Overtime

A deduction for the premium part of overtime pay, meaning the extra "half" in time-and-a-half required under the Fair Labor Standards Act, not the whole overtime check. It is capped at $12,500 a year ($25,000 joint), shrinks above $150,000 of modified AGI ($300,000 joint), and runs for tax years 2025 through 2028. Social Security and Medicare tax still apply. For nurses and EMTs: this is a real saving on heavy overtime, but it is a deduction, not tax-free pay.

8. Car Loan Interest Deduction: New

Up to $10,000/year of interest deductible on loans for new vehicles that had final assembly in the United States, for tax years 2025 to 2028, shrinking above $100,000 of modified AGI ($200,000 joint). This didn't exist before.

9. PMI Deductibility: Restored

Private mortgage insurance is treated as deductible mortgage interest starting 2026. Previously expired.

10. Charitable Contributions: Changed

Non-itemizers can now deduct up to $1,000 ($2,000 MFJ) of cash gifts, though not gifts to a donor-advised fund. But itemizers face a new 0.5% floor after 2025, and top-bracket itemizers are capped at a 35% deduction rate.

11. AMT Exemption: Permanent

The higher Alternative Minimum Tax exemption levels from TCJA are now permanent. Fewer taxpayers will be subject to AMT.

12. Bonus Depreciation: 100% Restored

For business owners: 100% bonus depreciation is retroactively restored for property acquired after January 19, 2025. This reverses the phase-down (80% → 60% → 40%) that was already in progress.

13. Section 179: $2,560,000 for 2026

This is the rule that lets a business write off equipment in the year it is put to work instead of deducting it a slice at a time over many years. The OBBBA roughly doubled the amount, and because the figure is adjusted for inflation every year from 2026 on, the 2026 limit is $2,560,000. Buy heavily in one year and the limit shrinks dollar for dollar once you place more than $4,090,000 of equipment in service. Relevant for business-owner clients.

14. Energy Credits: Expired

15. QSBS Exclusion: Tiered

Qualified Small Business Stock exclusion is now tiered: 100% for stock held 5+ years, 75% for 4 years, 50% for 3 years. Applies to stock acquired after July 4, 2025.

Retirement Planning: What Changed for 2026

The retirement side of the OBBBA combines with SECURE 2.0 provisions that were already scheduled. Together, they create meaningful changes:

Contribution Limits: Higher Across the Board

• 401(k)/403(b)/457(b): $24,500 (up from $23,500 in 2025)
• IRA/Roth IRA: $7,500 (up from $7,000)
• Catch-Up 50+: $8,000 for 401(k)/$1,100 for IRA (IRA catch-up is now inflation-adjusted for the first time)
• Super Catch-Up (ages 60 to 63): $11,250 for 401(k) plans, instead of $8,000

Roth Catch-Up Mandate: The $150K Rule

If you earned $150,000+ in FICA wages in 2025 from that employer (Box 3 of your W-2, Social Security wages), all catch-up contributions above $24,500 must go to Roth. If your plan doesn't have a Roth option, no catch-up at all.

For senior military officers, GS-14+, and senior nurses: Check your W-2 now. This changes your withholding strategy.

Dependent Care FSA: Increased

Limit raised from $5,000 to $7,500 for most filers. If you have young children in daycare, this is an immediate benefit.

QCD Limit: $111,000

For those age 70½+ making Qualified Charitable Distributions from their IRA: the limit is now $111,000 (up from $108,000 in 2025).

Estate Planning: The Biggest Change of All

This was the estate planning question for the last 5 years: should families accelerate gifting before the exemption reverted to ~$7 million? The OBBBA eliminated that urgency entirely.

For 9/11 families: How an award is treated for income tax and how it is treated for estate tax are two separate questions, and no VCF or USVSST source addresses the estate side at all. We do not quantify or predict estate-tax exposure, and neither should anyone selling certainty. If you have received VCF or USVSST distributions, take the estate question to a CPA and, where appropriate, an estate attorney. One point worth knowing going in: estates of victims who died as a result of the September 11 attacks are exempt from New York estate tax, where the death resulted from wounds or injuries received in the attack or from participation in the rescue or recovery operations. Exempt from the tax is not the same as excused from the filing — a New York return may still be required.

For veterans: Combined VA disability (tax-free), CRDP/CRSC payments, TSP balances, and real estate: fewer veterans will ever touch the exemption threshold, but for those with substantial assets, the planning is now straightforward.

The Clock Is Ticking: What's Temporary

Not everything in the OBBBA is permanent. These provisions have expiration dates, and the planning window to use them is shrinking:

Provision	Expires	Who Should Act
SALT Cap $40,400 (2026)	Dec 31, 2029	NY/NJ/CA/CT residents with high state taxes
Senior Bonus Deduction	Dec 31, 2028	Taxpayers age 65+; full amount under $75K/$150K, none above $175K/$250K
No Tax on Tips	Dec 31, 2028	Service industry workers
No Tax on Overtime	Dec 31, 2028	Nurses, EMTs, first responders, anyone with regular OT
Car Loan Interest	Dec 31, 2028	Anyone financing a new vehicle
Energy Credits	Already expired (2025)	Window closed

What's Still Coming: AVTCA

While the OBBBA is signed law, there's one more piece of legislation to watch:

The American Victims of Terrorism Compensation Act (AVTCA) (S.706 / H.R.1530) was introduced in February 2025 with bipartisan support. If passed, it would:

• Establish guaranteed annual payments from the fund (instead of irregular distribution rounds)
• Clarify the DOJ's mandate to channel sanctions penalties to the fund
• Increase congressional oversight and fund staffing

5 Steps to Take Right Now

Regardless of which community you belong to, here's the action plan:

1. Review your tax withholding. TCJA rates are permanent, so make sure your W-4 is optimized. Over-withholding is an interest-free loan to the government.
2. Maximize temporary deductions. The Senior Bonus Deduction, overtime exemption, and SALT cap expansion are all time-limited. Build these into your 2026 to 2028 tax strategy.
3. Revisit your estate plan. If you had "sunset planning" strategies in place (accelerated gifting, GRATs, ILITs sized for a $7M exemption), you may be able to simplify. A $15M exemption with no scheduled sunset changes the calculus. Note the sunset is gone, not the number: $15M is the 2026 figure, and it is adjusted for inflation from 2027 on.
4. Fund your retirement accounts to the new limits. 401(k): $24,500. IRA: $7,500. Catch-up: $8,000 / $11,250 for ages 60 to 63. Roth mandate for $150K+ earners.
5. Talk to an advisor who specializes in your situation. OBBBA changes interact with VCF awards, USVSST distributions, VA disability, pensions, 457(b) plans, and PSLF strategies in ways that a generic tax prep service won't catch.