The One Large Lovely Invoice Act (OBBBA), signed into legislation on July 4, 2025, largely serves to increase and modestly broaden a number of provisions of the 2017 Tax Cuts and Jobs Act (TCJA), offering advisors and their shoppers with a clearer tax planning panorama heading into 2026. Whereas most of the most impactful provisions – equivalent to the improved State And Native Tax (SALT) deduction and new below-the-line deductions for suggestions and time beyond regulation – are already in impact for 2025, OBBBA nonetheless introduces a number of nuanced planning alternatives with looming year-end deadlines, providing advisors a possibility to assist quite a lot of shoppers earlier than the tip of 2025.
One main alternative stems from OBBBA’s adjustments to charitable contribution guidelines. Starting in 2026, itemized charitable deductions will likely be diminished by a 0.5%-of-AGI ground, and high-income taxpayers within the 37% bracket will even see a 2/37 haircut on all itemized deductions. Excessive-income shoppers might profit from frontloading charitable giving into 2025 to keep away from these new limitations, probably utilizing Donor Suggested Funds (DAFs) to protect flexibility in future grantmaking. Concurrently, beginning in 2026, a brand new above-the-line charitable deduction of as much as $1,000 (single) or $2,000 (joint) will turn out to be out there to non-itemizers. This introduces a planning wrinkle for shoppers close to the itemizing threshold, who might need to lump non-charitable deductions like SALT and mortgage curiosity into 2025, whereas preserving smaller charitable presents for future standard-deduction years.
One other time-sensitive technique applies to workers with Incentive Inventory Possibility (ISOs) compensation. In 2026, the phaseout threshold for the AMT exemption will drop, whereas the SALT deduction cap will rise to $40,000, growing the danger of triggering AMT for ISO workout routines. This narrows the window for shoppers with unexercised ISOs to behave in 2025 to keep away from or cut back AMT publicity. Particularly for shoppers whose ISO workout routines would land them within the 2026 “bump zone” – the place marginal tax charges on further AMT revenue can attain 42% – it might make sense to speed up workout routines into 2025, the place they could end in no or decrease AMT.
OBBBA additionally expands 529 plan distribution guidelines to incorporate as much as $20,000 of Ok–12-related bills and credentialing prices like coursework required for CFP certification, efficient for distributions made after July 4, 2025. Importantly, funds can be utilized to reimburse bills incurred at any level throughout 2025, so long as the distribution is made earlier than year-end. This creates a one-time alternative for shoppers with eligible 529 balances to reimburse themselves for beforehand ineligible academic bills from earlier within the 12 months.
Moreover, the introduction of a number of momentary below-the-line deductions for seniors, tip earners, time beyond regulation staff, and auto mortgage curiosity creates a brand new layer of complexity for Roth conversion and withdrawal methods between 2025 and 2028. Every deduction phases out over particular (however separate) revenue thresholds, which means pre-tax revenue from withdrawals or conversions may unintentionally cut back or get rid of a number of deductions. Advisors can revisit present Roth conversion plans in mild of those phaseouts, recognizing that even modest conversions might produce ‘magnified’ marginal charges on account of misplaced deductions. Efficient coordination between tax software program and the advisor’s planning instruments will likely be vital to mannequin the true value of conversions throughout this window.
For self-employed professionals in Specified Service Trades or Companies (SSTBs) – together with monetary advisors – the shifting phaseout ranges for the Certified Enterprise Earnings (QBI) deduction create one more one-time planning alternative. Although OBBBA retains a lot of the QBI deduction in its earlier kind below TCJA, it widens the SSTB phaseout vary in 2026. Because of this, SSTB house owners whose revenue falls inside the present 2025 phaseout vary might need to defer revenue into 2026, the place the spike in marginal tax charges on revenue via the phaseout vary will likely be extra gradual. Conversely, these whose revenue already exceeds the 2025 phaseout limits however may fall inside the expanded 2026 vary might profit from accelerating revenue into 2025 to keep away from a spike in marginal revenue subsequent 12 months.
Lastly, OBBBA accelerates the expiration of sure vitality credit initially launched by the Inflation Discount Act. Whereas some deadlines – equivalent to these for electrical automobile credit – have already handed, there’s nonetheless time earlier than December 31, 2025, to finish qualifying energy-efficient dwelling enhancements and obtain as much as $3,200 in tax credit. Smaller initiatives like new doorways or home windows – and even scheduling a house vitality audit – should still be possible inside this slender timeframe and may also help shoppers cut back each their taxes and utility prices.
In the end, whereas OBBBA would not fully overhaul the tax code, it does introduce a collection of slender however significant planning alternatives for a variety of shoppers. Serving to shoppers plan and execute year-end tax methods is an annual alternative for advisors to point out their worth, however with OBBBA’s new provisions, advisors have the possibility to create much more tangible tax financial savings earlier than the calendar flips to 2026!