Reference guide for advisors on the One Big Beautiful Bill Act

In a move to preserve key elements of the 2017 Tax Cuts and Jobs Act (TCJA), as well as introduce new tax policies, lawmakers passed a new piece of legislation: the One Big Beautiful Bill Act, which was signed into law by President Trump on Friday, July 4, 2025.

Provisions of the bill either permanently or temporarily extend aspects of the tax code which affect individuals, businesses, and estates. This brings numerous financial planning implications and opportunities for advisors and their clients, some of which are summarized below.

Key provisions financial advisors should know

For all clients

Permanent extension of certain TCJA provisions:

• Individual federal income tax rates: Permanently extends, with inflation adjustments, starting in 2026.¹
• Standard deductions: Makes permanent the increased standard deduction and annually adjusts it for inflation. Starting in tax year 2025, the standard deduction is increased to $15,750 for individual filers/$31,500 for joint filers, $23,625 for head of household. 
• Cap on itemized deductions: Limits the value of itemized deductions to 35%. In most cases, individual taxpayers will get the full value of their itemized deductions, except for those in the highest individual income tax bracket (37%).
• SALT (state and local taxes) deduction: Increases the cap from $10,000 to $40,000, and increases 1% each year through 2029, phasing out at $500,000 modified adjusted gross income (MAGI) before returning to $10,000.
• Alternative minimum tax (AMT): Permanently extends the increased individual AMT exemption amounts and reverts the exemption phaseout thresholds to 2018 levels ($500,000 single/$1 million joint filers), indexed for inflation thereafter.
• Child tax credit: Permanently extends the increased child tax credit. The nonrefundable child tax credit is increased to $2,200 per child beginning in tax year 2025 and indexed for inflation.

Financial planning implications: With the permanence² of current federal income tax rates, advisors can continue to implement Roth conversions, tax-loss harvesting, and tax threshold planning strategies with more confidence. Additionally, the increase to the SALT cap could benefit high-income clients in high-tax states. Advisors should consider reviewing clients’ income levels and deductions to optimize tax benefits, including managing taxable income, maximizing or accelerating deductions, and taking advantage of Roth conversion opportunities.

Creation of permanent charitable deduction: For taxable years after 2025, non-itemizers can claim a deduction of up to $1,000 for single filers/$2,000 for married filing jointly for certain charitable contributions.

Financial planning implications: Advisors should be prepared to inform clients who do not itemize that some amount of charitable deductions will be available to them moving forward and consider these deductions when exploring tax-planning opportunities.

 

For senior clients

Enhanced standard deduction for seniors: Temporarily adds a $6,000 deduction for each qualified individual senior through 2028. The senior deduction begins to phase out when the taxpayer’s MAGI exceeds $75,000 for single/$150,000 for joint filers. A qualified individual is a taxpayer who is 65 or older.

Financial planning implications: We recommend advisors inform seniors about the potential enhanced deduction and incorporate income planning to reduce the taxable portion of a client’s Social Security benefits, as appropriate.

 

For high net worth & ultra-high net worth clients

Increased estate tax exemption: Permanently extends the estate and lifetime gift tax exemption. The exemption amount is raised to $15 million single/$30 million joint filers starting in 2026 and indexed for inflation.

Financial planning implications: With the permanence of the increased lifetime exemption amounts, high-net-worth clients can transfer significantly more wealth without incurring federal estate or gift taxes. Advisors will want to encourage clients to revisit their estate plans and gifting strategies.

Introduction of floor on charitable contributions: A new 0.5% floor on charitable contributions for taxpayers who elect to itemize for taxable years after December 31, 2025. The amount of an individual’s charitable contributions for a taxable year is reduced by 0.5% of the taxpayer’s contribution base for the taxable year.

Financial planning implications: As the first 0.5% of charitable donations would not be deductible starting in 2026, affluent clients may benefit from accelerating contributions. Advisors should discuss the value of donor advised funds and explore front-loading contributions in 2025 before losing deductibility.  

 

For business owners

Enhanced qualified business income (QBI) pass-through deduction (Section 199A): Makes permanent the 20% deduction.

Financial planning implications: The expansion of the 199A deduction could create new planning opportunities for small business owners. Advisors should revisit entity structures and income thresholds with clients to maximize deductions.

 

For clients planning for family & education

Introduction of child savings accounts: The new tax bill introduces a new tax-advantaged child savings account option named “Trump accounts,” that can be opened for any child under the age of 18, starting in 2026. It also creates a pilot program that enables the federal government to contribute $1,000 per eligible child born between 2025 and 2028. For newborns, accounts may be opened by either parents or guardians. The child must be a U.S. citizen to be eligible for an account. 
 
Notable provisions include:  

• Effective starting in 2026.
• No contributions will be allowed until 12 months after the date of enactment. 
• No withdrawals are allowed before the child reaches the age of 18.
• Individual contributions are not tax-deductible; contributions by certain entities are allowed and may be tax-deductible.
• When the child reaches age 18, the account is essentially converted into a traditional IRA. 

Financial planning implications: Advisors should be prepared to answer questions about the potential for tax-advantaged growth and flexibility, while assisting clients on what type of account to fund first to meet a client’s goals.

529 use expansion: Expands the use of 529 plans to include post-secondary credentialing expenses such as certifications, licenses, and other professional qualifications. Additionally, the amount of tuition and related expenses at an elementary or secondary public, private, or religious school that is treated as a qualified higher education expense is now increased from $10,000 to $20,000, starting in 2026.

Financial planning implications: Expanded use of 529 accounts as well as the increase in K–12 eligible expenses could warrant changes to education savings goals. Review clients’ education savings strategies to maximize plan value.³

ABLE accounts changes: Permanently extends increased contribution limits and provides an additional year of inflation adjustment for the limit base amount. The saver’s credit is increased by an additional $100 starting in 2027. The new law also permanently allows designated beneficiaries who make qualified contributions to achieving a better life experience (ABLE) accounts to qualify for the saver’s credit and permanently allows tax-free rollovers from 529 qualified tuition programs into qualified ABLE programs.

Financial planning implications: Be prepared to advise clients on the benefits of ABLE accounts and the saver’s credit.

 

Other noteworthy provisions

No tax on tips: Creates a new deduction for qualified tips received during the year available through 2028. This is an above-the-line deduction available to itemizers and non-itemizers.  However, this excludes highly compensated individuals and those defined under Section 199A.  The deduction is capped at $25,000 and phased out at MAGI levels above $150,000 for single filers and $300,000 for those married filing jointly.

Financial planning implications: Assess which clients have tip income and are eligible for this deduction and adjust tax planning strategies accordingly.

No tax on overtime: Creates an above-the-line deduction for qualified overtime compensation received during the year. The deduction applies to overtime that exceeds the employee’s regular rate and is available through 2028. The deduction amount is capped at $12,500 for single filers and $25,000 for those married filing jointly and phased out at MAGI levels above $150,000 and $300,000 respectively.  

Financial planning implications: Clients with overtime income may need help tracking these earnings to ensure they maximize this deduction.

 

Embracing tax policy changes

Tax policy is dynamic and subject to change. Advisors should focus on “no regrets” planning, making beneficial decisions regardless of future tax changes.

At Vanguard, we understand the complexities of tax-efficient investing and are committed to helping advisors and their clients navigate these changes. Our comprehensive suite of tax-efficient investment solutions is designed to maximize returns while minimizing tax liabilities. Together, we can help your clients achieve their financial goals with confidence, even in the face of an ever-changing tax landscape.⁴

 

Disclosures and footnotes:

1 Additional one-time inflation adjustment in 2026 for 10% and 12% tax brackets.

2 This tax bill has extended current tax brackets indefinitely; however, Congress can always change tax law, including provisions that have been made permanent.

3 State tax treatment of withdrawals for K–12 tuition expenses, apprenticeship program expenses, and student loan repayments is determined by the state(s) where the taxpayer files state income tax. Please consult with a tax advisor for further guidance.

4 Newly enacted U.S. tax law: Investor considerations | Vanguard.

All investing is subject to risk, including the possible loss of the money you invest.

Neither Vanguard nor its financial advisors provide tax and/or legal advice. This information is general and educational in nature and should not be considered tax and/or legal advice. Any tax-related information discussed herein is based on tax laws, regulations, judicial opinions and other guidance that are complex and subject to change. Additional tax rules not discussed herein may also be applicable to your situation. Vanguard makes no warranties with regard to such information or the results obtained by its use, and disclaims any liability arising out of your use of, or any tax positions taken in reliance on, such information. We recommend you consult a tax and/or legal advisor about your individual situation.