Year-End Tax Planning in Light of the One Big Beautiful Bill Act

As the leaves change and the calendar approaches December 31, 2025, savvy taxpayers are preparing their financial records for year-end planning. This year’s landscape is heavily influenced by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.

Dubbed the "Working Families Tax Cut," this comprehensive reconciliation bill prevents the expiration of the 2017 Tax Cuts and Jobs Act (TCJA) provisions, which were set to lapse after 2025, potentially increasing taxes by over $4 trillion. Instead, OBBBA makes many TCJA elements permanent while adding temporary benefits through 2028. With inflation adjustments included and new deductions available, now is the ideal time to accelerate income strategies, realize losses, and secure savings before the year ends.

Permanent Tax Rates and Brackets

At the core of OBBBA’s influence are the permanently set individual income tax rates and brackets, adjusted annually for inflation. In 2025, single filers will see the 10% bracket extend to $11,925 (up from $11,600 in 2024), the 12% to $48,475, and the top 37% starting at $626,350. Joint filers will enjoy proportional increases, with the 37% rate beginning at $751,600. This permanence removes the "cliff" of 2026 tax increases, but it also means there will be no reversion to higher rates from before the TCJA. Year-end tip: If you’re nearing the threshold of a higher tax bracket, consider postponing bonuses until 2026 or accelerating deductions such as charitable contributions.

Standard Deduction and SALT Cap Boost

The standard deduction jumps to $15,000 for singles and $30,000 for joint filers—a $2,000 temporary increase through 2028—reducing the appeal of itemizing for many. However, for high earners in blue states, the big change is the state and local tax (SALT) cap rising from $10,000 to $40,000 for 2025 only (phasing out above $500,000 AGI and reverting in 2030). Prepay 2026 property taxes by December 31 to take advantage of this window, but crunch the numbers—phaseouts could reduce benefits for those over the threshold.

Relief for Seniors and Service Workers

Seniors and service workers receive customized relief. OBBBA adds a $6,000 "bonus" deduction on top of the existing $1,950 senior standard add-on, bringing the total to as much as $7,950 per person ($15,900 for couples), gradually phasing out above $75,000 AGI ($150,000 joint). Until 2028, this helps reduce Social Security taxes (though it doesn’t provide full exemption).

Tipped employees and self-employed individuals who receive tips can now deduct qualified tips reported on W-2s or 1099s, a benefit for hospitality workers. Overtime pay will also be fully deductible from 2025 to 2028. Action item: Service professionals should keep detailed tip records via employer statements or Form 4137. Car enthusiasts can deduct up to $10,000 in interest on loans for U.S.-made vehicles (phasing out over $100,000 AGI), but leases do not qualify—buy now if you’re eligible.

Family-Focused Provisions

Family-focused provisions demand attention. The child tax credit holds at $2,000 per qualifying child ($1,700 refundable), but jumps temporarily to $2,500 through 2028, requiring a child’s Social Security number. Adoption credit becomes partly refundable up to $5,000 (indexed annually).

Expanded 529 plans now cover K-12 tuition, homeschooling, and even postsecondary credential programs. For newborns, "Trump Accounts" (or MAGA Accounts) offer tax-free growth on up to $5,000 annual contributions, seeded by a $1,000 government deposit for kids born 2025-2028—perfect for education or homebuying. Families should consider front-loading 529 gifts or opening these accounts before year-end to harness compound growth.

Estate Planning Wins

Estate planners rejoice: The lifetime exemption doubles to $15 million ($30 million for couples), indexed from 2025, alleviating portability concerns. Gift generously now to take advantage of this before any future adjustments.

Final Action Steps

In this post-OBBBA era, tax planning is less about dodging cliffs and more about harvesting low-hanging fruit. Consult a CPA to model scenarios—volatility lingers with possible 2026 add-ons like tariffs or endowment taxes. By acting decisively in Q4 2025, you can trim liabilities, fortify retirement, and position for prosperity. Remember, the best tax strategy is proactive: Review, adjust, file early.