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 2–3 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 ($15,750 single / $31,500 MFJ for 2025) is permanent and inflation-adjusted. For most taxpayers, itemizing no longer makes sense unless you have significant mortgage interest or state taxes.

3. SALT Cap — Raised to $40,000 (Temporary)

For families in New York, New Jersey, California, and Connecticut, this is the single biggest dollar-for-dollar change. If you're paying $25,000+ in state and local taxes, you just got a $15,000+ larger deduction.

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 $40K 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 above-the-line deduction that didn't exist before. For many of the older 9/11 family members and retired first responders, this reduces taxable income by up to $12,000 at no effort.

6. No Tax on Tips

A temporary exemption from federal income tax on tip income. 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 temporary exemption from federal income tax on overtime pay. For nurses and EMTs: this is significant. Healthcare workers routinely work overtime — and until this provision expires, that overtime is federal-tax-free.

8. Car Loan Interest Deduction — New

Up to $10,000/year deductible for qualifying new vehicles purchased 2025–2028. 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). 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 — Raised to $2.5M

The expense limit jumped from $1.22M to $2.5M for 2025, with a phaseout at $4M. 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 60–63): $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 (Box 5 of your W-2), all catch-up contributions above $24,500 must go to Roth. No exceptions. 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: If you've received VCF awards, USVSST distributions, and are benefiting from the Bitcoin recovery case — the $15M permanent exemption means most families won't face estate tax on any of these combined amounts. This is a fundamental shift in how estate planning should be approached.

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 $40K	Dec 31, 2029	NY/NJ/CA/CT residents with high state taxes
Senior Bonus Deduction	Dec 31, 2028	Taxpayers age 65+ with income under $75K/$150K
No Tax on Tips	TBD (temporary)	Service industry workers
No Tax on Overtime	TBD (temporary)	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 — 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 2026–2028 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. $15M permanent changes the calculus.
4. Fund your retirement accounts to the new limits. 401(k): $24,500. IRA: $7,500. Catch-up: $8,000 / $11,250 for 60–63. 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.