One Big Beautiful Bill Act Summary: What High-Income Households Need to Know

The One Big Beautiful Bill Act (OBBBA) has made sweeping changes to tax legislation for 2025 and beyond. Many of these changes are slated to bring positive impacts to high-income households, but wading through the extensive changes can be time-consuming. 

What do you need to know to leverage changes in your financial planning?

Here’s what you need to know about the OBBBA, the changes likely to impact your financial future, and how you can make it work for your gain.

Tax Brackets and Standard Deduction

The Tax Cuts and Jobs Act (TCJA) created a seven-bracket structure for individual tax returns, but it was set to end in 2025. TCJA rates were lower than those that high-income earners would have seen had the policy been permitted to sunset at the end of the year. 

Instead, the One Big Beautiful Bill Act made the tax brackets permanent as well as the increased standard deduction.

What benefits can you anticipate under the OBBBA in relation to your end-of-year taxes?

Those in the top bracket (above $626,350 for single filers and $751,600 for married couples filing jointly) would have seen their tax rates increased to 39.6 percent if the policy had been permitted to sunset. Instead, the OBBBA caps it at 37 percent – providing substantial savings!

Not to mention, the standard deduction is almost double what it would have been without the TCJA. For single filers, the new permanent standardized deduction for 2025  is $15,750 (compared to the previous rate of $8,350). Couples filing jointly can expect a deduction of $31,500 (compared to the previous rate of $16,700). Both are indexed for inflation. 

State and Local Taxes (SALT)

State and local tax deductions are also a consideration with the One Big Beautiful Bill Act. Under this provision, the cap increased from $10,000 to $40,000 from 2025 through 2029, with phases for inflation. In 2030, filers can expect SALT to revert to $10,000.

The phase-out begins at a modified adjusted gross income (MAGI) of $500,000 for single filers with an upper cap of $600,000.

Deductible Interest

In addition to the rate cuts of the TCJA extension, individuals can now deduct the interest for the most common types of loans. Notably, this applies to auto loan interest and mortgage interest.

When it comes to an auto loan, there is an allowable deduction of up to $10,000 per year in interest. This deduction will apply to vehicles assembled in the United States and phases out at $100,000 for single filers and $200,000 for married couples filing jointly. This deduction is set to last through 2028 and can be claimed whether you itemize your deductions or not. 

Mortgage interest has long been a tax-deductible expense for those who itemize their returns. In that vein, there has been a limit on deductible interest that has made its way into permanent tax policy. The debt limit for new mortgages is $750,000 on your primary residence for single filers and married couples filing jointly.

In addition to deducting traditional mortgage interest, private mortgage insurance is also treated as part of your mortgage interest. PMI generally applies to homeowners who have put down less than 20 percent of the purchase price of their home.

Enhanced Child Credit

Many people look forward to a credit simply for having minor children in their care. In summary, the OBBBA has increased the child tax credit to $2,200 per child in 2025, indexed for inflation beginning in 2026. 

Keep in mind that the tax credit will be adjusted annually, meaning it is likely to increase year over year.

Lifetime Gift and Estate Tax Exception

Some people might have been eager to utilize their full estate and gift tax exemption, knowing that there was set to be a decrease in the coming year. As with the expansion of the tax brackets, the OBBBA made the exemption for larger lifetime gift and estate tax exemptions a permanent part of tax law.

In 2025, the exemption increased from roughly $14 million to $15 million for individuals. Couples can give double this amount, capping it at $30 million in 2025. This exemption is set to increase annually with adjustments for inflation.

Alternative Minimum Tax

While many of the policies of the One Big Beautiful Bill Act will benefit high-income earners, the Alternative Minimum Tax is one of the few places where high-income households are negatively affected. Starting in 2026, new thresholds will expand the number of taxpayers subject to AMT.

What can you expect from AMT under the new legislation?

The OBBBA has an exemption phase-out of $500,000 for single filers and $1 million for those married filing jointly (adjusted for inflation each year after 2026). These figures are lower than the rates that applied pre-OBBBA, alongside increased exemption phase-outs (25 to 50 percent for 2026). This all means that more people are likely to owe alternative minimum tax moving forward.

Charitable Giving Changes

One of the areas that permits tax filers in high-income brackets to minimize their taxable income while making a difference is charitable contributions. Under the OBBBA, there is a new floor that requires filers to contribute more than 0.5 percent of their AGI to deduct their contributions. The only deductions that are deductible are those above this floor.

That being said, there are also caps on what you can give and deduct. If you fall into tax bracket seven, your deductions are capped at 35 percent of your income.

Another consideration is the permanent extension of larger deductible donations. You can now give up to 60 percent AGI in cash donations to public charities (50 percent for non-cash gifts).

Plan Your Financial Future with Confidence

When you want to make sure you understand the finer details of the One Big Beautiful Bill Act and how it will impact you as a high-income earner, Consilio Wealth Advisors can help. We offer fiduciary and wealth planning services that allow tech professionals with unique compensation structures to make the most of their money.

Contact us today for a consultation on how you can leverage these changes for your end-of-year tax situation!

Disclosures

The information provided in this article is for educational and informational purposes only and does not constitute investment advice and should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

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