If the recent passage of the One Big Beautiful Bill Act (OBBBA) has left you scratching your head trying to figure out what it means for your taxes and finances, you’re not alone. This massive bill is filled with complexities—including phase-outs, exclusions, exceptions, and carve-outs—that reflect the compromises made to secure its passage.

To add to the confusion, certain provisions go into effect immediately (such as the permanent extension of the Tax Cuts and Jobs Act or TCJA), while others, like the new 0.5% income floor for deducting charitable gifts, won’t take effect until 2026.

Although reviewing every detail of this extensive bill is beyond the scope of this post, excellent summaries from both the Tax Policy Center and the Tax Foundation are available if you’d like a deeper dive into how this law affects the federal budget.

Key takeaways for taxpayers

There are a few provisions that will have a significant impact on most taxpayers. 

• Permanent Extension of the TCJA: Effective immediately, this is expected to be the largest tax-saving measure for most taxpayers.

• Increased Standard Deduction and Additional Deduction for Seniors: A permanent boost to the standard deduction is another saver, as is the additional $6,000 deduction for taxpayers over 65. However, that senior deduction phases out for individuals with over $175,000 of income ($250,000 for married couples) and sunsets after 2028.

• Social Security Tax: While there is not a tax break specific to Social Security income, the $6,000 senior deduction may result in lower overall taxes for many seniors.

• State and Local Tax (SALT) Deduction Increase: The increase to the state and local tax (SALT) deduction cap may reduce taxes for some, but it phases out starting at $500,000 of income and is reduced back to $10,000 for taxpayers with over $600,000 of income.

• Enhanced Tax Benefits for Business Owners and Investors: The Act makes the 20% qualified business income deduction permanent with increased phase-out ranges, while enhancing startup equity tax benefits. One offset is a new 1.0% floor for corporate charitable gift deductions.

Beyond the taxes: Social Security and medicare impacts

The new law will have an impact on individuals beyond just changes to their tax bill. The Committee for a Responsible Federal Budget estimates the new law will push Social Security and Medicare A into insolvency in 2032 rather than 2033, although it’s important to remember that “insolvency” doesn’t mean there is no money to pay out benefits. It’s possible Congress could make adjustments to address insolvency, but if not, it’s estimated that benefits would shrink for all recipients by 24%, while hospital benefits would be reduced by about 11%. Your Fulcrum team can help you understand how potential reductions in Social Security Benefits could affect your long-term plan.

Legacy planning: still essential under the new law

From a legacy planning perspective, even if your estate is likely to be below the new $15 million exemption amount, planning is still important. There are some estate planning tools that could help reduce income in certain situations, and estate plans are still necessary to direct your legacy and for asset protection purposes. And, while the current law makes the new exemption amount “permanent,” it’s entirely possible the law could change in the future. Stay proactive by reviewing your estate planning strategy regularly.

The impact of the new law will be different for each taxpayer. Your Fulcrum team can guide you through the nuances of this complex law. We will be looking at this in upcoming review meetings, but please don’t hesitate to contact your advisor if you have any immediate questions.