Blog

KEY PROVISIONS OF THE ONE BIG BEAUTIFUL BILL ACT

By: Rick Imhoff, CFP®

The Congress passed and President Trump signed into law the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. OBBBA helped to avert potentially significant tax increases with the expiration of the Tax Cut and Jobs Act (TCJA) of 2017 at the end of this year. OBBBA also included some additional income and estate tax benefits that will benefit many taxpayers.

Estate Tax

OBBBA permanently increased the federal estate tax exemption amount to $15 million beginning in 2026 indexed for inflation. The exemption amount for 2025 is $13.99 million. With proper planning, a married couple can shelter up to $30 million from estate taxes. The top federal estate tax rate remains unchanged at 40% on the amount over the exemption. The step up in basis in assets at death is still available.

It is important to keep in mind that the higher estate tax exemption amount is at the federal level. Unfortunately, the state of Illinois only has a $4 million limit. In addition, even if you are just a dollar over the $4 million limit, the entire amount is subject to the Illinois estate tax. So, the $4 million is not considered an exemption.

Income Tax

The seven income tax brackets currently in effect remain the same and the capital gains tax rate is also unchanged.

Standard Deduction

Beginning in 2026, non-itemizers will have a new standard deduction which will be indexed for inflation. For single filers, the standard deduction increases to $15,750 next year versus $12,000 for 2025. For married couples filing joint, the standard deduction increases to $31,500 versus $24,000 this year.

Bonus Deduction

For those age 65 and older, there will be a bonus deduction of $6,000 beginning this year and available each year through the 2028 tax year. For married couples who are both age 65 and older would receive a bonus deduction of $12,000. This is in addition to the permanent extra deduction of $2,000 per single filer or $3,200 for those who are married filing joint and age 65 and older. It is important to note that the bonus deduction is available to those who itemize and those who do not itemize.

SALT

The deduction of state and local taxes on the federal income tax return was limited a couple of years ago and is capped at $10,000. Beginning this year, the cap will be raised

to $40,000 with a phase out beginning at $500,000 of adjusted gross income. The $40,000 cap will revert to $10,000 in 2030.

Charitable Deductions

Beginning next year, non-itemizers can deduct cash donations of $1,000 in charitable donations for single filers and $2,000 for married couples filing jointly. However, for those who itemize, there will be a .5% floor on charitable deductions based on the taxpayers’ adjusted gross income. This means that the first .5% of your charitable donations is not deductible.

There is much more to OBBBA but this highlights a few of the key items that appear to provide some opportunities to do some income tax planning to take full advantage of these additional deductions and other provisions. Be sure to consult with our tax advisor and/or financial planner before year-end to see what options you have this year and beyond.

Rick Imhoff, CFP® is Senior Financial Planner & Wealth Management Officer for the MidAmerica National Bank Wealth Management Group and he can be reached at rimhoff@midnatbank.com or (309) 647-5000 ext. 1130