The One Big Beautiful Bill Act: A Comprehensive Guide with Real-World Examples
This analysis accompanies our newsletter summary and provides detailed case studies showing how the OBBBA's provisions might affect families at different income and wealth levels.
The One Big Beautiful Bill Act represents the most significant tax reform since 2017, introducing $4.5 trillion in changes that will reshape financial planning for millions of Americans. While some provisions offer immediate benefits, others create new complexities that require careful navigation.
Below, we examine each major provision with concrete examples showing how these changes might affect your specific situation.
Financial Planning Provisions:
SALT Deduction: The $500,000 Cliff
The Change: Taxpayers with AGI under $500,000 can deduct up to $40,000 in state and local taxes through 2029 (increasing 1% annually). Those above $500,000 remain capped at $10,000.
Case Study - The $495,000 Family (The Beneficiaries): Meet Lisa and David, living in Charlotte, with combined AGI of $495,000.
Before OBBBA: Capped at $10,000 SALT deduction despite paying $18,000 in property taxes and $22,000 in state income taxes.
After OBBBA: Can deduct $40,000 in SALT, saving approximately $8,800 in federal taxes annually (assuming 22% bracket).
Planning opportunity: They can prepay 2026 property taxes in December 2025 to maximize the benefit before potential changes.
Case Study - The $510,000 Family (The Cliff Victims): Meet Sarah and Tom, with AGI of $510,000.
The reality: Despite earning only $15,000 more than Lisa and David, they receive no SALT relief and remain capped at $10,000—even though they pay $25,000 in property taxes and $26,000 in state income taxes.
Strategic response: As business owners, they're exploring deferring Q4 client payments to January or accelerating equipment purchases to potentially slip under the $500,000 threshold in future years.
Standard Deduction Changes
The Numbers:
Single filers: $15,750 (up from $15,000)
Married filing jointly: $31,500 (up from $30,000)
These increases are now permanent
Impact: For many families, the higher standard deduction makes itemizing less attractive. A married couple needs more than $31,500 in combined mortgage interest, charitable giving, and (limited) SALT deductions to benefit from itemizing.
Retirement Planning
Trump Accounts: A New Tool for Generational Wealth
The Mechanics: Up to $5,000 annually per child until age 18, tax-deferred growth, automatic IRA conversion at 18.
Case Study - The Young Family: Meet Jennifer and Mark with three children: ages 2, 5, and 8.
Maximum scenario: Contributing $5,000 annually for each child:
2-year-old: 16 years of contributions = $80,000 invested, potentially worth $185,000+ at age 18 (assuming 6% growth)
5-year-old: 13 years of contributions = $65,000 invested, potentially worth $130,000+ at age 18
8-year-old: 10 years of contributions = $50,000 invested, potentially worth $88,000+ at age 18
Family impact: Total family investment of $195,000 could grow to over $400,000 across three IRA accounts by the time the youngest turns 18.
Integration strategy: This family is already maximizing 529 plans for education savings. Trump Accounts provide a complementary tool focused on retirement rather than education.
Case Study - The Grandparents: Meet Robert and Helen with 6 grandchildren ages 3-16.
Wealth transfer opportunity: They can contribute $5,000 annually to each grandchild's Trump Account without using their annual gift tax exclusion.
Impact: Over 10 years, they could contribute $300,000 total, potentially creating over $750,000 in IRA assets for their grandchildren by the time the youngest reaches 18.
Roth Conversion Clarity
The Change: Permanent tax rates provide certainty for multi-year conversion strategies.
Case Study - The Early Retiree: Meet Patricia, age 58, recently retired with $2 million in traditional IRAs.
Strategy: With permanent tax brackets, she can confidently plan a 7-year Roth conversion ladder, converting approximately $285,000 annually to fill up the 22% tax bracket while avoiding the 24% bracket.
Tax consideration: She'll pay both federal and state taxes on conversions, but the permanent rate structure allows for confident long-term planning.
Benefit: By age 65, her entire IRA will be Roth, eliminating future RMDs and creating tax-free inheritance for her children.
Estate & Legacy Planning
Estate Tax Relief: Who Benefits Most?
The Numbers: $15 million per person ($30 million for couples) starting January 1, 2026.
Case Study - The $10 Million Estate: Meet William and Susan, successful business owners with $10 million net worth.
Before OBBBA: Faced potential federal estate tax exposure as exemptions were set to be cut in half in 2026.
After OBBBA: Complete elimination of federal estate tax concerns. Since North Carolina has no state estate tax, they have no state-level concerns either.
Planning shift: Instead of complex trust structures to minimize estate tax, they can focus on straightforward wealth transfer strategies and family goals.
Case Study - The $40 Million Estate: Meet Charles and Margaret, entrepreneurs with $40 million net worth.
Tax savings: Previously facing potential estate tax on $14 million+ (roughly $5.6 million in taxes), they now face tax only on $10 million (roughly $4 million in taxes).
Net benefit: Approximately $1.6 million in federal estate tax savings.
New planning focus: With reduced estate tax pressure, they're exploring generation-skipping strategies using their separate $15 million GST exemptions to benefit grandchildren directly.
Case Study - The $80 Million Estate: Meet the Morrison family, with significant business and real estate holdings.
Remaining exposure: Still face estate tax on $50 million ($80M - $30M exemption), approximately $20 million in federal taxes.
Strategic response: Implementing aggressive gifting strategies using both annual exclusions and lifetime exemptions, plus generation-skipping trusts to maximize the new $15 million GST exemptions for each spouse.
Charitable Giving: A New Landscape
The New Rules Explained
Non-itemizers: Up to $1,000 individual/$2,000 joint above-the-line deduction (excludes donor-advised funds)
Itemizers: New 0.5% AGI threshold + 35% cap (down from 60%)
New credit: Up to $1,700 for scholarship organization donations
Case Study - The $250,000 AGI Family: Meet David and Karen, who give $15,000 annually to their church and local charities.
Impact analysis:
AGI threshold: First $1,250 (0.5% of $250,000) not deductible
Effective deductible donation: $13,750
Tax benefit: Approximately $3,025 (22% bracket)
Previous benefit: $3,300
Net cost: Additional $275 annually
Planning opportunity: They could redirect $1,700 to qualifying scholarship organizations to receive dollar-for-dollar tax credits, effectively recovering their lost deduction and more.
Case Study - The $750,000 AGI Family: Meet Sarah and Tom, who give $50,000 annually.
Impact analysis:
AGI threshold: First $3,750 not deductible
35% cap: Allows up to $262,500 in deductions (well above their giving level)
Effective deductible donation: $46,250
Tax cost: Approximately $1,400 annually in lost benefits
Strategic response: They're exploring bunching donations every other year to minimize threshold impact and using donor-advised funds for timing flexibility.
Case Study - The $2 Million AGI Family: Meet Robert and Helen, major philanthropists giving $400,000 annually.
Major impact:
AGI threshold: First $10,000 not deductible
35% cap: Maximum deduction of $700,000 (their giving fits within this)
Lost deductions: $10,000 annually
Tax cost: Approximately $3,700 annually
Advanced strategy: They're front-loading major gifts into 2025 before rules take full effect and exploring private foundation structures for greater control.
Other Notable Provisions
529 Plan Expansion
New uses: K-12 expenses (including tutoring), workforce training, credentialing programs.
Case Study - The Career Transition: Meet Lisa, whose 529 plan has $40,000 remaining after her daughter finished college.
New opportunity: She can use the funds tax-free for professional certifications, coding bootcamps, or trade school programs for herself or other family members, rather than facing penalties for non-qualified withdrawals.
HSA Enhancements
Expanded eligibility:
Medicare Part A enrollees who continue working
Bronze/catastrophic ACA plan holders
Spousal catch-up contributions to same account
Case Study - The Working Retiree: Meet John, age 66, automatically enrolled in Medicare Part A but still working part-time.
Previous situation: Couldn't contribute to HSA despite having qualifying high-deductible health plan through work.
New opportunity: Can resume HSA contributions, adding $4,300 annually ($3,300 base + $1,000 catch-up), providing valuable tax deductions and tax-free growth for future medical expenses.
Planning Implications and Next Steps
Immediate Actions to Consider:
Review income timing if you're near the $500,000 SALT threshold
Evaluate charitable giving strategies given the new restrictions
Consider Trump Accounts for children and grandchildren
Reassess estate planning with higher exemptions
Plan Roth conversions with permanent rate certainty
Longer-Term Strategic Considerations: The OBBBA creates both opportunities and traps. Families just under income thresholds have significant advantages over those just above them. The permanent nature of many provisions allows for confident long-term planning, but the complexity requires careful coordination of multiple strategies.
Working with Your Advisory Team: Given the complexity and interconnected nature of these changes, coordination between your financial advisor, tax professional, and estate planning attorney is more important than ever. Each decision affects multiple areas of your financial plan.
This analysis provides general guidance based on current law. Individual situations vary significantly, and specific tax and legal advice should be obtained from qualified professionals. We're here to help you navigate these changes and develop strategies tailored to your unique circumstances.
