OBBBA: What Financial Advisors Need to Know

The One Big Beautiful Bill Act: What Financial Advisors Need to Know

Last Edited by: LPL Financial

Last Updated: September 17, 2025

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, ushering in one of the most sweeping overhauls of the U.S. tax code since the Tax Cuts and Jobs Act (TCJA) of 2017.

Whether you're a seasoned financial advisor or just starting out, understanding the implications of this legislation is essential - not just for your own practice, but for guiding your investing clients through a rapidly evolving financial landscape.

A New Era of Tax Policy: What's Changed?

Let's start with the basics. The OBBBA makes permanent many of the TCJA's provisions and introduces new ones that affect individuals, families, and businesses. Here are some of the headline changes.

Individual Income Tax Rates

The seven-bracket system (10%, 12%, 22%, 24%, 32%, 35%, 37%) is now permanent. This offers long-term clarity for planning strategies like Roth conversions and retirement distributions.

Standard Deduction

The standard deduction has increased to $15,750 for single filers and $31,500 for joint filers, indexed annually for inflation.

Seniors aged 65+ receive a temporary bonus deduction of $6,000 through 2028, which phases out at $75,000 modified adjusted gross income (MAGI) for singles and $150,000 for joint filers.

SALT Deduction

The State and Local Tax (SALT) deduction cap has been raised from $10,000 to $40,000 through 2029, with a 1% annual increase. However, it phases out for high-income earners - starting at $500,000 MAGI (for single and joint filers). SALT deduction reverts to $10,000 after 2029.

OBBBA does not restrict or eliminate the use pass-through entity tax (PTET) workarounds. Partnerships and S corporations operating in states with PTET regimes may continue to deduct state-level taxes at the entity level, offering a potential workaround to the individual SALT deduction limit.

Child Tax Credit

The child tax credit is now permanently increased to $2,200 per child, indexed for inflation. It phases out at $200,000 MAGI for single filers and $400,000 for joint filers.

New Tools for Families: Trump Accounts

One of the most talked-about features of the OBBBA is the introduction of a new tax-advantaged savings vehicle for children under 18.

Here's how they work:

• The Secretary of the Treasury must establish all Trump Accounts.
• Children born or under the age of 18 between 2025 and 2028 receive a one-time $1,000 federal contribution.
• Families can contribute up to $5,000 annually (after-tax), with employers allowed to contribute up to $2,500 tax-free. The $2,500 employer contribution counts towards the annual $5,000 total contribution limit.
• Funds must be invested in low-cost, diversified U.S. equity index funds.
• No withdrawals are allowed until the child turns 18, at which point the account converts into a traditional IRA.

Action step: For advisors, this opens up opportunities for conversations with clients around multigenerational wealth planning, education funding, and long-term savings strategies.

Estate Planning: Breathing Room for High-Net-Worth Clients

The estate and gift tax exemption has increased to $15 million per person (or $30 million per couple), indexed for inflation. This change provides significant flexibility for wealth transfer strategies, including:

• Grantor Retained Annuity Trusts (GRATs)
• Spousal Lifetime Access Trusts (SLATs)
• Dynasty trusts and sales to intentionally defective grantor trusts (IDGTs)

Action step: Revisit clients' estate plans and consider front-loading gifts before potential political shifts alter the landscape.

Charitable Giving: New Opportunities and Limitations

The OBBBA introduces a non-itemizer charitable deduction of up to $1,000 for single filers and $2,000 for joint filers, starting in 2026. This is a permanent provision and could re-engage donors who previously lost tax incentives under the TCJA.

However, for itemizers, a new 0.5% AGI floor applies to charitable deductions, and the maximum benefit is capped at a 35% tax rate - even for those in the 37% bracket.

Existing limits on deductibility, such as the 60% of AGI ceiling for cash gifts to public charities remains in place.

Action step: Both itemizers and non-itemizers will benefit from paying attention to the timing of their charitable contributions. Consider accelerating charitable contributions and exploring donor-advised funds to maximize impact.

Business Planning: Enhanced Deductions and Expensing

Changes impacting business owners include:

• Qualified business income (QBI) deduction: The 20% QBI deduction is now permanent, with modestly expanded phase-out thresholds.
• Bonus depreciation: 100% bonus depreciation is reinstated permanently for qualified property placed in service after January 19, 2025.
• Section 179 expensing: The cap increases to $2.5 million, with phaseouts starting at $4 million.

These provisions offer powerful tools for managing taxable income, improving cash flow, and planning capital expenditures.

Education and Retirement Planning: Expanded Flexibility

The maximum withdrawal amount is increased to $20,000. 529 plans now cover a broader range of expenses, including:

• K-12 educational materials, tutoring, and testing fees
• Postsecondary credentialing and continuing education
• Special education therapies and adaptive learning tools

This expansion makes 529 plans more versatile and relevant for families with diverse educational needs.

Questions Clients May Ask - and How to Answer Them

Clients will likely have questions about how these changes affect their financial lives. Here are a few you should be ready to address:

"How does the SALT deduction change affect me?"

If your client lives in a high-tax state and earns under $500,000 (for single and joint filers), they may benefit from the increased cap. Above those thresholds, the deduction phases out, so income management strategies become critical.

"Should I adjust my charitable giving strategy?"

For non-itemizers, the new deduction offers a modest incentive. For itemizers, the 0.5% AGI floor and 35% cap mean timing and structure matter more than ever. Investors may consider donor-advised funds and bunching strategies.

"What should I do with my estate plan?"

With the exemption now at $15 million per person, clients have a window to transfer wealth tax-free. Advisors may revisit trust structures and gifting strategies to take full advantage.

Action Plan for Helping Clients Navigate the OBBBA

Here are a few steps you can take to help your clients feel more informed and prepared for the changes outlined in the bill.

Take a Fresh Look at Tax Strategies

First, review each client's current tax strategy. With the new provisions in play, it's a great time to reassess income levels, deductions, and credits.

Keep Clients in the Loop

Clearly explain what's changed under the bill and what it means for your clients' financial picture. No jargon - just straightforward, honest conversations so they understand the impact and feel empowered to make smart decisions.

Explore New Planning Opportunities

Consider strategies like Roth conversions, tax-loss harvesting, and charitable giving. These can be powerful tools to optimize tax planning.

Stay Sharp on Regulatory Updates

Tax laws evolve, so staying on top of IRS guidance and Treasury regulations related to the OBBBA can help you offer timely, accurate advice and empower your clients to make informed decisions.

Focus on "No Regrets" Planning

With sunset clauses still looming in 2026 and political shifts on the horizon, consider modeling different tax outcomes so clients can see how various scenarios might affect them. It's all about being prepared, not surprised.

Final Thoughts

The One Big Beautiful Bill Act is more than just a tax reform - it's a strategic inflection point for financial advisors. By understanding its nuances and proactively guiding clients, you can turn legislative complexity into planning clarity.

Disclosures

While the Federal tax laws have changed, individuals are still subject to the tax laws that apply in their state.

LPL does not provide tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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