Understanding the One Big Beautiful Bill Act (BBB)
Tax Changes for 2025 and What They Mean for Your Finances
On July 4, 2025, the One Big Beautiful Bill Act (“BBB”) was signed into law, introducing wide-ranging updates to U.S. tax policy. The legislation extends key provisions from the 2017 Tax Cuts and Jobs Act (“TCJA”) and adds new deductions and tax planning opportunities for individuals, families, and business owners. As your advisors, we want to help you understand what’s changing—and how these changes may impact your tax liability, investments, estate strategy, and overall financial plan.
This article outlines several key tax provisions from the new law. While not a comprehensive review of all 887 pages, we’ve highlighted the areas most relevant to Sequoia clients.
Not interested in taking a deep dive into the latest tax code updates? No judgment—we promise. Here are the quick highlights on what the BBB may mean for your finances:
· Individual income tax rates (10%–37%) made permanent
· Standard deduction increased to $15,750 (single) / $31,500 (joint)
· State and Local Tax (SALT) deduction cap raised to $40,000 with income phaseouts
· Estate tax exemption increased to $15 million per person
· New deductions for tip income, overtime, and auto loan interest (with phaseouts)
· New $6,000 deduction for seniors age 65+
· New tax-advantaged savings accounts for newborns
Prefer more than just the cliff notes? Read on for a deeper dive into these provisions—and how they could impact your financial picture.
Key Tax Provisions and Their Impact
1. Permanent Extension of Individual Income Tax Rates
The TCJA’s seven tax brackets (ranging from 10% to 37%) were scheduled to expire in 2026 and revert back to pre-2017 rates. The BBB makes these rates permanent, benefiting many households with lower federal tax rates, especially those in the 22% and 24% brackets.
Current 2025 Tax Brackets (Post-BBB):
· 10%: Up to $11,600 (single) / $23,200 (joint)
· 12%: $11,601–$47,150 / $23,201–$94,300
· 22%: $47,151–$100,525 / $94,301–$201,050
· 24%: $100,526–$191,950 / $201,051–$383,900
· 32%: $191,951–$243,725 / $383,901–$487,450
· 35%: $243,726–$609,350 / $487,451–$731,200
· 37%: Over $609,350 / Over $731,200
Pre-2017 Brackets (Before TCJA):
· Ranged from 10% to 39.6%
· Middle-income taxpayers often paid 25% or 28%
· Top bracket started at $418,400 (single) / $470,700 (joint)
How Does This Impact You: Permanently lower brackets provide long-term planning certainty. With rates locked in, taxpayers can make more strategic decisions about Roth conversions, realizing capital gains, or shifting income across years with greater confidence.
2. Increased Standard Deduction
In 2024, right before the BBB, the standard deduction was $14,600 for single filers and $29,200 for married filing jointly, reflecting inflation adjustments from the TCJA, which nearly doubled the standard deduction starting in 2018 (from $6,350 single and $12,700 joint in 2017). The BBB further increases these amounts, making them permanent starting in 2025 at $15,750 for single filers and $31,500 for joint filers, with annual inflation adjustments continuing.
How Does This Impact You: The increased standard deduction lowers taxable income for non-itemizers, potentially reducing your tax bill compared to pre-TCJA and 2024 levels, with the jump from $14,600/$29,200 to $15,750/$31,500 providing additional savings. If you itemize, we can evaluate whether itemizing remains optimal given other BBB changes.
3. Higher SALT Deduction Cap
The state and local tax (SALT) deduction allows you to deduct state and local taxes (e.g., property, income, or sales taxes) paid during the year. It is a below-the-line deduction, which means it is only available to those who itemize on Schedule A to their 1040. The BBB raises the SALT cap from $10,000 to $40,000 for 2025-2029, with a 1% annual increase, reverting to $10,000 in 2030. There are phaseouts, however, for high-income earners with the deduction being reduced to a floor of $10,000.
How Does This Impact You: If you live in a high-tax state and itemize deductions, this could reduce your federal tax bill significantly. The benefit of the increased SALT deduction, however, is limited with the phaseouts for high-income earners who would be the most likely to benefit the most from the increase.
4. Increased Estate and Gift Tax Exemption
The lifetime estate and gift tax exemption is permanently increased to $15 million for individuals and $30 million for married couples, starting in 2026, with annual inflation adjustments. This is up from the 2025 exemption of $13.99 million per individual, which was set to revert to pre-TCJA levels at the end of the year.
How Does This Impact You: The increase from $13.99 million to $15 million allows you to transfer more wealth tax-free to heirs or through gifts, reducing potential estate tax liability. This enables strategic gifting to reduce your taxable estate, freeing up assets for investment in trusts or other vehicles that align with your long-term goals. We can review your estate plan to optimize wealth transfers while maintaining investment growth.
5. Qualified Business Income (QBI) Deduction Made Permanent
The BBB makes permanent the TCJA’s Section 199A deduction, allowing a 20% deduction on qualified business income from pass-through entities (e.g., sole proprietorships, partnerships, S corporations, LLCs). This applies to business income but is limited for high-income earners in “specified service” trades or businesses (SSTBs), like law, medicine, or financial services. For 2025, the deduction phases out for SSTBs if taxable income exceeds $509,300 (joint) or $254,650 (single), with full phaseout at $609,300 (joint) or $304,650 (single). Non-SSTB businesses face limits based on W-2 wages or capital investment above these thresholds. The deduction reduces taxable income, not adjusted gross income, and cannot create a net operating loss.
How Does This Impact You: If you own a pass-through business, this deduction may lower your tax rate on business income, potentially saving thousands annually, which can be reinvested into your business for growth or into diversified investments to build wealth.
6. New Above-the-Line Deductions (2025–2028)
These deductions are available to all taxpayers, even if you don’t itemize:
· Tip Income: Up to $25,000 of tip income is deductible for workers in tipped industries (e.g., waiters, barbers), phasing out for incomes above $150,000 (single) or $300,000 (joint).
· Overtime Pay: Up to $12,500 of qualified overtime pay is deductible, phasing out for incomes above $100,000 (single) or $200,000 (joint), with full phaseout at $125,000 (single) or $250,000 (joint).
· Auto Loan Interest: Up to $10,000 in interest on loans for U.S.-assembled vehicles is deductible, phasing out for incomes above $100,000 (single) or $200,000 (joint). Unlike the TCJA’s electric vehicle (EV) tax credit ($7,500 for qualifying EVs, limited by model and battery rules), this deduction applies to interest on loans for any U.S.-assembled vehicle (gas, hybrid, or electric), new or used, and can be claimed over multiple years as you pay interest.
How Does This Impact You: These deductions reduce taxable income for eligible taxpayers, particularly those with tip or overtime income or financing U.S.-made vehicles. The auto loan deduction’s broader scope compared to the EV credit also offers more flexibility to Americans who are looking to buy a new vehicle in the next few years. Remember, however, that these deductions are only available through 2028.
7. New Deduction for Seniors
The BBB introduces a temporary $6,000 deduction (per qualifying individual) for taxpayers aged 65 and older from 2025–2028, on top of the senior standard deduction ($2,000 for single filers, $1,600 per spouse for joint filers). This bonus phases out for incomes above $75,000 (single) or $150,000 (joint). It aims to offset rising living costs for seniors on fixed incomes, encouraging financial independence in retirement. While the deduction is consistently referred to as a removal of taxes on social security for the majority of eligible Americans, the deduction is not tied to Social Security benefits but applies to all income sources. It also is not available to those individuals who decide to file for social security before they turn 65.
How Does This Impact You: This may reduce taxable income for eligible seniors, lowering their tax bill and freeing up funds for cash-flow, enhancing retirement security. While it does not technically remove the taxes on social security, many Americans will benefit from the new deduction while it is effective.
8. Charitable Contribution Changes
The BBB reinstates charitable deductions for non-itemizers, allowing up to $1,000 (single) or $2,000 (joint) for cash contributions. For itemizers, a 0.5% floor based on adjusted gross income (AGI) applies, meaning deductions are only allowed for contributions exceeding 0.5% of AGI (e.g., for $1 million AGI, contributions above $5,000 are deductible). Deductions for those in the 37% tax bracket are capped at 35% of the donated amount.
How Does This Impact You: The non-itemizer deduction encourages charitable giving, while the 0.5% AGI floor adds complexity for itemizers. Structuring contributions using donor-advised funds or appreciated securities can maximize tax benefits and align with your investment strategy, balancing tax savings with portfolio growth.
9. Child Tax Credit and Other Family Benefits
The Child Tax Credit is permanently increased to $2,200 per child, with a $1,700 refundable portion, adjusted for inflation. The refundable portion allows up to $1,700 per child as a refund even if your tax liability is zero. The adoption tax credit is now partially refundable (up to $5,000). The BBB expands 529 plans to cover K-12 materials and postsecondary trade credentials, building on the SECURE Act of 2019, which allowed up to $10,000 annually for K-12 tuition.
How Does This Impact You: Families with children or adopting may see reduced tax liability or receive refunds, increasing funds available for education savings or other investments like custodial accounts. The expanded 529 plans also offer more options for educational options for children seeking non-public school options.
10. “Trump Accounts” for Newborns
The BBB introduces “Trump accounts,” tax-advantaged savings accounts for children born between 2025 and 2028, with a $1,000 federal seed contribution and annual parental contributions up to $5,000. Earnings grow tax-deferred, and qualified withdrawals are taxed as long-term capital gains.
How Does This Impact You: These accounts offer tax-deferred growth for eligible children, reducing future tax burdens on withdrawals and providing a flexible vehicle for long-term wealth building. These can be integrated into an investment strategy for your children or grandchildren, complementing 529 plans.
Scope and Sunsets
This article highlights key provisions of the BBB, but is not a comprehensive list of all changes. Many of the provisions, such as the increased SALT deduction cap, senior bonus deduction, and deductions for tip income, overtime pay, and auto loan interest, are temporary and are set to sunset in three to four years (2028–2029). This limited window underscores the importance of proactive planning to maximize these benefits while they are available.
Next Steps
The changes introduced by the BBB are complex—and their impact will depend on your income, assets, and long-term goals. Now is the ideal time to review your financial picture in light of this new law.
Schedule a consultation with your team at Sequoia to explore how these changes may affect you—and how we can bring clarity, confidence, and strategy to every step of your financial journey.