Tax Planning After OBBBA: What Changed and What to Do Next
- Devin M. Starr, CFP®
- Jul 1
- 5 min read
Key Takeaways
SALT deduction cap increased to $40,000 through 2029 but phases out over $500,000 AGI.
New $6,000 senior deduction for ages 65+ through 2028, with income limitations.
Charitable giving rules tightened.
Clean energy tax credits eliminated by late 2025/2026, but some state deductions are unaffected for New Jersey residents.
The One Big Beautiful Bill Act (OBBBA), which was signed into law on July 4, 2025, brought sweeping tax changes that affect millions of individuals and retirees. Some changes create near-term opportunities (e.g., an expanded SALT deduction and a senior deduction), while others curb popular breaks (notably clean-energy credits) and add new charitable-giving constraints starting in 2026. With July marking the midpoint of the tax year, now is one of the best times to act — there's still enough runway to make meaningful moves before December 31. To cut through the confusion, I've identified the provisions most relevant to our clients and their planning strategies.
1. State and Local Tax (SALT) Deduction Cap The OBBBA temporarily increased the deduction for state and local taxes to $40,000 a year from $10,000 a year for tax years 2025 to 2029. In theory, this would seem like a huge benefit for residents of high tax states like New Jersey. However, the deduction phases out for taxpayers with adjusted gross income (AGI) over $500,000.
Planning Insight: While people who make less than $500,000 could benefit from the higher SALT cap, the standard deduction remains quite large, so many people will still need other deductions to itemize. Consider lumping charitable gifting into a Donor advised fund while the increased SALT cap is in effect (see below).
2. Senior Deduction for People 65 and Older Starting in 2025, seniors will receive an additional $6,000 deduction per taxpayer aged 65 and over ($12,000 for couples if both spouses are over 65) for tax years 2025 to 2028. The full deduction is allowed if your AGI is under $75,000 for single filers and $150,000 for those filing Married Filing Jointly (MFJ). The deduction phases out between $75,001 to $175,000 for singles and between $150,001 and $275,000 for MFJ.
Planning Insight: Many retirees will benefit. We can help with carefully managing retiree income to maximize the eligible deduction.
3. Estate Tax Exemption Raised to $15 Million Per Person Many affluent people (and their advisors) feared the generous estate exemption of $14 million ($28 million married couples) would be cut in half after sunsetting at the end of 2025. Thanks to the passage of OBBBA, the exemption was actually increased (rather than halved) to $15 million per person (or $30 million per couple) starting in 2026, with further inflation adjustments thereafter. This change will come as a relief to families with estates of over $15 million who otherwise would have faced estate tax rates of up to 40% on the excess.
Planning Insight: With the current estate exemption permanently increased to $15 million per person, estate tax planning strategies for most families will focus on minimizing future income taxes for inheritance beneficiaries. Also, while the federal estate tax exemption is high, many states have their own (lower) estate and inheritance tax exemptions that still require planning.
4. Charitable Giving: New Rules in 2026 Beginning in 2026, itemizers must exceed a 0.5% of AGI floor before charitable deductions become deductible. Gifts below that floor yield no deduction. Example: If your AGI is $100,000 you will not be able to itemize your first $500 of charitable gifts. Also in 2026, taxpayers who take the standard deduction can deduct up to $1,000 (single) or $2,000 (married filing jointly) for cash donations to public charities — even if they don’t itemize.
Planning Insight: The increased SALT cap in 2025 also means that you may need a smaller number of charitable deductions for your total itemized deductions to exceed the standard. Donating stock to a DAF allows you to take the charitable tax deduction in the year the DAF was funded, not when the charitable gifts were granted, allowing you to lump many years' worth of gifts. Due to the new hurdle, families may consider lumping charitable contributions into a single year.
5. Other Provisions Added
Standard deduction: The higher standard deduction introduced with the 2017 Tax Cut & Jobs Act is now permanent. It has increased slightly to $15,750 for single filers ($31,500 MFJ) from $15,000 single ($30,000 MFJ).
Auto loan interest deduction: Another new provision of the OBBBA is the deduction for auto loan interest of up to $10,000 per year for tax years 2025 to 2028 for vehicles in which final assembly is made in the U.S. This deduction applies only to new vehicles purchased after December 31, 2024. NOTE: leases and loans for commercial vehicles do not qualify. The deduction phases out by 20% for each dollar of AGI over $100,000 (single) or $200,000 (MFJ). Not sure if your vehicle was assembled in the US? Check the Vehicle Identification Number. VINs starting with 1, 4 or 5 are assembled in the U.S.
529 qualified expenses: The definition of qualified expenses for 529 distributions is enhanced to include tutoring and non-tuition related expenses for attending public, private, or religious elementary and secondary schools. In addition, the annual distribution limit of $10,000 is doubled for K-12.
6. Discontinued Credits (Primarily for Clean Energy) On the flip side, OBBA repealed many of the clean energy tax credits introduced under the Inflation Reduction Act in 2022. These credits were originally scheduled to sunset between 2032 and 2035. These credits include:
Deductions for purchasing electric vehicles ($7,500 new and $4,000 used). OBBA terminates these credits for vehicles acquired after 9/30/25.
Alternative Fuel Vehicle Refueling Property Credit. Up to $1,000 for electric vehicle charging equipment installed at a taxpayer's personal residence. The OBBA termination deadline has now passed as of July 1, 2026. This credit is no longer available
Energy Efficient Home Improvement Credit. Up to $1,200 toward the cost of energy-efficiency improvements (e.g., windows, doors, insulation, or heating and cooling equipment, and home energy audits). OBBA terminates this credit for property placed in service after 12/31/25.
Residential Clean Energy Credit. Up to 30% of the cost of purchasing or installing solar panels, wind power, geothermal heat pumps, or fuel cell equipment. OBBA terminates this credit for expenditures made after 12/31/25, regardless of when the property is placed in service. NOTE: The NJ state deduction ($4,000) is NOT affected.
The deadlines for all major clean energy credits have now passed. If you missed these windows, it is worth reviewing whether any qualifying purchases were made prior to the applicable cutoff dates, as retroactive documentation may still support a credit claim on your 2025 or 2026 return. The NJ state solar deduction of $4,000 remains unaffected.
Conclusion
Keep in mind, many provisions of the current tax law are temporary, with key rules scheduled to sunset in 2028 or 2029. This makes it critical to take advantage of opportunities now while staying flexible for future changes. If you’d like to discuss how the OBBA and these updates affect your situation, reach out to Novi Wealth—we’re happy to help.
Devin Starr, CFP® Associate Wealth Advisor at Novi Wealth