Signed into law on 7/4/25, the One Big Beautiful Bill Act (OBBB Act) makes permanent the Tax Cuts and Jobs Act (TCJA) tax brackets and higher standard deduction. It also temporarily increases the state and local tax (SALT) deduction with a phase out for high earners. Some clients may need to adjust strategies before the end of the year, so now may be a good time to reach out.

The OBBB Act marks a tax overhaul that will require clients to review their current tax planning strategies. The bill made some TCJA provisions permanent and added provisions that may create new opportunities. The trade-off? An even more complex planning environment.

Key Provisions and Considerations for Clients

Unless otherwise noted, the following provisions are effective in 2025:

• TCJA Tax Brackets Are Now Permanent The TCJA ordinary income tax rates are now permanent, and the inflation adjustment provision has been increased by an extra year for the 10%, 12%, and 22% brackets. Long-term capital gains and dividend rates remain the same, and the net investment income tax still applies. The complexity caused by the different brackets for ordinary income and capital gains remains.

• Permanent Increase to TCJA Standard Deduction This TCJA provision simplified federal income-tax filing for many taxpayers, eliminating the need to file an itemized return. This will remain true going forward. The personal exemption has been permanently eliminated.
  
  Standard deductions are:
  • Married filing jointly/survivors: $31,500
  • Single: $15,750
  • Head of household: $23,625

ACTION Seniors who make qualified charitable distributions (QCDs) may find that the limits help put the 0% bracket for long-term capital gains within reach. QCDs alongside deferral strategies that can control the recognition of gains may help keep clients’ income under the limit.

• Increased SALT Caps with Phase-Out Income Thresholds For clients with high state and local taxes, the Act offers temporary relief: The current SALT cap of $10,000 has been temporarily increased to $40,000 for tax year 2025. Beginning in 2026, the amount will increase by 1% each year through 2029. In 2030, the deduction will revert to $10,000.
  
  Higher-income taxpayers may find that the relief does not apply to them. The deduction begins to phase out at a modified adjusted gross income (MAGI) of $500,000. For those with a MAGI of $600,000 or higher, the SALT limit remains $10,000.
  
  The SALT workaround available in many states remains in place, allowing pass-through entities (PTEs) to benefit from both the increased cap and the PTE workaround until 2030.

ACTION Review Roth IRA conversions. For some clients, the higher SALT deduction may make Roth conversions a viable option. For higher-income clients, the additional income from a Roth conversion may reduce the SALT deduction to the $10,000 floor.

Enhanced Deductions for Seniors For those age 65 and older, the Enhanced Senior Deduction will be temporarily available in 2025 through 2028. The amount is $6,000 per individual ($12,000 married filing jointly) and is available whether the taxpayer is using the standard deduction or itemizing. When MAGI exceeds $75,000/single or $150,000/married filing jointly, the deduction reduces by 6% until it is phased out at $175,000 or $250,000, respectively.

ACTION As this deduction is available in 2025, clients 65 and older may want to consider managing income to stay under the threshold for the phase out. Roth conversions may be less attractive. QCDs and deferral strategies may help.

• Increased Child Tax Credit The child tax credit permanently increases to $2,200, indexed for inflation after 2025. The credit is available for taxpayers with incomes at or below $200,000 for singles or $400,000 for those married filing jointly. For qualifying taxpayers, the credit is refundable up to $1,700 in 2025.
  
  
• Home Mortgage Interest Deduction The principal limit for the home mortgage interest deduction is $750,000 and permanent. Taxpayers who itemize may deduct interest paid on mortgage debt up to $1,000,000 if the debt was incurred prior to 12/15/2017.
  
  
• Increased Brackets for Alternative Minimum Tax (AMT) The increased brackets for the AMT are permanent. Those with incomes under $500,000 for singles or $1,000,000 for those married filing jointly still are not affected by the AMT.
  
  
• Temporary Above-the-Line Deduction for Charitable Contributions Charitable contributions made after 12/31/2025 may qualify for a temporary $1,000 ($2,000 for those married filing jointly) above-the-line deduction for non-itemizers. The deduction will be available through 2028.

ACTION For clients over 70½ with IRA assets, a QCD is likely still the best option for charitable giving because it doesn’t increase MAGI. Check with clients who do not itemize—they may want to plan to maximize this deduction in 2026.

• Increased Estate-, Gift-, and Generation-Skipping-Tax Exemption Beginning in 2026, the unified credit for these tax exemptions will be permanently increased to $15,000,000 per individual ($30,000,000 for those married filing jointly), indexed for inflation.
  
  Remember that states may or may not have an estate or inheritance tax and may or may not follow the federal unified credit exemption. While smaller estates should plan to assure proper transfer of assets, state-level exemption planning may be required.

ACTION As more clients fall under the limit, annual reviews of account registrations and beneficiary designations will become more important in assuring proper disposition of assets. For clients unsure whether additional income might be needed later in life, non qualified annuities may offer a flexible wealth-transfer option.

• Expanded Education Options for 529 Plan Beneficiaries Financial professionals can benefit from new rules that allow 529 accounts to cover the cost of professional credentials, such as CFP^® designations. The IRS will provide additional guidance in the coming months.
  
  
• Reach Out to Clients Soon These are deeply complex provisions that clients may need close guidance to review and consider. As some provisions go into effect this year, reaching out to clients now can facilitate important planning conversations before the year ends. That may mean better outcomes—and a lower tax bill.

ACTIONS YOU CAN TAKE RIGHT NOW

• Identify clients who might need to manage thresholds in 2025.
  
  
• Evaluate whether deferral strategies or other options can help.
  
  
• Implement necessary changes with clients promptly.
  

Additional Resources and Links

White House Web Page: The OBBB Act

Should I Convert to a Roth IRA?

Social Security Administration Statement on the OBBB Act

For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com

This material is educational and intended for an audience with financial services knowledge.

No bank guarantee • Not a deposit • May lose value

Not FDIC/NCUA insured • Not insured by any federal government agency