Breaking Down the One Big Beautiful Bill: Key Tax Changes Every Investor Should Know

By Steven A. Henderson, CPA, PFS, CFP®, CKA®; Regional Director and Partner, and Jana Ramsey-Weaver, CPA, Wealth Manager at Merit Financial Advisors

When Congress passed the One Big Beautiful Bill (OBBB) earlier this year, headlines focused on which tax provisions would last, and which would eventually sunset. Yet beyond the headlines, the real question is far more practical: how will these changes affect your income, investments, and long-term financial plan?

More than 150 million Americans file individual tax returns each year and roughly 90% of them use the standard deduction. The OBBB permanently locks in the higher deduction levels that doubled under the 2017 Tax Cuts and Jobs Act, shielding more income from tax. But while that sounds simple, the reality is layered with new credits, deductions, and phase-outs that could either boost your after-tax income or trip you up if you don’t plan carefully.

Key takeaways for individuals

• Tax rates stay lower — for now.
  • Without the OBBB, top marginal individual rates would have jumped back to 39.6 percent in 2026. They’ll now remain at 37 percent. That permanence gives both individuals and small-business owners more confidence in long-term planning.

• New “senior bonus” deduction.
  • From 2025 to 2028, individuals 65 and older can claim an additional $6,000 deduction, though it phases out for higher earners. Policymakers have described this as “a Social Security tax relief by another name.”

• Temporary breaks on tips and overtime.
  • Service-industry and hourly workers can deduct up to $25,000 in tips income. Also, a new overtime deduction equal to the half portion of overtime pay with a cap of $12,500 (single), and $25,000 (MFJ) is also available between 2025 and 2028. Both of these changes are aimed at lower-income earners.

• SALT cap relief — with strings attached.
  • State and local tax (SALT) deduction cap rises from $10,000 to $40,000 starting in 2025. But that benefit begins to phase out once income exceeds $500,000 and disappears above $600,000. This will impact high earners who pay a significant amount of real estate or state income taxes, especially those who live in high tax states such as California, New York or New Jersey.

Updates for business owners

• 100% bonus depreciation returns
  • Businesses can again expense the full cost of most new or used equipment with useful lives of 20 years or less and placed in service after January 19, 2025. That means faster write-offs and more immediate cash-flow benefits.

• R&D credits strengthened
  • Full expensing of qualifying research assets is restored — and some firms can even amend prior returns to claim missed deductions.

• Pass-Through Entity (PTE) workaround made permanent
  • S corporations and partnerships may continue paying state taxes at the entity level, sidestepping the SALT limit for their owners.

• Flat 21% corporate rate locked In
  • The permanent 21% corporate rate keeps U.S. companies competitive globally and gives corporations a stable base for capital-budget decisions.

Why this matters for planning

The OBBB spans more than 100 provisions, adding new complexity to an already complicated tax code. For many households, the immediate effect will be an increase in take-home pay — but the long-term impact is a projected $3.5 to $5.5 trillion rise in the federal deficit over 10 years. Rising national debt could translate to higher borrowing costs and slower growth in the next decade.

For individual investors, the practical message is clear: coordination and planning matters. Your financial advisor and CPA should be talking to each other, not working in parallel silos.

Be cautious with Roth conversions

Roth conversions remain one of the most misunderstood strategies in personal finance. On the surface, paying taxes now for tax-free income later sounds wise. But under OBBB’s new phase-outs, conversions can trigger unintended consequences, such as losing eligibility for the senior deduction or bumping your Medicare premiums through Income-Related Monthly Adjustment Amount (IRMAA) surcharges. Once a conversion is made, it’s irrevocable. A careful projection with both your advisor and CPA is essential before acting.

Charitable planning in a changing landscape

Generosity still pays — but timing matters now more than ever. Beginning in 2026, only charitable gifts exceeding 0.5% of adjusted gross income (1% for corporations) will be deductible. For high-net-worth donors, the value of itemized deductions will also be capped at 35%, effectively creating a 2% “tax” on generosity for those in the top 37% bracket.

If you’re planning a major gift or funding a donor-advised fund, consider doing so in 2025 to lock in the full deduction. And for retirees over 70½, Qualified Charitable Distributions (QCDs) remain a powerful way to give directly from an IRA, satisfy required minimum distributions, and lower taxable income.

Looking ahead to 2026 and beyond

• Estate and gift exemptions: Now increased to $15 million (from $13.99 million) per individual ($30 million per couple), indexed for inflation starting in 2027.
• 529 plans: Annual distribution limit doubles to $20,000 for K-12 education-related expenses.
• Dependent Care FSA: Increases from $5,000 to $7,500.
• Gambling deductions: Taxpayers may deduct only 90% of losses against winnings.

Each of these rules creates new opportunities and new pitfalls, depending on your income level, age, and filing status.

The bottom line

Tax planning is never static. The OBBB provides short-term relief and long-term uncertainty. As always, the winners will be those who plan early, stay informed, and coordinate across their financial team.

At Merit Financial Advisors, we believe proactive planning is the best defense against surprise tax bills and the surest way to align your money with your life’s goals. Curious how the OBBB affects you? Contact a Merit advisor or visit meritfinancialadvisors.com to schedule a consultation before year-end.

Investment advice offered through Merit Financial Group, LLC, an SEC registered investment adviser.