This article was first featured in the April 2026 issue of Fairfield Lifestyle, which you can find linked here.
ARTICLE BY RYAN C. SHEPPARD, CPA, CFF
PHOTOGRAPHY BY ALEX TORRES | PARK CITY STUDIOS
As a CPA I’m frequently fielding questions about the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025. Key provisions like the enhanced State and Local Tax (SALT) deduction, Trump accounts, senior deduction, and no-tax-on-tips/overtime rules are top of mind. These changes offer some significant tax relief and more importantly, some permanency in the tax code. Below are a few of the more significant highlights.
The SALT deduction—allowing itemized deductions for state and local taxes (property, income, or sales taxes)—saw one of the biggest updates under OBBBA. The prior $10,000 cap (from the 2017 TCJA) has been raised to $40,000 (for joint filers) for tax years 2025 through 2029. This is significant for those earning under 500K and live in high-tax states like Connecticut. Basically, the full $40,000 cap applies if your income is $500,000 or less for joint filers (250k for single filers). For example, if you are a joint filer and make under 500k, you are likely to pick up another $30,000 in tax deductions on your 2025 filing!
Trump accounts are an interesting new wrinkle—tax-deferred savings for minors under 18. Parents or guardians open them with after-tax contributions up to $5,000 annually (including up to $2,500 from employers tax-free). Earnings grow tax-deferred, and qualified post-18 withdrawals roll into traditional IRAs. In addition, for kids born 2025-2028, electing an account triggers a one-time $1,000 federal deposit. If you welcomed a child in 2025, claim this soon via IRS Form 4547 or the online portal—it’s a free boost for long-term growth. These complement 529 plans but focus on general child expenses without immediate contribution deductions.
Seniors (65+ by year-end) get a temporary $6,000 additional deduction ($12,000 if both spouses qualify) for 2025-2028, on top of the standard deduction and existing senior adjustments. This directly lowers taxable income, often preserving more Social Security from taxation and reducing brackets. For fixed-income retirees, this is a welcome provision.
NO TAX ON TIPS AND OVERTIME: WORKER-FOCUSED RELIEF
The “no tax on tips” deduction allows a whopping $25,000 deduction in qualified tips (from IRS-listed customary-tip occupations like servers or drivers) for 2025-2028. This deduction phases out above $150,000 in income ($300K for joint filers). Similarly, “no tax on overtime” deducts up to $12,500 ($25,000 joint) of the premium overtime portion (e.g., the extra in time-and-a-half), also phasing out at the same thresholds.
TAX PERMANENCY
One of the most consequential aspects of the law is the permanency of individual rates. The OBBB permanently locks in the current individual income tax rate structure, eliminating the looming uncertainty that taxpayers and advisors have faced for years.
Previously, many tax strategies were driven by the expectation that rates would revert higher at a future date. That uncertainty pushed taxpayers toward accelerated income recognition, rushed Roth conversions, and compressed planning timelines. With rate permanency now established:
- Long-term tax planning becomes more predictable and allows for better planning.
- Income-timing strategies can be evaluated on economics, not trepidation.
- Multi-year modeling is much more reliable.
There is no guarantee that tax rates will never change again, in fact they likely will, – but it does remove automatic increases that were already baked into prior law; a win for taxpayers.
BUSINESS PROVISIONS
While much of the OBBB focuses on individual tax relief, the law also includes important changes for businesses. Most notably, the permanency of individual tax rates provides long-term certainty for owners of pass-through entities, allowing compensation, distribution, and succession decisions to be driven by economics rather than expiring tax rules. The bill also reinforces incentives for capital investment through faster cost recovery by accelerating tax write-offs. In addition, and most significantly, the OBBB retains the Qualified Business Income Tax Deduction for small business owners that was first enacted in 2017. Had this not been renewed, most small business owners would have seen a significant tax increase. Overall, the OBBB rewards businesses that plan deliberately and execute correctly.
FINAL THOUGHTS
The OBBB was a significant piece of legislation in that it touches so many areas of the tax code. Most joint filers making under $500k are going to see significant benefits from the bill while those over $500k will see little change. Now that the law is settled and folks are filing their income tax returns, individuals and businesses should re-evaluate their long-term savings strategy, update long-term business planning, and model multi-year strategies.
For more expert tax advice and preparation, accounting services or estate planning, visit rollerisheppardcpas.com
