By David A. Herman
Financial Associate, Thrivent Financial
U.S. President Donald Trump signed into law the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, after months of deliberation in the U.S. House and Senate. The legislation includes multiple tax provisions that will guide individuals, business owners, and investors in planning their finances for many years to come. It makes permanent most of the 2017 Tax Cuts and Jobs Act (TCJA) tax provisions that were set to expire this year, while delivering some new deductions and changes.
The One Big Beautiful Bill Act contains multiple new tax deductions that are intended to represent a step toward fulfilling campaign promises made to end taxes on Social Security, tips, and overtime. These new deductions are temporary, but other changes are permanent.
Deduction for Seniors
Effective for tax years 2025-2028, the legislation creates a new $6,000 deduction for qualifying individuals who reach the age of 65 during the year. The deduction begins to phase out when modified adjusted gross income exceeds $75,000 ($150,000 for married filing jointly).
Investment Accounts for Children (“Trump accounts”)
A new tax-deferred account for children under the age of 18 is created, effective January 1, 2026. With limited exceptions, up to $5,000 in total can be contributed to an account annually (the $5,000 amount is indexed for inflation). Parents, relatives, and employers, as well as certain taxable, nonprofit, and government organizations, may make contributions. Contributions are not tax-deductible. For children born between 2025 and 2028, the federal government will contribute $1,000 per child into eligible accounts. Distributions generally cannot be made from the account prior to the account holder reaching the age of 18, and there are restrictions, limitations, and tax consequences that govern how and when account funds can be used. To have an account, a child must be a U.S. citizen and have a Social Security number.
Charitable Deduction for Non-Itemizers
The legislation reinstates a tax provision that was previously effective for tax year 2021. A deduction for qualifying charitable contributions is now permanently established for individuals who do not itemize deductions. The deduction is capped at $1,000 ($2,000 for married filing jointly). Contributions must be made in cash to a public charity and meet other specific requirements. This deduction is available starting in tax year 2026.
Car Loan Interest Deduction (“No Tax on Car Loan Interest”)
For tax years 2025-2028, interest paid on car loans is now deductible for certain buyers. Beginning in 2025, taxpayers who purchase qualifying new vehicles assembled in the United States for personal use may deduct up to $10,000 in loan interest annually. The deduction is phased out at higher incomes, starting at a modified adjusted gross income of $100,000 (single filers) or $200,000 (joint filers).
There’s more …
The One Big Beautiful Bill Act includes broad and sweeping changes that will have a profound impact. While income and estate tax provisions are highlighted here, the legislation also makes fundamental changes impacting areas such as healthcare, immigration, and border security. There are also additional tax changes made by the legislation that are not mentioned in this summary. Additional information and details will be available in the coming weeks and months.
As always, if you have questions about how these changes affect your specific situation, consider consulting a tax professional.
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