Why Invest Internationally?
August 1, 2025
Quarterly Market Review: October 2025
October 2, 2025
By Tanner Doudna
In July of 2025, the OBBBA (One Big Beautiful Bill Act) was signed into law. There are many changes that impact the financial industry and personal finances, some happen immediately, some are in future years. I’ll spare all of us by not breaking down the hundreds of updates, but I wanted to highlight some planning strategies we are considering as a result of the OBBBA.
2017 tax cuts made permanent
The TCJA (Tax Cuts and Jobs Act), passed in late 2017, doubled the standard deduction, eliminated personal exemptions, and lowered the tax brackets. The top bracket dropped from 39.6% to 37%, 28% to 24%, 15% to 12%, and so on. The increase in the standard deduction made tax bunching and Roth Conversions much more attractive. Additionally, the TCJA doubled the estate tax exemption (from ~5.5MM to ~11MM). These changes, which were set to expire and revert back to pre-TCJA levels, have been made permanent by the OBBBA. The “runway” for Roth conversions at the 10%, 12%, and sometimes 22% and 24% rates, has grown, and we will continue to evaluate Roth conversions annually for our clients. There’s also a new 4-year window for those ages 65+ to use their new, higher deduction to convert more funds into their Roth at a lower tax rate.
Tax Bunching
For those that don’t know, tax bunching is when you “bunch” itemized deductions into one tax year, and take the standard deduction in the alternate year. The two most common deductions our clients use to accomplish tax bunching are 1) Charitable giving and 2) Property taxes.
Charitable Giving: The OBBBA established a new 0.5% adjusted gross income (AGI) floor for charitable contributions. Meaning: you can only deduct charitable contributions that exceed 0.5% of your AGI. For example: If someone making $200,000 gave $30,000 to charity, they would be able to deduct $29,000 of those donations (200,000 x 0.5% = 1,000). This has similarities to the current law for deducting medical expenses. Tax bunching can help avoid that floor every other year. On the other side, be sure to save your charitable giving receipts because, starting in 2026, you can itemize a small amount of charitable donations ($1,000 for single taxpayers, $2,000 for married filing jointly) even if you are taking the standard deduction.
Property Taxes: The SALT (State and Local Taxes) cap was significantly increased – from $10,000 to $40,000. That deduction starts phasing out at $250,000 ($500,000 for married filing jointly) of MAGI (Modified Adjusted Gross Income), and it’s a pretty quick, steep phaseout. In the past, folks who were bunching their deductions and had SALT deductions above $5,000 have been hitting their cap. With the new, much larger cap, folks under the income phaseout with high SALT deductions will now possibly save thousands on their tax bill.
Others
- Trump Accounts: While it looks like financial institutions won’t be ready to actually open these accounts until late 2026, it’s worth getting the free $1,000 for children born in 2025-2028.
- “No tax on tips”: If you are in an occupation that regularly receives a lot of tips, the new (up to) $25,000 deduction may open up more room in a lower tax bracket for Roth conversions.
- Going green? Act quickly: As a result of the OBBBA, there are credits for “going green” that are expiring soon. Most expire by the end of 2025, including the clean vehicle credit. The new energy-efficient home credit expires at the end of June 2026.
- Auto Loan Interest: If you are torn on which new vehicle to get, maybe the new ability to deduct up to $10,000 of auto loan interest from cars assembled in the United States will break the tie.
We are here to help with any questions you have, and we are always evaluating better ways to help you reach your goals!
