Understanding the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings sweeping changes to the tax code. It locks in many of the Tax Cuts and Jobs Act provisions and introduces a new set of deductions, credits, and planning opportunities.

Now that it’s law, there’s more clarity around what rules apply going forward, but the changes themselves can still be complex. Overall, OBBBA is likely to reduce taxes for many households by maintaining lower rates that were set to increase in 2026, though high earners may face complexities like the AMT bump zone.

This article walks through the major changes in plain language so you can understand what matters and where it may make sense to plan ahead.

1. Tax Brackets

The familiar TCJA income tax brackets (from 10% up to 37%) are now permanent. That means taxpayers avoided the scheduled jump in rates at the end of 2025. You keep the same structure going forward, which helps with planning and reduces uncertainty.

2. Standard Deduction

For 2026, the standard deduction is set at $15,750 for single filers, $31,500 for married filing jointly, and $23,625 for heads of household, with inflation indexing. Seniors, those aged 65 or older or legally blind, qualify for an additional standard deduction of approximately $1,500 per person for single or head of household filers, or $1,200 per spouse for married filing jointly, adjusted for inflation.

In addition, the bill adds a new $6,000 above-the-line deduction for individuals age 65 or older (or blind), or $12,000 per couple, available from 2025 through 2028. This was designed as an alternative to making Social Security benefits tax-free. Instead of exempting Social Security directly, this deduction reduces taxable income. It begins to phase out over $175,000 AGI for singles or $250,000 for joint filers, at a 6% rate above the threshold.

3. Itemized Deductions

SALT cap: The deduction cap for state and local taxes increases from $10,000 to $40,000, beginning in 2025. This expanded cap phases out for taxpayers earning above $500,000 and reverts to $10,000 in 2030.

Charitable giving floor: Starting in 2026, itemized charitable deductions only apply after you exceed a minimum of 0.5% of your AGI.
For example, if your AGI is $200,000, your first $1,000 ($200,000 x 0.5% = $1,000) of charitable donations doesn’t count toward a deduction. Only amounts above that floor are deductible.

High-income limitation: The value of itemized deductions is capped at 35% for those in the 37% bracket.

Non-itemizers can deduct up to $1,000 (single) or $2,000 (joint) in charitable contributions starting in 2026.

4. Below-the-Line Deductions: Tips, Overtime, and Auto Loans

From 2025 through 2028, taxpayers may deduct the following, even if they do not itemize:

• Up to $12,500 per individual or $25,000 per couple in qualified tips.

• Up to $12,500 per individual or $25,000 per couple in qualified overtime premium pay. Only the overtime premium portion counts. Qualified tips refer to gratuities earned in service-based roles, such as restaurant or hospitality work. Qualified overtime premium pay includes only the additional pay rate (e.g., time-and-a-half) for hours worked beyond standard hours.

• Up to $10,000 in interest on qualifying auto loans for new vehicles assembled in the United States.

These deductions are subject to income-based phaseouts. For the auto interest deduction, the phaseout starts at $100,000 MAGI for single filers and $200,000 for joint, ending fully at $149,000 and $249,000, respectively. These changes primarily benefit middle-income earners, particularly in service or hourly wage roles.

5. Child Tax Credit

The child tax credit increases to $2,200 per qualifying child beginning in 2025 and is now permanently indexed to inflation. The refundable portion remains limited to $1,400, with phaseout thresholds unchanged.

6. 529 Plan Flexibility

OBBBA expands the flexibility of 529 plans. In addition to college and K-12 expenses, 529 plans may now be used for a broader range of educational programs, including postsecondary credentialing, tutoring, dual-enrollment, job training, and apprenticeships. The K-12 withdrawal limit increases from $10,000 to $20,000 annually. Some qualified expenses for first-time home purchases and caregiving may also become eligible, pending final guidance.

7. “Trump” Accounts

For children born between 2025 and 2028, the government will open a new account at birth with a $1,000 deposit. Parents can contribute up to $5,000 per year, and the funds grow tax-deferred. Withdrawals may be used for college, job training, or a first home.

Details around implementation, provider options, and distribution rules are still being developed.

8. Section 199A: Qualified Business Income Deduction

The 20% deduction for qualified business income (QBI) from pass-through businesses is now permanent. This applies to sole proprietors, partnerships, S-corporations, and certain real estate investors. Income phaseouts and service business limitations remain in place. For 2025, the phaseout starts at $197,300 for single filers and $394,600 for joint. This offers long-term clarity for small business owners and self-employed individuals.

9. Estate and Gift Tax Exemption

Beginning in 2026, the lifetime estate and gift tax exemption rises to $15 million per person, indexed for inflation. For married couples, this means up to $30 million of assets may pass tax-free. This increase is now permanent.

10. Alternative Minimum Tax (AMT)

The AMT exemption amounts remain high, but the thresholds at which those exemptions phase out are lower. This creates a narrow "bump zone" where taxpayers may face marginal rates as high as 42%. For example, single filers between roughly $500,000 and $676,200, or joint filers between $1 million and $1.27 million, may be affected. Trusts and estates continue to use older, lower exemption levels.

11. Qualified Opportunity Zones

OBBBA makes the QOZ program permanent. Capital gain deferral becomes rolling on a 5-year timeline rather than ending in 2026. Investors still qualify for a 10% step-up in basis after five years and full exclusion after ten years.

The bill also introduces Qualified Rural Opportunity Funds (QROZs). These receive a 30% basis step-up after five years and have looser rules around "substantial improvement" to promote rural investment. Additional reporting requirements were added for both QOZs and QROZs.

12. Clean Energy and Other Provisions

Several clean energy tax credits created under the Inflation Reduction Act are being phased out earlier than planned:

• EV purchase credits end after September 2025

• EV charger installation credits end after June 2026

• Wind and solar projects must begin construction by June 2026 or be in service by December 2027

Methane fees are delayed for a decade. Biofuel tax credits continue through 2031.

Section 179 expensing (a tax deduction allowing businesses to deduct the full cost of qualifying equipment or property in the year of purchase) remains available at higher levels, and certain interest paid on new vehicle purchases becomes deductible within income limits.

The Qualified Small Business Stock (QSBS) exclusion increases from $10 million to $15 million.

What This Means for You

These changes offer valuable opportunities, but their complexities, such as income phaseouts and expiration dates, require strategic planning. To fully leverage these opportunities, it’s critical to work with a professional who can tailor strategies to your unique financial situation.

Frequently Asked Questions

Does this mean my tax rates won’t change anymore?
The individual tax brackets from the 2017 Tax Cuts and Jobs Act are now permanent. That means they won’t automatically revert to higher rates in 2026. However, Congress could always make changes in future legislation.

Is Social Security now tax-free?
Not exactly. Instead of making Social Security benefits tax-free, the law created a $6,000 deduction for seniors ($12,000 for couples) to reduce taxable income. It can help reduce taxes on Social Security, but it’s not a direct exemption.

Will the new deductions apply to me?
Many of the new deductions—like those for tips, overtime, and auto loan interest—apply to middle-income taxpayers. But most come with income phaseouts, so eligibility depends on your adjusted gross income.

How long will these changes last?
Some provisions are permanent, like the tax brackets and QBI deduction. Others, like the tip and overtime deductions, expire after 2028. Understanding the timeline is important when planning.

What if I’m a business owner?
The 20% QBI deduction is now permanent, which is a win for most pass-through business owners. The Section 179 expensing rules and QSBS exemption were also expanded. If you’re self-employed or own a business, these changes are worth reviewing closely.

Disclaimer: This article is provided for informational purposes only and is not intended as tax, legal, financial, or investment advice. The information presented reflects our understanding of the One Big Beautiful Bill Act as of its passage on July 4, 2025, and is subject to change based on future regulatory guidance or interpretations. Tax and financial planning is complex and depends on individual circumstances. We strongly recommend consulting with a qualified tax professional, financial advisor, or legal counsel to evaluate how these changes apply to your specific situation. Vaultis Private Wealth does not provide tax or legal advice.

Retirement Plans for Small Business Owners

As a small business owner, offering a retirement plan is not just about attracting and retaining talented employees—it's also about securing your own financial future. With various retirement plan options available, choosing the right one can be challenging. As a business owner, your retirement planning needs are unique, often intertwined with your business succession strategy and personal financial goals. This article will explore different retirement plans suitable for small businesses, focusing on how they can benefit you as the business owner. We will discuss their features, benefits, contribution limits, and considerations to help you make an informed decision.

1. 401(k) Plans (Traditional and Roth)

Overview: A 401(k) plan is a popular retirement savings option that allows employees, including business owners, to contribute pre-tax dollars from their wages, with the option for employers to match contributions. Additionally, a traditional 401(k) can include a Roth 401(k) feature, allowing for after-tax contributions with tax-free withdrawals in retirement.

Ideal for: 401(k) plans are ideal for business owners with more than 25 employees who want to offer a competitive benefits package while maximizing their own retirement savings. The Roth feature is particularly beneficial if you expect to be in a higher tax bracket in retirement.

Contribution Limits (2024):

• Employee contribution: Up to $23,000 annually

• Catch-up contribution (age 50+): Additional $7,500

• Total contribution (employee + employer): $69,000 or 100% of compensation, whichever is less

Tax Benefits: Contributions to a traditional 401(k) are made with pre-tax dollars, reducing your taxable income, while Roth 401(k) contributions are made with after-tax dollars, allowing for tax-free withdrawals in retirement. Employer contributions are tax-deductible.

Considerations: 401(k) plans require annual non-discrimination testing and have higher administrative costs compared to some other plans. However, they offer flexibility and high contribution limits, making them a robust option for business owners looking to maximize their retirement savings.

As a business owner, this plan type may offer you the ability to save significantly for retirement while providing a valuable benefit to attract and retain top talent.

2. Solo 401(k) Plans

Overview: Also known as an individual 401(k), this plan is designed for self-employed individuals or business owners with no employees other than a spouse. It allows for significant contributions as both employer and employee.

Ideal for: Solo 401(k) plans are perfect for sole proprietors, partnerships, and small business owners with no full-time employees. This plan offers a retirement savings option without the complexity of managing a larger plan.

Contribution Limits (2024):

• As both employer and employee, you can contribute up to $69,000 annually

• Catch-up contribution (age 50+): Additional $7,500

The contribution limits for Solo 401(k) plans is higher than traditional 401(k) plans because you can contribute in two capacities: as both the employee and the employer. This dual contribution ability allows you to maximize your retirement savings more effectively than with other plan types. 

Tax Benefits: Contributions are tax-deductible, and earnings grow tax-deferred, providing significant tax advantages for self-employed individuals.

Considerations: Solo 401(k) plans are easy to administer with minimal paperwork but require filing Form 5500 when plan assets exceed $250,000. This plan is ideal for business owners looking to maximize their retirement savings without the administrative burden of a larger plan.

As a business owner, this plan type may offer you the flexibility to maximize your retirement savings while maintaining full control over your contributions and investments.

3. SIMPLE IRA (Savings Incentive Match Plan for Employees)

Overview: A SIMPLE IRA is a straightforward retirement plan that's easy to set up and manage, with mandatory employer contributions.

Ideal for: SIMPLE IRAs are ideal for business owners with 100 or fewer employees who want a low-cost, easy-to-administer plan that still provides valuable retirement benefits for themselves and their employees.

Contribution Limits (2024):

• Employee contribution: Up to $16,000 annually

• Catch-up contribution (age 50+): Additional $3,500

• Employer must match up to 3% of employee contributions or provide a 2% non-elective contribution for all eligible employees

Tax Benefits: Employee contributions are made with pre-tax dollars, and employer contributions are tax-deductible, making it a tax-efficient option for both parties.

Considerations: SIMPLE IRAs have lower contribution limits compared to 401(k) plans and require mandatory employer contributions. However, they are easy to set up and maintain, making them a convenient option for business owners looking for simplicity.

As a business owner, this plan type may offer you a straightforward way to save for retirement while providing a valuable benefit to your employees with minimal administrative burden.

4. SEP IRA (Simplified Employee Pension)

Overview: A SEP IRA allows employers to make tax-deductible contributions to their employees' retirement accounts, with high contribution limits relative to other plans.

Ideal for: SEP IRAs are ideal for self-employed individuals and small business owners with few employees. This plan offers a simple and flexible retirement savings option with significant tax advantages.

Contribution Limits (2024):

• Up to 25% of an employee's compensation or $69,000, whichever is less

• Same percentage must be contributed for all eligible employees

Tax Benefits: Contributions are tax-deductible for the employer, and earnings grow tax-deferred, providing significant tax advantages.

Considerations: Only employers can contribute to SEP IRAs, and they are easy to set up and administer. However, SEP IRAs can be less suitable for businesses with many employees due to the requirement to contribute the same percentage for all eligible employees. This can become costly as your workforce grows. This plan is ideal for business owners looking for a straightforward and tax-efficient way to save for retirement, particularly those with a small number of employees or solo practitioners.As a business owner, this plan type may offer you the ability to make substantial contributions to your own retirement while maintaining flexibility in your annual contribution amounts.

5. Safe Harbor 401(k)

Overview: A Safe Harbor 401(k) is similar to a traditional 401(k) but automatically passes non-discrimination testing, making it easier to manage.

Ideal for: Safe Harbor 401(k) plans are ideal for small to medium-sized business owners who want to maximize their own contributions and those of highly compensated employees without the risk of failing non-discrimination tests.

Contribution Limits (2024):

• Same as traditional 401(k)

Tax Benefits: Safe Harbor 401(k) plans offer similar tax benefits to traditional 401(k) plans, including tax-deductible contributions and tax-deferred growth.

Considerations: Safe Harbor 401(k) plans require mandatory employer contributions, which are immediately 100% vested, providing a strong incentive for employee participation. This plan is ideal for business owners looking for a straightforward way to maximize contributions and ensure compliance.

Non-discrimination testing, which these plans automatically pass, is an annual requirement for traditional 401(k) plans to ensure they don't unfairly benefit highly compensated employees or key company decision-makers. By passing these tests automatically, Safe Harbor plans reduce administrative burden and allow higher-earning employees to maximize their contributions without restriction.

This plan is ideal for business owners looking for a straightforward way to maximize contributions and ensure compliance without the worry of failing non-discrimination tests.

As a business owner, this plan type may offer you the ability to maximize your own retirement savings without concerns about test failures, while also providing a valuable benefit to your employees.

Choosing the right retirement plan for your small business depends on various factors, including the size of your company, your budget, and your retirement goals. Each plan type offers unique advantages and considerations, from contribution limits to tax benefits and administrative requirements. By carefully evaluating these options and consulting with a financial advisor, you can select a retirement plan that best serves your business and your long-term financial goals.

For personalized guidance on selecting and managing the right retirement plan for your business, consider reaching out to Vaultis Private Wealth. Our team of experts specializes in working with business owners like you, understanding the unique challenges and opportunities you face in planning for retirement while managing your business. We can help you navigate the complexities of retirement planning, integrate it with your business succession strategy, and optimize your overall financial picture. Contact us today to learn how we can assist you in achieving your retirement goals while maximizing the value of your business.

Disclosures: The information provided in this article is for educational purposes only and should not be considered as financial, legal, or tax advice. Please consult with a financial advisor, tax professional, or legal counsel for advice specific to your business and personal financial situation. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. It is important to carefully consider your investment objectives, risk tolerance, and time horizon before making any investment decisions. Retirement plans are subject to various IRS and Department of Labor regulations. Business owners should ensure that their chosen retirement plan complies with all applicable laws and regulations, including contribution limits and non-discrimination requirements. The tax benefits and implications of retirement plans can vary based on individual circumstances and changes in tax laws. It is recommended to consult with a tax professional to understand the specific tax implications for your business and personal finances. The administration of retirement plans may involve additional costs and responsibilities. Business owners should consider these factors when selecting a retirement plan and may wish to engage a third-party administrator or financial institution to assist with plan management. The information in this article is based on current laws and regulations as of the date of publication. Future changes in legislation or regulations may impact the suitability or benefits of certain retirement plans. Regularly review your retirement plan options to ensure they continue to meet your needs.