The One Big Beautiful Bill Act (OBBA) has been described as both a landmark tax cut and a controversial restructuring of American fiscal policy. For most taxpayers, the truth lies somewhere in between.
At Tax Advisors of Cary, we recognize that headlines rarely capture the full story. While the bill does extend certain favorable tax provisions and introduce new deductions, it also embeds limitations and phase-outs that affect how, and whether, those provisions apply to you. This commentary is here to help you think through the nuances of the OBBA and its potential effects, especially if you’re navigating complex financial decisions or managing significant income.
Stability for Some, Complexity for Others
One of the most talked-about aspects of OBBA is its effort to make permanent many of the tax changes from the 2017 Tax Cuts and Jobs Act (TCJA). For example:
- Lower individual tax rates are now permanent.
- The higher standard deduction is locked in and inflation-adjusted.
- The Qualified Business Income (QBI) deduction is secured and slightly expanded.
This brings a welcome level of predictability to a tax code that has seen many temporary provisions over the last decade. For taxpayers with stable income, especially business owners or retirees with consistent financial planning needs, this permanence allows for longer-term strategy development.
However, that stability is not without complication. Many of the new or continued benefits come with income thresholds, phase-outs, and specific eligibility requirements that make implementation difficult without professional guidance. In short, the tax code is still not user-friendly and OBBA does little to simplify it.
SALT Cap: A Temporary Relief
The increase in the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 is one of the most significant short-term benefits for high earners. For residents of North Carolina who pay both income and property taxes, this may provide meaningful deductions over the next five years.
But the relief is temporary. The cap reverts to $10,000 in 2030. More importantly, it begins to phase out once a taxpayer’s modified adjusted gross income (MAGI) exceeds $500,000. In that light, the expansion is less a permanent fix and more a brief planning window that could close sooner depending on future legislative changes.
Qualified Business Income Deduction: More Room, More Planning
For business owners, the QBI deduction remains one of the most powerful tools for reducing taxable income. OBBA retains the 20% deduction for qualifying pass-through income and slightly increases the phase-out limits for service-based businesses.
This change gives professionals and entrepreneurs more room to maneuver. For high-income clients with business operations, this provision remains essential, but also underscores the importance of entity selection, reasonable compensation, and smart income timing.
Charitable Giving: A Mixed Bag
Non-itemizers can now claim a charitable deduction: up to $1,000 for single filers or $2,000 for married couples filing jointly. This allows more taxpayers, even those taking the standard deduction, to deduct modest charitable gifts.
Itemizers face a new 0.5% Adjusted Gross Income (AGI) floor: you can only deduct charitable contributions that exceed 0.5% of your AGI. For example, with an AGI of $100,000, only the amount above $500 per year counts as a deductible contribution.
Estate Tax Planning: A Crucial Opportunity
The bill’s permanent increase in the federal estate and gift tax exemption to $15 million per individual ($30 million per couple) is one of the most impactful provisions for families with large estates.
This change creates a limited-time opportunity for wealth transfer planning. Even if you’re not currently affected by estate taxes, rising property values, business growth, and investment appreciation could eventually push families into taxable territory. Planning ahead, through trusts, gifting, or family business restructuring, can reduce future tax exposure.
Temporary Deductions with Narrow Use
OBBA includes several new deductions, such as those for tips, overtime pay, and auto loan interest, but all of them are temporary and phased out at relatively modest income levels. For many high-income taxpayers, these deductions may never come into play.
This highlights a common feature of the bill: broad language with limited reach. Many provisions that appear to offer relief are narrowed by strict income caps or sunset dates. As a result, much of the bill’s tax relief is front-loaded and temporary.
Key Questions to Consider
If you’re unsure how the OBBA may affect your situation, here are a few questions to begin the conversation:
- Does your income level put you in or near any new phase-out zones?
- Could your business qualify for enhanced QBI deductions?
- Are you planning any large charitable contributions in the next few years?
- Does your estate plan reflect the new exemption limits?
- Are you likely to benefit from the SALT cap increase before it expires?
These questions may seem technical, but they help clarify whether the bill presents a planning opportunity, a tax liability, or both.
The Importance of Personalized Tax Strategy
The One Big Beautiful Bill Act is neither universally good nor bad. It offers benefits but many are conditional. It brings stability but also embeds complexity. And while it aims to provide relief, much of it is temporary or limited by income and status.
At Tax Advisors of Cary, our goal is to help you make sense of legislation like OBBA by offering real-world insight, not political spin. We take pride in helping clients develop forward-thinking strategies tailored to their income, assets, and goals. If you’re unsure how the changes apply to you, now is the right time to review your plan with a professional at Tax Advisors of Cary.
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