SALT Relief, Tip Breaks, and College Shake-Ups: Your Quick Guide to the OBBB ☕️

Written By: Tommy Lopez Jr., CFP®, Founder | Financial Advisor

The nearly 900-page spending and tax reconciliation bill, known as H.R. 1, or as some are calling it, the “One Big Beautiful Bill,” is now law. What makes this bill so beautiful? Well, as the saying goes, beauty is in the eye of the beholder, so grab a fresh cup of coffee or your favorite drink, and let's dig in. 

• 🟢 Permanent Wins: Lower tax brackets, $2,200 Child Tax Credit, $15M individual gift and estate exemption ($30M Joint).
• 🟡 Expires 12/31/2028: “No Tax on Tips,” “No Tax on Overtime,” $6K senior deduction, $40K SALT cap.
• 👶 Newborn boost: $1,000 Treasury deposit + $5K/year Contribution Limit into a “Trump Account.”
• 🚗 Car-loan interest & other sweeteners phase out after 2028. Scroll for details, planning moves, and deadlines you don’t want to miss.

Temporary—but Generous—Deductions 🟡 (2025-2028)

Higher-Education 📚 & Healthcare 🩺 Tweaks

Individual Rates From (TCJA) of 2017 Are Now Permanent

Top provisions impacting individuals, families, and businesses:

Standard Deduction Boost

• $15K for Individual filers and $30K for MFJ increases to $15,750 and $31,500, respectively, starting in 2025 and indexed for inflation going forward. 

Child Tax Credit 

• Increased from $2K to $2.2K starting in tax year 2025 and will be adjusted for inflation going forward. 

State and Local Tax (SALT) Deduction 

• The $10K cap deduction was increased to $40K starting in 2025 and indexed for inflation. 
• The new cap will phase down for high-income earners (MAGI of $500K starting in 2025, with a $10K floor).
• The updated SALT deduction is scheduled to revert to $10K in 2030. 

Social Security Deduction Boost

• Starting in tax year 2025 through 2028, seniors 65 and older will each receive a $6K deduction ($12K MFJ). 
• The deduction will be based on modified adjusted gross income and will phase out entirely for single filers with MAGI over $75K and $150K for couples filing jointly. 
• The deduction boost is scheduled to end at the end of 2028. 

“No Tax on Tips“

• Unfortunately, tips will continue to be taxed; however, a deduction for “qualified tips” will be available with a cap of $25K. 
• In addition, the deduction is reduced or will start being phased out by $100 for each $1,000 of the taxpayer’s MAGI above $150K for single filers, and $300K for joint filers. 
• Payroll taxes for Social Security and Medicare still apply.

”No Tax on Overtime”

• Again, unfortunately, the name is misleading. Overtime will still be taxed, however, a new deduction will be available for “qualified overtime compensation.”
• The maximum deduction for qualified overtime compensation is $12,500 ($25,000 for joint returns). 
• Similar to tips, the deduction is reduced for taxpayers with MAGI above $150K for single filers and $300K for joint filers. 
• Payroll taxes for Social Security and Medicare still apply.

Estate and Gift Tax Exemption

• Increased to $15 million for individuals and $30 million for couples, and applies to estates of decedents dying and gifts made after December 31, 2025. 

Higher Education Updates

Students and graduates can’t catch a break as new rules and regulations continue to change. 

• New loan limits are established for graduate and professional students
• Graduate Student (not a professional student):  Maximum annual amount of $20,500
• Professional Student: Maximum annual amount of $50,000. 
• Aggregate limits beginning July 1, 2026:
  • Graduate student (not or never a professional student): $100k
  • Graduate student (is or has been a professional student): $200k
  • Professional student (not or never a graduate student): $200k 
  • Professional student (is or has been a graduate student): $200k
• Parent Borrowers (Federal Direct PLUS Loans), beginning July 1, 2026: 
  • Annual Limit: Maximum annual amount of $20k per dependent student.
  • Aggregate Limit: Maximum aggregate amount of $65k per dependent student. 
  • Lifetime Maximum Aggregate Amount for All Students (excluding parent PLUS loans), beginning July 1, 2026: $257,500

New Saving Option "Trump Accounts"

• For Minors under 18
• Generally, annual contributions are limited and capped at $5K (adjusted for inflation after 2025) and are not deductible.
• A pilot program offers direct government contribution of $1K for eligible U.S. citizen children born between 2025 and 2028, and does not count towards the annual limit. 
• Employers can also contribute up to $2.5K annually. It will not count as income for the employee. 
• Withdrawals are not allowed until age 18, with very few exceptions. 
• Strict investment rules.
• Distributions are subject to income tax.

Businesses and Business Owners

• Full expensing for certain business property
• Qualified Business Income (QBI) Deduction: The bill enhances the QBI deduction by increasing phase-in amounts and introducing a minimum deduction for active qualified business income. 
• Increased section 179 expensing limits: Dollar limitations for expensing certain depreciable business assets under Section 179 are increased. 
• Information Reporting Threshold: Increases the threshold for requiring information reporting with respect to certain payees from $600 to $2,000. 

Other Notable Provisons:

• ABLE Accounts: Increased contribution limits and expanded eligibility for rollovers from qualified tuition programs into ABLE accounts are now permanent, effective for contributions after December 31, 2025.
• Opportunity Zones: The program is permanently renewed and enhanced, with new decennial designations and modified rules for capital gains deferral, including a special increase in basis for investments in "qualified rural opportunity funds" held for at least 5 years.
• Rural Healthcare Funding: A grant program will be established for States to help with improving access and other health activities. 

Action Checklist ☑️

1. Run a 2025 projection—include $40 K SALT cap, new deductions, and brackets.
2. Open a Trump Account for 2025-28 babies; file the $1 K election ASAP.
3. Rebalance college plan—PLUS limits + RAP rules may raise out-of-pocket costs.
4. Schedule a “year-end moves” meeting—we’ll map Roth conversions, gifting, and SALT prepayments before deadlines hit.

Final Thoughts & Disclaimer

The OBBB creates real planning opportunities, with some provisions expiring in a few years. We’re here to help maximize your financial planning opportunities. 

Ready to see how these changes hit your 2025 tax bill?

📅 Book a 30-minute call here. 

☕ Tommy Lopez, CFP® – Coffeehouse Capital

_{This post is for educational purposes only and shouldn’t be considered legal or tax advice. Coordinate with your Financial Advisor and consult your tax and legal professional for guidance tailored to your situation.}

_{Source: H.R. 1, OBBB}