Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) introduces sweeping changes to the federal tax code and financial landscape. This legislation includes tax cuts, benefit enhancements, and new savings opportunities—many of which will impact federal employees, retirees, and their families for years to come.
Below, we break down the most relevant updates and what they could mean for your financial plan.
Tax Changes & Deductions
Standard Deduction Increase (2025)
- $15,750 for Single filers
- $31,500 for Married Filing Jointly
Senior Bonus Deduction (2025–2028)
- Additional $6,000 deduction for taxpayers aged 65+
- Subject to phase-out for incomes above $75,000 (Single) or $150,000 (MFJ)
Child Tax Credit
- $2,200 per qualifying child
- Refundable portion up to $1,700
SALT Deduction Cap
- Increased to $40,000, indexed to inflation
- Phases out beginning at $500,000 of income
- Reverts back to $10,000 in 2030
Car Loan Interest Deduction (2025–2028)
- Deduction up to $10,000 of interest on new auto loans
- Phases out for incomes over $100,000 (S) / $200,000 (MFJ)
- Vehicle must be assembled in the U.S.
Tip Income Deduction (2025–2028)
- Deduction up to $25,000 of qualified tip income
- Available to those earning less than $150,000 (S) / $300,000 (MFJ)
Overtime Pay Deduction (2025–2028)
- Above-the-line deduction of:
- $12,500 (Single)
- $25,000 (MFJ)
- Applies to qualified overtime pay
Estate, Gift & Retirement Planning
Estate & Gift Tax Exemption
- $15 million per individual / $30 million per couple
- Made permanent starting in 2026
“Trump Accounts” Introduced (for children born between 2025 and 2028)
- $1,000 federal deposit at birth
- Parents can contribute up to $5,000/year
- Grows tax-deferred
- Qualified withdrawals will be taxed as long-term capital gains
- Must be invested in U.S. equity index mutual funds
- Withdrawal Rules:
- Under 18: No withdrawals allowed
- Ages 18–25: Up to 50% for qualified expenses
- Ages 25–29: Full balance for qualified expenses
- 30+: Full balance available for any reason
- Qualified Expenses Include:
- Education
- First-time home purchase
- Starting a small business
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Student Loan Reform
Student Loan Caps
- Graduate loans capped at:
- $20,500/year
- $100,000 lifetime
- Professional degree loans (e.g., doctors, lawyers):
- $50,000/year
- $200,000 lifetime
- Total federal loan limit: $257,500 (excludes Parent PLUS)
Parent PLUS Loan Cap
- $65,000 lifetime
Loan Program Changes
- Grad PLUS loans eliminated beginning July 2026
- Only two repayment options for new borrowers starting mid-2026:
- Standard Repayment
- Income-Based Repayment (now called Repayment Assistance Plan, or RAP)
- Debt forgiveness timeline under RAP extended to 30 years
Clean Energy & Education Changes
EV & Clean Energy Credits Expire
- Ends $7,500 new EV and $4,000 used EV tax credits after Sept 30, 2025
- Ends energy-efficiency home credits (solar panels, heat pumps, windows, etc.) after Dec 31, 2025
Private School Scholarship Credit (Starting 2027)
- Tax credit of up to $1,700 for donations to approved nonprofits that fund K–12 private school scholarships
- Program is optional by state and school district
Small Business & Pass-Through Income
Section 199A Deduction Becomes Permanent
- The Qualified Business Income Deduction (up to 20% for pass-through businesses) is no longer set to sunset
Medicaid Work Requirements (Starting 2027)
- Able-bodied adults age 19–64 must work 80 hours/month and show proof
- Requirement begins December 31, 2026, in most states
What All of This Means for Feds & Retirees
The OBBBA introduced key tax changes, all of which could impact retirement, education, and estate planning decisions for federal employees and retirees.
Feds should review their plans with a qualified, fed-focused financial advisor to ensure they’re positioned to take advantage of the changes—and avoid unintended tax consequences.
Need help understanding how the OBBBA affects you? Email us at [email protected] to schedule a free financial planning consultation with our team to learn more.
**Written by Katelyn Murray, CFP®, ChFEBC®, FBS®, CFT-1™, ECA. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Katelyn Murray and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
