Ref: OBBA signed by President Trump 7/4/25
STATE TAX: California does NOT conform to any of these changes. Some states such as Utah and New Mexico have “rolling conformity” and will likely adopt many of these changes. Non-California clients should check their individual state adoption.
Individual selected highlights:
- SALT limitation: From 2025 through 2029: New limit of $40,000 reduced for modified adjusted gross income over $500,000.
- Standard deduction: Starting in 2025: $15,750 single; $23,625 head-of-household and $31,500 married joint.
- Estate/gift tax exemption: $15 million starting in 2026.
- 529 plans: Starting 2026: Annual limit on distributions of $20,000 and can be used for elementary or secondary schools in addition to post-secondary.
- Charitable for those who don’t itemize: Starting in 2026, up to $1,000 ($2k for married) for cash gifts.
- Tip income deduction: Above the line deduction up to $25k for tips in industry which customarily and regularly receives tips INCLUDING INDEPENDENT CONTRACTORS. Phases out when modified AGI exceeds $150k ($300k married joint). For years 2025 – 2028. UPDATE: The IRS has promised to publish a list of “occupations where tips are traditionally received” by October 2, 2025.
- Overtime deduction: Up to $12,500 ($25k married) for qualified overtime compensation. Phase out when modified AGI is over $150k ($300k married).
- Senior deduction: Additional deduction of $6,000 per individual age 65 or over from 2025 – 2028. Phase out when modified AGI is over $75k ($150k joint)
- US assembled car interest: Deduction up to $10k of interest on us assembled vehicle for years 2025 – 2028. Phased out when modified AGI exceeds $100k ($200k on joint return).
- Mortgage insurance premiums: Starting in 2026… deductible if itemizing. Phased out for modified AGI over $100k ($50k married filing separate).
- Termination of Clean Energy Credits: For vehicles purchased after September 30, 2025.
