On July 1, 2025, Congress passed the final version of the One Big Beautiful Bill Act, ushering in sweeping changes to the tax code that will impact nearly every taxpayer, business owner, and investor starting next year. With more than 1,100 pages of provisions, these new rules and tax updates can feel overwhelming, but understanding how it affects your financial situation is essential. That’s why we’ve reviewed the full legislation, so you don’t have to, and in this article we summarize the most important updates, along with how these changes might impact your finances.

What This Means for You

This new law makes permanent some popular tax cuts from the 2017 Tax Cuts and Jobs Act, introduces a handful of new deductions, and rolls back certain clean energy incentives. While some changes reduce taxes across the board, others include income limits and phaseouts that make proactive planning more important than ever. Below, we break down the key areas to help you understand what’s changing and how to adjust your strategy.

Higher Standard Deduction for All

Starting in 2025 there is a higher standard deduction for all tax filers. The standard deduction is permanently increased to $15,750 for single filers and $31,500 for married couples filing jointly. This higher deduction continues the simplification of tax filing for most households by lowering taxable income without the need to itemize. Since nearly 90% of taxpayers already claim the standard deduction, this change will directly reduce tax bills for the majority of filers, with no income phaseout to worry about.

Bigger Child Tax Credit

For families with dependent children there is a bigger tax credit that may benefit you. The child tax credit increases to $2,200 per child, beginning in 2025. This higher amount is also indexed for inflation starting in 2026, ensuring it keeps pace with rising costs. The refundable portion of the credit remains capped at $1,400 per child, adjusted for inflation. Importantly, eligibility still depends on meeting income and documentation requirements, such as providing valid Social Security numbers for both parents and children. This boost provides meaningful relief for families, but income-based phaseouts continue to apply as under previous law.

New Senior Deduction With Income Limits

There is a new Senior deduction with income limits. Seniors age 65 and older can benefit from a new $6,000 deduction per eligible taxpayer, available through 2028. However, this benefit phases out for higher-income households: the deduction is reduced by 6% of the amount your modified adjusted gross income (MAGI) which exceeds $75,000 (for single filers) or $150,000 (for joint filers). Those with incomes above these thresholds may see the deduction partially until it becomes fully eliminated at higher levels of income. This makes it especially important for retirees and near-retirees to plan distributions from retirement accounts carefully to stay under the phaseout limits where possible.

Expanded Estate and Gift Tax Exemption

There is an expanded estate and gift tax exemption in the new bill. For high-net-worth individuals and families, the law increases the estate and gift tax exemption to $15 million per person starting in 2026, with annual inflation adjustments. This change creates a window of opportunity to transfer more wealth tax-efficiently during your lifetime or at death, and may warrant a review of your estate plan and current gifting strategy.

Business Owner Benefits

The law makes the popular Qualified Business Income (QBI) deduction permanent and slightly more generous, raising it from 20% to 23% of qualified income. For business owners and self-employed individuals, this remains a valuable way to reduce taxable income. In addition, the phaseout thresholds for the QBI deduction are increased, so more income can qualify. The deduction now starts phasing out at $75,000 for single filers and $150,000 for joint filers, compared to prior lower thresholds. Business owners with even modest levels of qualified income (over $1,000) will see a minimum deduction of $400, adjusted for inflation in later years.

The QBI deduction only applies to owners of pass-through businesses, such as a sole-proprietor, partnership, S-Corp, and certain LLC’s. The more nuanced part of this rule is that it is subject to phaseouts and restrictions for high-income taxpayers, especially if you’re in a “specified service trade or business”. Be sure to discuss this with a tax professional to understand the limitations and to see if you qualify.

Tips, Overtime, and MAGA Accounts

Workers in service industries will welcome the new exemption for tips and overtime income, up to $25,000 annually, from federal income tax. However, this benefit phases out for high earners: for every $1,000 in income over $150,000 (single) or $300,000 (joint), the deduction is reduced by $100.

For new parents, the law creates MAGA accounts. These tax-advantaged savings accounts will be funded with a one-time $1,000 federal contribution for each U.S.-citizen child born between 2025 and 2028. Parents must provide a Social Security number for the child, and there are income limits for higher-earning families.

Health and Education Enhancements

Several provisions improve flexibility in health and education savings. Medicare enrollees are now eligible to contribute to Health Savings Accounts (HSAs), and unused balances from Flexible Spending Accounts (FSAs) or Health Reimbursement Arrangements (HRAs) can now be rolled into HSAs. Additionally, 529 education savings accounts can now cover K–12 tuition, homeschooling costs, and workforce training programs, continuing to expand their usefulness beyond just college.

Energy and Clean Vehicle Incentives Ending

On the other side of the ledger, the law rolls back many clean energy incentives and electric vehicle (EV) credits. Most of these credits expire after 2025, though some limited extensions remain for manufacturers below certain production thresholds. If you’re considering an EV purchase or energy-efficient home upgrades, it may make sense to act soon to take advantage of the expiring credits.

Planning Ahead

This new law affects nearly every aspect of the tax code, and by extension, your financial plan. Whether you’re a family with young children, a senior on a fixed income, a business owner, or someone thinking about estate planning, there are opportunities here to optimize your strategy as well as potential pitfalls to avoid if you don’t plan ahead.

At Navalign, we’re here to help you understand which provisions apply to you and how best to adjust your plan. From lowering your taxable income to maximizing deductions and timing wealth transfers strategically, we can guide you every step of the way.