If you are like our clients whom we call Midwestern Millionaires — hardworking, frugal, diligent savers — the One Big Beautiful Bill (OBBB) is a hot topic right now.
While OBBB might seem like just another piece of legislation, it does create some beneficial opportunities for smart retirement planning decisions.
In this article, I share 12 points that apply to those who are in or near retirement, have pensions and have $1 million or more saved and how you can make the most of them.
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1. Lower tax rates aren't going away
Good news first: The lower income tax brackets from the Tax Cuts and Jobs Act (TCJA) are now permanent. (The word "permanent," in government-speak, means the rates could be changed down the road, but that would require new legislation. As I always say, "The tax code is written in pencil.")
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Before OBBB, tax rates were set to jump in 2026. Now, you can keep enjoying today's lower brackets. This is good news for anyone planning to have higher income during retirement from pensions or larger tax-deferred savings like an IRA or 401(k).
It is also helpful for those looking to do Roth conversions.
2. The standard deduction is going up
Starting in 2025, standard deductions are rising to $15,750 for single people and $31,500 for those who are married filing jointly.:
There's an additional $6,000 deduction for those over age 65, but it's available only through 2028. You can claim this $6,000 even if you itemize.
It phases out for single people with a modified adjusted gross income (MAGI) over $75,000 and goes away once you hit a MAGI of $175,000 (over $150,000 to $250,000 for married filing jointly).
This deduction is in addition to the already allowed $2,000 for single filers and $3,200 for married filing jointly.
So the total potential standard deduction for those over 65 is $23,750 ($15,750 + $2,000 + $6,000) for singles and $46,700 ($31,500 + $3,200 + $12,000) for married couples.
For those who "hate taxes" and want to pay their fair share and not a penny more, I would recommend requesting my book I Hate Taxes by clicking here. It is a fun read and will help with tax-saving strategies for those in or near retirement who have been diligent savers.
3. New charitable deduction for non-itemizers
Charitable giving is now more advantageous for everyday taxpayers. Starting in 2026, non-itemizers can deduct cash gifts to charity up to $1,000 (single) and $2,000 (married filing jointly).
This is a rare perk for those who typically claim the standard deduction, and it is an easy way to make your generosity go a little further on your tax return.
4. SALT deduction expanded
OBBB lifts the state and local tax (SALT) deduction to $40,000, indexed for inflation through 2029.
However, it phases out quickly for incomes over $500,000 (married) and disappears entirely above $600,000. This helps many high-income filers and may especially benefit those in higher-tax states like New York, New Jersey or California. This could also be another reason to do more strategies like a Roth conversion.
5. 'Trump accounts' for children
For those expecting a child (or grandchild) this year through 2028, OBBB introduces a new type of savings tool: the Trump account. Here's how it works:
- Parents receive a $1,000 government contribution for each child born through 2028.
- No withdrawals can be made until the child is age 18. Once the child is 18, the Trump account will be treated as a traditional IRA.
- Withdrawals are taxed as ordinary income, and pre-59½ distributions have a 10% penalty added.
- There are many exceptions to the 10% penalty, including college tuition and a first-time home purchase.
- Any child under 18 can open a Trump account. Only those born from 2025 through 2028 will receive the $1,000 seed money.
What I recommend: Take advantage of the $1,000 but contribute the rest to a 529 plan or UTMA account, both of which typically offer stronger tax advantages.
6. Overtime and tips may be tax-free
Service industry workers and overtime warriors might see a welcome tax break through 2028:
- Up to $25,000 in tips can be excluded from taxable income (single or married)
- Up to $12,500 in overtime pay per taxpayer is also deductible
- These benefits phase out for incomes above $150,000 (single) or $300,000 (married) and disappear entirely at $175,000 and $350,000, respectively.
7. Big incentives for scholarships and school donations
Starting in 2027, donations to scholarship granting organizations (SGOs) will earn a generous $1,700 federal tax credit. This is a powerful way to support education while trimming your tax bill.
8. HSA rules stay the same
Despite plenty of speculation, health savings accounts (HSAs) remain unchanged under OBBB. While some hoped for higher contribution limits, the rules stay the same.
9. Auto loan interest deduction
This is not heavily talked about, but you must meet many requirements for this to work. Here are the details:
- A deduction of up to $10,000 in interest on auto loans
- Only for cars assembled in the U.S.
- Must be a new car. Used cars do not qualify.
- Deduction is available from 2025 through 2028
- Phases out when MAGI is above $100,000 (single) or $200,000 (married)
10. New AGI floor for charitable deductions
Starting in 2026, there's a new 0.5% (AGI) adjusted gross income floor on charitable deductions for itemizers. What does this mean? High-income givers might want to maximize donor-advised funds (DAFs) in 2025 before these new limitations hit.
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If you make $200,000 a year, then the first $1,000 you give will not count toward your itemized deductions.
11. Limited deductions for high earners
Beginning in 2026, taxpayers in the 37% tax bracket will get only the equivalent of a 35% deduction for itemized expenses.
This reduces the value of deductions for high-income earners. This will affect only those in the highest income bracket.
12. Higher estate and gift tax exemptions
This will apply to only about 0.3% of taxpayers, but OBBB lifts the federal estate tax exemption in 2026 to $15 million (single) and $30 million (married).
This is a win for high-net-worth families, as bringing these limits down in 2026 had been discussed.
What you can do now
If you're a Midwestern Millionaire, or just a careful saver anywhere in the country, it is important to do the following:
- Review your charitable strategies for 2025-2028
- Plan any potential Roth conversions while rates remain low
- Evaluate new deductions or credits you might qualify for
- Avoid surprises, as some benefits phase out after 2028
If you take only one thing from this article, I hope it is this: Do not ignore this bill. Even small changes, like the charitable deductions for non-itemizers or new rules for tips and overtime, can translate into thousands of dollars in tax savings.
For higher-net-worth families, estate planning and Roth conversions are more critical than ever.
OBBB isn't just another piece of political news, it is a toolbox of opportunities for proactive planners. Do not wait until it is too late. The next few years might be the best tax-planning window we have ever had.
This article has been updated.
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