Key OBBB Tax Changes for Individuals: What You Need to Know Now

Tyler N
Jun 25
2 min read

The Opportunity to Build a Better Budget Act (OBBB) introduces sweeping tax changes with long-term implications for individual taxpayers, high earners, small business owners, and families. As trusted advisors in complex tax matters, Y Advisory breaks down the critical provisions and what they could mean for your planning strategy.

1. Permanent Extension of TCJA Individual Income Tax Rates

The OBBB makes the 2017 Tax Cuts and Jobs Act (TCJA) individual tax rates permanent, eliminating uncertainty about future rate increases. This provides a more stable environment for income tax and estate planning.

2. Pass-Through Deduction Increased to 23%

The Qualified Business Income (QBI) deduction for pass-through entities (e.g., sole proprietors, partnerships, S corporations) increases from 20% to 23%. This change boosts the effective after-tax income for small business owners and entrepreneurs.

3. Increased Standard Deduction

The OBBB raises the standard deduction across all filing statuses, further reducing taxable income and simplifying filing for many individuals. This will affect both lower and middle-income households as well as retirees.

4. Permanent Child Tax Credit at $2,000

The Child Tax Credit (CTC) is now permanently set at $2,000 per qualifying child, providing consistent financial relief for families and greater certainty for multi-year planning.

5. State and Local Tax (SALT) Deduction Cap Raised

For taxpayers earning $500,000 or less, the SALT deduction cap is increased from $10,000 to $40,000. This is especially beneficial for residents in high-tax states, potentially improving their overall federal tax positions.

6. No Federal Tax on Overtime or Tips (with income limits)

To encourage workforce participation, overtime wages and tips will now be exempt from federal income tax, subject to an income limitation. This may reshape compensation strategies and employer benefit structures.

7. Higher Contribution Limits for Health Savings Accounts (HSAs)

The OBBB raises HSA contribution limits, again subject to income thresholds. This enhances the value of HSAs as a tax-advantaged vehicle for healthcare savings and retirement planning.

Strategic Implications

These reforms have broad planning implications, particularly for:

High-net-worth individuals
Small business owners and pass-through entities
Families seeking to optimize deductions and credits
Taxpayers in high-income-tax states

At Y Advisory, we help clients proactively adjust their strategies to maximize benefits under the new provisions, ensuring tax efficiency while mitigating risk.

📞 Let’s talk before year-end. Early planning will be key to leveraging the new OBBB provisions.