The sweeping tax and spending package known as the One Big Beautiful Bill (OBBBA) officially became law on July 3, 2025. That means the major tax provisions we’ve been following for months are no longer theoretical—they are finalized and in effect. For retirees and investors in Maryland, Delaware, and across the country, this legislation has significant planning implications.
Below, we break down what’s now set in stone and what it means for you.
Key Takeaways:
- Extension of the 2017 tax cuts means tax rates aren’t increasing in 2026 afer all
- New Senior Deduction of $6,000 per filer over age 64
- Charitable Giving Deduction now available even if you don’t itemize
- Estate and Gift Tax Exemption permanently increased
- SALT Deduction Cap Raised—but with income-based phaseout
Taxes Are Staying the Same
The headline item is the permanent extension of the individual tax rates originally enacted under the 2017 Tax Cuts and Jobs Act (TCJA). These tax cuts were scheduled to expire on December 31, 2025, which would have meant higher tax bills starting in 2026. The new law locks in those lower tax brackets for the long term.
This means the familiar tax rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—will remain in place. The income thresholds for each bracket were adjusted for inflation in 2025 and will continue to rise modestly each year going forward, providing a bit more breathing room for tax-sensitive retirees. In short: your tax bracket won’t be going up just because it’s 2026. Our projected tax rates in 2026 are as follows:
| Filing Status | 10% | 12% | 22% | 24% | 32% | 35% | 37% (Top Rate) |
|---|---|---|---|---|---|---|---|
| Single | $0 – $11,925 | $11,925 – $48,475 | $48,475 – $103,350 | $103,350 – $197,300 | $197,300 – $250,525 | $250,525 – $626,350 | Over $626,350 |
| Married Filing Jointly | $0 – $23,850 | $23,850 – $96,950 | $96,950 – $206,700 | $206,700 – $394,600 | $394,600 – $501,050 | $501,050 – $751,600 | Over $751,600 |
| Head of Household | $0 – $17,000 | $17,000 – $64,850 | $64,850 – $103,350 | $103,350 – $197,300 | $197,300 – $250,500 | $250,500 – $626,350 | Over $626,350 |
| Married Filing Separately | $0 – $11,925 | $11,925 – $48,475 | $48,475 – $103,350 | $103,350 – $197,300 | $197,300 – $250,525 | $250,525 – $626,350 | Over $375,800* |
2. The New Senior Deduction (Starting 2025)
One of the most retiree-friendly provisions in OBBBA is the creation of a new Senior Deduction for individuals over the age of 64. This new deduction: – Adds $6,000 for single filers and adds $12,000 for married couples filing jointly (if both are age 65 or older).
This deduction applies regardless of whether you itemize or take the standard deduction. It’s stacked on top, creating potential room for creative planning such as: harvesting capital gains tax-free, making Roth conversions more affordable or just sheltering Social Security and pension income more effectively.
The Senior Deduction Phase Out
- Begins at $75,000 of MAGI for individuals and $150,000 for couples
- Fully phased out at $175,000 (single) or $250,000 (joint)
While the deduction doesn’t eliminate tax on Social Security benefits directly, it may reduce or eliminate the need to include Social Security in taxable income for many retirees. According to the White House, this change is expected to reduce the percentage of retirees paying federal tax on Social Security from 36% down to 12%. However, this deduction is temporary, scheduled to expire after 2028, so planning strategies should reflect that timeline. Like we said, a great time to think about how to harvest some income with this new added deduction!
3. Charitable Giving Enhancements
Historically, most retirees haven’t received a tax break for charitable contributions unless they itemized their deductions—something fewer people do now due to the high standard deduction.
OBBBA changes that by allowing an above-the-line deduction of $1,000 for individuals and $2,000 for married couples that will apply regardless of if you itemize or not. Donations can only be cash and must be made to a qualified charity. Unfortunately non-cash gifts like clothing or furniture will not count. Those will still need to go towards the itemized limits. However:
For larger charitable givers and anyone who is adding charitable donations to their itemized deductions, the bill imposes a 0.5% AGI floor before itemized deductions kick in. That means: – If your AGI is $200,000, the first $1,000 of charitable donations won’t be deductible under itemization rules. – Only the amount above that floor counts toward your itemized deductions. This does not apply to the above the line deduction referenced above. Only itemized amounts.
Also important: If you’re in the top marginal tax bracket (income above $627,350 for singles or $752,350 for joint filers), your charitable deduction is capped at a 35% rate, not your full 37% marginal rate. This reduces the relative value of charitable giving at the highest income levels. You can jump back to the top of the page to see the full breakdown of income tax brackets.
4. SALT Deduction Boost—with a Catch
The State and Local Tax (SALT) deduction cap has been temporarily increased: – From $10,000 to $40,000, starting in 2025 – Indexed slightly for inflation each year through 2029. If yout noticing a theme, it’s some of the best parts of the tax law will potentially sunset again. All subject to future Congressional action, of course.
The SALT deduction does have a steep income phaseout that will be important to pay attention to for higher income retirees and pre-retirees. The phaseout starts at $500,000 of MAGI. The deduction is reduced by 30% of the amount over the threshold – Fully phased out at $600,000 of income. This will be come a critical threshhold. Not only will you owe tax on the income between $500-$600k of income, but you’ll add back an additonal $30,000 of income that was previously deducted. At a 35% federal bracket, that can get expensive, turning into a 45.5% marginal federal rate. A $10,000 minimum deduction remains in all cases and will act as a floor regardless of income. So, worst case, it’s as if the law never happened!
Delaware and Maryland Implications
Retirees in Delaware may not get as much advantage with the increased SALT caps due to our relatively moderate state taxes. Maryland retirees may benefit more since it misses some of the tax friendly provisions unique to Delaware and much higher property taxes. This isn’t likely to get anyone to shift their residence back to Maryland. However, for those who are running into the income cap, the PTE (Pass Through Entity) tax payment is still eligible. There was an attempt early in the bill to phase this out. Business owners and those with an LLC or other entity can still pay and deduct state taxes at the corporate level.
This expanded SALT cap will sunset in 2029, at which point the $10,000 limit returns unless extended.
5. Estate & Gift Tax Limit Raised
For high-net-worth families, this might be the most impactful change of all. OBBBA: Permanently increases the estate and gift tax exemption to $15 million per person, or $30 million per couple – This exemption will be indexed for inflation going forward – The provision is not subject to sunset, offering rare stability in long-term estate planning. The usual caveat applies here as every other “permanent” provision we’ve listed – that it’s only as permanent until the next Congress decides it’s not.
However, this avoids the dramatic reversion that was expected in 2026, when the exemption was set to drop back to around $7 million per person. Now, wealthy families have more room to pass assets without incurring federal estate tax—and the step-up in basis at death remains intact. It will be worth paying attention to how future Congresses treat this given the fiscal condition our country finds itself in.
6. Other Provisions and “MAGA Accounts”
In addition to retiree-focused measures, the bill includes a few new provisions for working families and younger Americans:
- Up to $10,000 in deductible auto loan interest for those earning under $100,000. Though vehicles must be made in the United States. However, for retirees who have a new car purchase lined up – this may be a fruitful planning opportunity to finance a portion instead of paying or cash. We’ll need to see how the IRS decides to finalize the bill with regulation and where it gets listed on the return.
- Overtime pay deduction of up to $12,500 ($25,000 MFJ), also with income limits
- No federal income tax on tip income of up to $12,500 ($25,000 MFJ), for eligible workers. This deduction applies to “qualified tips,” implying that tips are both voluntary and customary to the industry or position. So, for all of you with a W-2 job, you can’t claim your bonus as a “tip”.
And Lastly, And a new program known as the “MAGA Account” (Make America Grow Again)—a hybrid investment account for children born between 2025 and 2028. The Treasury will automatically deposit $1,000 into each account for children born between 2025-2028. These are expected to operate as a cross between a UTMA and 529 plan, though additional IRS guidance is forthcoming. We’ll have more to say on these as guidance is issued and we have some more clarity on where it might fit. For now though, anyone with new grandchildren appears to be getting $1,000 put into one of thsese accounts!
In Summary
Any tax law brings about opportunity. Sometimes its opportunity just to confirm your still doing the right thing. Other times there are new provisions that may directly affect you and require a slight (or big) shift in planning. Some of the provisions above you can expect to hear from us about. It will certainly be affecting a majority of our clients (and provide some great planning opportunities!). If you have questions on how this may affect you, or would like to talk to us about how we do tax planning – reach out to us here.
