The One Big Beautiful Bill Act: How It May Impact Your Money

The One Big Beautiful Bill Act (OBBBA), signed into law in early 2025, introduces a mix of temporary and permanent changes that will shape how Americans save, spend, and plan for the future.

OBBBA tax changes

New and enhanced tax breaks

The Act made several provisions from the Tax Cuts and Jobs Act (TCJA) permanent that were scheduled to expire after 2025.

• Increased child tax credit. Starting with the 2025 tax year, the maximum child tax credit is $2,200 per child, with existing income thresholds unchanged. The credit will be indexed for inflation beginning in 2026.
• Higher standard deduction amounts. For returns filed in 2026 (covering 2025 income), the standard deduction is $15,750 for single filers or married filing separately, $31,500 for married filing jointly, and $23,625 for heads of household. These amounts will continue to adjust annually for inflation.
• Estate and gift tax exclusion permanently raised to $15 million per individual starting in 2026, indexed for inflation thereafter. Gifts made in 2025 will still fall under the current exclusion amount.

The Act also introduces several temporary deductions (effective 2025–2028) aimed at reducing taxable income for working Americans and seniors:

• No tax on tips (temporary). Employees and certain self-employed individuals in tip-based occupations can deduct up to $25,000 of qualified tips annually. This deduction phases out for higher-income taxpayers and excludes those in Specified Service Trades or Businesses (SSTBs). It applies whether you itemize or take the standard deduction.
• No tax on overtime (temporary). Workers can deduct the overtime premium portion of pay (the “half” in time-and-a-half), up to $12,500 for singles and $25,000 for joint filers. Like the tip deduction, it phases out at higher income levels.
• No tax on car loan interest (temporary). Interest on loans for new, U.S.-assembled personal vehicles qualifies for a deduction of up to $10,000 annually. Used vehicles and leases do not qualify.
• Senior deduction (temporary). Individuals aged 65+ can claim an additional $6,000 deduction per person, on top of the standard deduction. This phases out for incomes above $75,000 ($150,000 for joint filers).

Tax credits eliminated or scaled back

The OBBBA significantly rolls back energy-related tax credits that were previously extended under the Inflation Reduction Act (IRA). These include:

• Energy efficient home improvement credit. Previously available through 2032, this credit (which was for home upgrades like insulation, windows, and HVAC systems) now ends for property placed in service after December 31, 2025. Homeowners must complete projects by year-end to qualify.
• Residential clean energy credit. The credit for solar panels, geothermal systems, and battery storage is terminated for expenditures after December 31, 2025. Originally scheduled to last until 2034, this accelerated sunset means homeowners should act quickly when planning installations.
• Clean vehicle credits. Credits for new and used electric vehicles are eliminated for purchases after September 30, 2025. Charging station credits also end mid-2026.
• Builder credit for energy-efficient homes. Ends for homes acquired after June 30, 2026.

Other impacts to your finances

Trump Accounts

A Trump Account is a new tax-advantaged savings and investment account created under the Act to help families build wealth for their children’s future. Think of it as a hybrid between a traditional IRA and a 529 plan: contributions are made with after-tax dollars, earnings grow tax-free, and withdrawals generally aren’t allowed until the child turns 18. At that point, the account converts into an IRA, subject to standard retirement rules. Unlike a 529, funds aren’t restricted to education—they can be used for any purpose once the beneficiary reaches adulthood.

Eligible children (under age 18 with a Social Security number) can receive contributions from parents, relatives, employers, and even nonprofits. The annual contribution limit is $5,000, and employers can add up to $2,500 tax-free. Plus, children born between 2025 and 2028 will receive a $1,000 federal seed deposit.
If you’re wondering how to open a Trump Account, the process will begin in mid-2026 when select financial institutions roll out these accounts. Parents or guardians will typically initiate the setup, and contributions can start after July 4, 2026. 

529 Plans 

The Act expands the flexibility of 529 education savings plans, making them more useful for families beyond traditional college costs. Starting in 2026, the annual withdrawal limit for K–12 expenses doubles from $10,000 to $20,000 per beneficiary, and the definition of “qualified expenses” now includes a wide range of items such as:

• Curriculum materials
• Tutoring
• Standardized test fees
• Online courses
• Educational therapies for students with disabilities 

In addition, 529 funds can now be used for career-focused education, including tuition and fees for professional licenses, industry certifications, and registered apprenticeship programs. The Act also makes permanent the ability to roll over unused 529 funds into ABLE accounts for individuals with disabilities, providing families with greater flexibility if educational needs change. 

Healthcare

The Act continues to significantly reshape U.S. healthcare—especially Medicaid and ACA Marketplaces—through new eligibility restrictions such as work requirements and stricter verification processes. These changes, combined with the scheduled expiration of enhanced ACA subsidies at year-end, are projected to increase the uninsured population. While President Trump has signaled openness to a short-term extension of ACA subsidies with new limits, no legislation has passed yet, leaving states and agencies uncertain about 2026 funding and coverage. 

While OBBBA is already law, many of its most consequential provisions, especially Medicaid eligibility changes and state financing restrictions, are scheduled to phase in between 2026 and 2028. This delayed timeline leaves room for potential revisions.

From temporary tax credits to Trump Accounts for kids, the One Big Beautiful Bill Act introduced a wealth of changes that will have both short- and long-term impacts on Americans. For more personal finance news, subscribe to General Electric Credit Union’s eNewsletter.