New tax act: Key changes to know

On July 4, President Trump signed the One Big Beautiful Bill Act into law. This extensive new piece of legislation carries implications for all American taxpayers. While details are still emerging, here’s a rundown of several major changes—and how they could directly impact your financial strategy.

The act makes permanent some provisions that were set to expire. It also introduces new deductions and credits that could significantly affect tax-efficient strategies for individuals and families.

The individual income tax rates from the 2017 Tax Cuts and Jobs Act are now permanent. Individual marginal income tax brackets stay at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Learn more about progressive tax brackets

Starting in 2026, you can gift up to $15 million tax-free during your lifetime or at death (double that for married couples). This exemption will increase with inflation each year and is now a permanent part of the tax code.

Starting in 2026, couples earning over $1 million may face higher taxes due to changes in the AMT. The income threshold where the AMT kicks in will drop to $1 million for joint filers, and the tax will phase in faster, meaning more high-income households could be affected. These changes are now permanent.

Starting in 2026, more small business owners, including those with S corps, partnerships and sole proprietorships, will qualify for the 20% pass-through income deduction.

The income limits for phasing out this tax break are rising to $75,000 for single filers and $150,000 for joint filers, and will adjust for inflation going forward. This deduction is now permanent.

Starting in 2025, the standard deduction will increase to $31,500 for married couples and $15,750 for single filers. These higher amounts are now permanent and will be indexed for inflation going forward.

Then in 2026, a new charitable tax break kicks in: if you don’t itemize, you can deduct up to $2,000 (joint) or $1,000 (single) for donations to qualified charities.

If you itemize your deductions, or are considering it, there are a few important changes coming that could affect how much you save on your taxes. Here’s what’s changing:

• Cap on tax savings for high earners: If you're in the top tax bracket (37%), your itemized deductions only will reduce your tax bill at a 35% rate. Example: A $10,000 deduction will save you $3,500 in taxes instead of $3,700.   
• New charitable deduction floor: To deduct charitable donations, itemizers now must give more than 0.5% of their adjusted gross income (AGI). If your AGI is $300,000, only donations above $1,500 will count toward your deduction.  
• Cash gifts still count generously: You still can deduct cash donations to public charities up to 60% of your AGI, just like before. 
• New tax credit for scholarship donations: Starting in 2027, you can get a $1,700 tax credit for donations to qualifying scholarship organizations—this is a dollar-for-dollar reduction in your tax bill, not just a deduction.  

Starting in 2026, 529 education savings plans will become more flexible. Families will be able to use up to $20,000 per year for K–12 tuition—double the previous limit—and the list of eligible expenses will expand to include things like books, tutoring and standardized test fees. In addition, 529 funds now can be used for career training and credentialing programs, making it easier to support a wide range of educational paths.

Starting in 2026, employees can continue to receive up to $5,250 per year in tax-free educational assistance from their employers, including help with student loan payments. This benefit, which was previously temporary, is now permanent and will be adjusted for inflation going forward.

The act also introduces several new provisions, many of which have expiration dates. Here are several you should know about.

From 2025 through 2029, the cap on the SALT deduction will rise to $40,000 for individuals earning under $500,000, up from the previous $10,000 limit. However, the cap will revert to $10,000 starting in 2030.

Beginning in 2025, workers earning under $150,000 can deduct up to $25,000 in combined tip income and overtime pay. This temporary tax break is designed to benefit service and hourly workers and will remain in effect through 2028.

If you purchase a U.S.-assembled vehicle between 2025 and 2028, you may be able to deduct up to $10,000 per year in auto loan interest. This deduction phases out for individuals earning over $100,000 and couples earning over $200,000.

Seniors will benefit from a new temporary deduction of up to $6,000 (or $12,000 jointly) available from 2025 through 2028. The deduction begins to phase out for individuals with modified adjusted gross income over $75,000, or $150,000 for couples. To qualify for the new senior tax deduction, you must be at least 65 years old by the end of the tax year.

The Child Tax Credit will increase to $2,200 per child starting in 2025 and will be indexed to inflation. This expanded credit is designed to help families keep up with the rising cost of raising children.

For children born between 2025 and 2028, the government will deposit $1,000 into a new tax-deferred savings account—nicknamed “Trump accounts.” Parents, relatives and others can contribute up to $5,000 per year. The funds grow tax-deferred and can be accessed once the child reaches adulthood.

We don’t expect you to read all 900 pages of the One Big Beautiful Bill Act. However, you should know that the new legislation could significantly impact how you plan, save and give in the years ahead. Connect with a Thrivent financial advisor to discuss details and update your financial plan accordingly.