Last month, Congress passed the Big Beautiful Bill Act, introducing some significant tax law changes. While some of these may work in your favor, others may require you to adjust your strategy, and a few are opportunities you’ll want to act on quickly before they disappear.
Here is an overview of some of the most notable updates:
1. SALT Cap Deduction Increased
The limit on State and Local Tax (SALT) deductions has been raised from $10,000 to $40,000. This change will primarily benefit taxpayers in higher-tax states, allowing for greater deductions on property, income, and sales taxes.
2. Higher Standard Deduction for Seniors
If you are age 65 or older, you may now claim an additional $6,000 on top of the standard deduction, reducing your taxable income if you take the standard deduction.
3. AGI Floor for Charitable Deductions
If itemizing, there is now a 0.5% AGI floor for charitable deductions. This means that the first 0.5% of AGI made in charitable donations is NOT deductible.
If taking the standard deduction, cash donations directly to charities now qualify for a $1,000 per person deduction. DAF donations do not qualify.
4. Auto Loan Interest Deduction
Interest paid on certain qualified auto loans may now be deducted from taxable income up to $10,000—similar to mortgage interest deductions for homeowners.
5. Changes to HSA Contributions
Individuals enrolled in Medicare Part A will no longer be able to make new contributions to Health Savings Accounts (HSAs).
6. Clean Energy Credit Rollbacks
Several clean energy incentives are set to expire over the next year, including the:
- Clean Vehicles Credit
- Alternative Vehicle Refueling Property Credit
- Energy Efficient Home Improvement Credit
- Residential Clean Energy Credit
Thinking about purchasing any clean energy products? We recommend acting soon before these changes take effect.
If you have any questions about how these updates may affect your personal situation or any of the other tax changes in the bill, please reach out to us.