What is one thing the OBBBA Tax Changes have in common with the Alps?

Today, I’m going to answer that riddle.  I’m also going to highlight the key issues from the new tax bill:

• What are the big wins for retirees?
• What changes may hurt early retirees?
• What the new law means for retirement planning.

But first, a story of my recent Pre-Go-Go adventure…

On June 29th, I left for Switzerland.

It was more than a vacation—it was my first deliberate experiment blending the final stretch of my working years with the early flavors of retirement. I’ve started calling it my “Pre-Go-Go” phase: that period before retirement where you test out what life might look like when the pace slows and priorities shift.

Since starting my business in 2011, I’ve never taken a vacation without my laptop—until this one. While I remained mostly unplugged, I used my phone to peek in on emails and Slack messages (an internal messaging app we use).

On July 1, we began our hike. Eight to ten hours a day, I was outdoors in the most beautiful country I’ve ever seen, with emails—and tax bills—far from my mind. I grew up watching The Sound of Music. Watching it on the screen and seeing it firsthand are quite different. The sheer scale of seeing mountains shoot straight up is… awe-inspiring. Our world is incredible.

Below is a picture from our first day of hiking.

---

The One Big Beautiful Bill Act Rolls Out

On July 3^rd, our internal “Planner” messaging channel began buzzing with the news of the One Big Beautiful Bill Act (OBBBA). 

“What would the team do?” I wondered.

They immediately set out to update our planning model. By Monday, July 7th, they began putting clients in the new model to understand the impact. They even wrote and sent a brief newsletter outlining a few key provisions.

I watched it all happen from afar and did not intervene. They didn’t miss a beat.

And I didn’t miss a beat either! I enjoyed my vacation and did not let the news distract me. Two and a half weeks immersed in another world did wonders for my energy and focus.

July 16^th was my first day back in the office. I was ready to go back. I missed work. It felt like being away from home or family for too long.  I’m clearly not ready for retirement—but I also confirmed that I need to incorporate more breaks like these. That balance is critical for me at this stage of my career.

Given all this, I label my first Pre-Go-Go trip experiment a success!

Now, on to what I (luckily) still love to do—translate financial complexity into what it means at a household level.

---

Digesting the New Tax Changes

My first thoughts on the OBBBA?

What a hodge-podge of random provisions! What complexity. If we thought Roth conversion analyses were difficult before… ooof (me trying to type out the sound of getting the wind knocked out of you). They just got exponentially more challenging.

For those who want a thorough technical run-down of the rules, no one does it better than the professionals who write for Kitces.com at the Nerd’s Eye View. You’ll find their write-up at Breaking Down The “One Big Beautiful Bill Act”: Impact of New Laws on Tax Planning.

For those who want a practical summary, I’ve outlined key provisions below—grouped by who benefits and who might be impacted negatively.

Let’s dive in.

---

Key Provisions of OBBBA

---

1. Universal Wins

A) Most Impactful: Tax Rates

• Impacts: Everyone
• Timeframe: 2025, no expiration

The current brackets no longer sunset, avoiding a reversion to pre-2018 levels. This one change alone is responsible for increasing “fundedness” by around 3% in most plans I’ve reviewed. (Fundedness is one of several metrics used to stress test a retirement plan.)

This positive impact comes from a reduction in households’ effective marginal rate, which reduces the present value of lifetime taxes, increasing the after-tax value of assets estimated at the end of a plan.

Or, put another way, these improved metrics offer the opportunity to spend more earlier without compromising future financial outcomes.

You may want to ask, “Rather than leave an extra couple hundred thousand when I’m 85, how much more could I spend now and still end up in the same place?”

B) Standard Deduction and Bracket Adjustments (Minor, but Beneficial)

These next two provisions also benefit nearly everyone:

• In 2025, a slightly higher standard deduction takes effect.
• In 2026, the 10% and 12% brackets expand modestly, which becomes worth a few hundred to a few thousand dollars in tax savings, depending on household income.

C) Extra Senior Deduction

• Impacts: Age 65+, MAGI < $175K* (singles), < $250K (joint)
• Timeframe: 2025 to 2028

MAGI refers to Modified Adjusted Gross Income.

Adds $6,000 (singles) or $12,000 (joint) to the standard deduction for qualifying seniors. The deduction begins phasing out at $75K (single) and $150K (joint), making Roth conversions and tax-deferred withdrawals trickier to plan when near those limits.

*Previous posted version showed this as $150k. It has been corrected to $175k.

D) Mortgage Insurance Deduction

• Impacts: Homeowners with <20% down
• Timeframe: Begins 2026

Mortgage insurance premiums become deductible again—helpful for late-start retirement savers, or perhaps those rebuilding after divorce or bankruptcy and using FHA/VA loans with less than 20% down.

E) Auto Loan Interest Deduction

• Impacts: MAGI <$150K (single), <$250K (joint)
• Timeframe: 2025 to 2028

Eligible for vehicles assembled in the U.S. and purchased with a new loan (or refinanced without increasing balance). Only the first $10,000 of interest is deductible.

I’m honestly perplexed how many households at these income levels will rack up $10K in interest. Perhaps that’s because I’m focused on retirees – a colleague reminded me that many households with teenage children have multiple cars. And who knows, maybe auto financing departments will get creative with loan packages where you pay all interest first?

F) Qualified Tips and Overtime Deductions

• Impacts: MAGI < $150K (single), < $300K (joint)
• Timeframe: 2025 to 2028

The Qualified Tips (first $25,000 of qualified tip income – same limit single or married) and Qualified Overtime deductions (first $12,500 single/$25,000 joint) are subject to eligibility requirements and phaseouts.

I see this as a win for service and blue-collar workers. Also helpful for retirees working part-time in tipped industries.

G) Charitable Deduction for Non-Itemizers

• Impacts: Non-itemizing filers
• Timeframe: Begins 2026, no expiration

Non-itemizers can deduct $1,000 (single) or $2,000 (joint) for charitable gifts. Modest, but could help households who give consistently but don’t meet the standard deduction threshold. However, this deduction, unlike the Qualified Charitable Contribution (QCD from an IRA), does not lower AGI, so it won’t help in other areas. 

H) SALT Deduction Increase

• Impacts: MAGI < $600,000
• Timeframe: 2025 – 2029

Raises the SALT cap (state and local taxes) to $40,000 (phasing out at MAGI of $500K and gone by $600K). Most useful for middle-income earners in high-tax states.

The definition of “middle income,” of course, is up for debate.

I) Estate Tax Exemption

• Impacts: Ultra-high-net-worth households
• Timeframe: Begins 2026

The estate tax exemption increases to $15 million per person, starting in 2026. Great news for the next generation of a select few families.

---

2. Changes That May Hurt Early Retirees

A) HealthCare Tax Credit Changes

• Impacts: Pre-age 65 Marketplace Plan users
• Timeframe: Begins 2026, no expiration

We’re back to pre-2021 rules. The 8.5% MAGI cap on premiums is gone. Starting in 2026, your income must fall within the federal poverty level thresholds to qualify for Advance Premium Tax Credits.

In the past few years, I’ve seen many early retirees (in the 55 to 64 age range) qualify for substantial credits that helped cover their insurance premium costs—even though many of them had financial assets in the $1.5 to $2.5 million range. That’s because eligibility is not tied to assets but to income. And income can be managed by when and how you use various assets for cash flow.

• Before 2021, if your income exceeded the federal poverty levels (FPL – adjusted each year with inflation), you were not eligible for a subsidy to help cover the cost of a Marketplace health plan.
• From 2021 to 2025, adjustments to the formula helped more households qualify for higher credits. In 2026, those adjustments are eliminated. Less households will qualify, and those who do will see lower credit amounts.

Additional changes are beyond the scope of this summary. But it all means that starting in 2026, income projections for your Marketplace plan application will be more critical—if you overshoot, you may owe far more back when you file your tax return than in recent years.

However, there may be one silver lining: a new HSA-eligible Marketplace plan. Some households losing credit eligibility may be able to get an HSA deduction instead—if they choose their plan appropriately.

Deductions, however, are not as beneficial as credits.

B) Not Great for Gamblers

• Impacts: Itemizers with gambling activity
• Timeframe: Begins 2025, no expiration

Losses can now only offset 90% of winnings. This hits gambling retirees hard, since winnings inflate AGI but losses don’t reduce it. (And a higher AGI can result in higher taxes in many other areas.)

I’ll never forget one client I worked with, who has since passed, who had over $500,000 in gambling wins and losses on his tax return each year. That’s a lot of time at the casino. Now that same client would claim $50,000 of gross income, even though his losses equaled his winnings.

With sports betting on the rise, this may impact more people.

C) Charitable Deduction Changes for Itemizers

• Impacts: Itemizers who make charitable contributions
• Timeframe: Begins 2026, no expiration

Charitable contributions, beginning in 2026, will be subject to a .5% (half a percent) floor, with a complex set of ordering rules to follow depending on the type of donation.

For some, donating more this year may be beneficial.

In one recent client meeting, we had donor-advised fund (DAF) contributions planned for this year and next, then in 2027, donations shift to come from the IRA through Qualified Charitable Contributions as this person reaches age 70 ½ that year. Now, instead, we recommend making the 2026 DAF contributions in 2025 to avoid losing part of the deduction due to the floor next year.

In addition, in 2026, there is an itemized deduction cap, which effectively means the benefit of the deductions is capped at the 35% rate, rather than the highest 37% rate. This impacts only those with income falling in this 37% bracket.

Essentially, these rules impose both a floor and a cap on charitable deductions.

For those who regularly contribute to charity, consider accelerating any future planned large charitable contributions into 2025.

D) AMT (Alternative Minimum Tax)

• Impacts: Taxable income > $500K (single), > $1M (joint)
• Timeframe: Begins 2026, no expiration

I’m not sure if anyone knows what AMT is anymore—since TCJA (Tax Cuts and Jobs Act) changes, it impacts only about .1% (1/10 of 1%) of households. A specified amount of income is exempt from the AMT tax. But this exemption phases out as your income crosses IRS thresholds.

Now, the AMT exemption phaseout limits drop, most likely hitting those who still hold incentive stock options—uncommon since 2006 accounting-rule changes—but potentially relevant in tech-heavy or executive households. This may also impact those with large capital gains, as those gains may more easily push them into the range where they lose the exemptions.

---

What This Means for Planning

There are many, many other changes. The sheer scope of this bill is mind-boggling. Without software, accurately incorporating everything into a tax return is nearly impossible. Perhaps Einstein could do it.

Everyone wants a “rule of thumb” approach for what to adjust. That was hard before. Now, with multiple income cliffs and overlapping MAGI thresholds, the only realistic approach is case-by-case.

One client told us they’d heard they should accelerate Roth conversions. Maybe—for some people, in some situations. But I can’t imagine recommending that universally based on OBBBA.

Our planning team has also debated how “permanent” these changes really are. Could future legislation raise rates? Absolutely. But even then, plans still benefit from several years of lower rates.

---

My Universal Conclusions

There are only two things I’ve seen hold true in every single plan so far:

1. OBBBA improves outcomes by a measurable margin.
2. It adds immense complexity, especially around conversions and withdrawal strategies.

Oh, and I’ll add a third: it gives me one giant headache. Has anyone tried correlating Advil sales with tax bill releases?

These changes illustrate the importance of thoughtful tax planning—it’s an evolving puzzle. And the OBBBA added many new pieces.

Whether you’re still working or already easing into retirement, an updated plan may reveal more room to breathe—maybe even enough for an earlier retirement, that bucket-list Pre-Go adventure, or simply the confidence for more worry-free spending in your Go-Go years.

In the opening line, I asked a riddle.  In my final line, I’ll answer it.

“Room To Breathe”

Perhaps the one thing OBBBA has in common with The Alps.

---

Your Turn: Have you evaluated how the OBBBA changes impact you? If so, we’d love to hear your insights in the comments.