3 new financial planning opportunities after OBBBA

While many provisions of the law commonly known as the One Big Beautiful Bill Act (OBBBA), H.R. 1, P.L. 119-21, simply made certain tax laws permanent, there are some new aspects or updates that come with financial planning opportunities for many clients, particularly over the next five tax years. Here are three that are worth considering as practitioners review the changes with clients.

For homeowners and other potential itemizers

Many taxpayers haven’t been deducting mortgage interest, charitable contributions, and other itemized deductions due to the effect of the $10,000 cap on state and local taxes (SALT) passed under the Tax Cuts and Jobs Act, P.L. 115-97, which made itemizing less advantageous. But H.R. 1’s temporary increase of the cap to $40,000 (phasing down to $10,000 for modified adjusted gross income (AGI) over $500,000) from 2025 through 2029 warrants a conversation, particularly around timing for certain deductions in 2025 versus 2026–2029.

Some additional provisions of H.R. 1 provide further reasons for having this conversation. Starting in 2026, itemized charitable deductions will be subject to a 0.5% floor: The amount of a taxpayer’s deductible charitable contributions for a tax year will be reduced by 0.5% of the taxpayer’s contribution base (generally, their AGI) for the tax year. Further, the law adds a cap on the amount of all itemized deductions for people in the highest (37%) tax bracket starting in 2026. These new rules may prompt some clients to accelerate charitable contributions into 2025 to realize the full value of the contribution.

In addition, all taxpayers will be able to deduct up to $1,000 in cash donations ($2,000 for joint filers) to qualified charitable organizations starting in 2026, even if they don’t itemize. (For more on these rules, see “Tax Provisions in the One Big Beautiful Bill Act,” JofA, July 7, 2025.)

Taking all of this together, for clients who have charitable intent and flexibility on when and how much they give, some planning may be in line for the next couple of years to realize the full tax benefit of their generosity. If nothing else, advising clients to return to more diligent tracking of noncash contributions, such as donations of clothing and household goods to charitable resale shops, may help them realize a larger deduction through itemizing if they were previously limited by the effect of the SALT cap. Additionally, clients can be advised to clean out their closets and make one-time gifts to their favorite nonprofits by the end of 2025 to obtain the full benefit of the deduction rather than losing part of the benefit if the gifts are made in 2026.

For new car purchases

For taxpayers who are already planning on purchasing a new car, the ability to deduct up to $10,000 in interest annually in tax years 2025–2028 in certain circumstances may influence their choice of vehicle and financing decisions. H.R. 1 allows the deduction whether or not the person itemizes deductions, but the loan must be secured by the purchase of a new vehicle (used cars don’t apply), for personal use only, that underwent final assembly in the United States, among other requirements. The deduction also phases out for taxpayers with $100,000 or more of modified AGI ($200,000 for joint filers).

The vehicle must be a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds. The loan must have originated after Dec. 31, 2024. Lease payments do not qualify.

Clients who could otherwise pay cash for a vehicle but choose to finance for the tax deduction will need to weigh the cost of interest, factoring in the tax deduction, against the rate they are earning on their savings to see if it’s worth it. In most cases, they will find that it is not, although psychologically, claiming the deduction may feel better to them.

Overall, the ability to deduct interest should be considered a nice perk for taxpayers who would have to finance a purchase anyway but certainly should not be a reason for someone to purchase a higher-priced brand-new vehicle over a used car just for the tax deduction.

Expanded use of 529 accounts

A full examination of the additional uses for 529 account funds warrants a separate article, but one change to the rules may be of particular interest to CPAs and other professionals with licensure and continuing education requirements — H.R. 1 expanded the use of tax-free 529 withdrawals to pay for continuing education and professional license fees. While self-employed professionals may still see a better tax result by deducting these fees as a business expense rather than making a 529 withdrawal, clients in professions that require ongoing certification that may not be fully financially supported by employers may find some state income tax relief in this change.

For example, Patrice is a part-time physical therapist who works for a small practice in Michigan. Her employer offers a small annual stipend for continuing education, but it is not enough to cover the full cost of her annual required continuing education classes in physical therapy. One way for Patrice to take advantage of this expanded 529 use is to open a 529 plan in the state of Michigan and contribute any amounts she anticipates spending on continuing education classes beyond her employer stipend, then taking the Michigan income tax deduction (up to $10,000 per year since she’s married) for the contribution before paying her expenses.

While numerous other elements to H.R. 1 impact clients’ lifetime tax bill and other financial planning decisions, CPAs might find these three points are relevant to their own family finances as well as those of the average working American.

For more information, don’t miss the ongoing H.R. 1 PFP MasterClass Series, which offers webcast deep dives into the personal financial planning implications of the new law. And bookmark the AICPA’s tax changes hub, the go-to library for all things H.R. 1.

— Kelley C. Long, CPA/PFS, CFP, is a personal financial coach and consultant in Arizona. To comment on this article or to suggest an idea for another article, contact Dave Strausfeld at David.Strausfeld@aicpa-cima.com.