As many of you know, the “One Big Beautiful Bill Act” (OBBBA) was officially signed into law on July 4, 2025. This new legislation finally puts to rest the uncertainty around what our tax code would look like once the Tax Cuts and Jobs Act of 2017 (TCJA) was scheduled to sunset at the end of 2025. At its core, OBBBA makes many of the provisions in the TJCA permanent, while also adding a few new planning opportunities we will be keeping an eye on.

Below, we’ve highlighted a few parts of the new bill that may be relevant for many of our Lighthouse clients:

(1) Changes to how Social Security is taxed

(2) Adjustments to the State and Local Tax (SALT) deduction cap

(3) New limitations on wagering losses

1. Expanded Social Security Deduction

One of the more noteworthy updates in the bill is a new “senior deduction” aimed at reducing the tax burden on Social Security benefits. Starting in the 2025 tax year, taxpayers age 65 and older can claim an additional deduction of up to $6,000 for individuals or $12,000 for couples filing jointly.

The deduction begins to phase out for those with modified adjusted gross income (MAGI) above $75,000 (single) or $150,000 (married filing jointly). The deduction will phase out entirely at $175,000 for single filers $250,000 for joint filers.

2. SALT Deduction Cap Adjusted

Another big change is the adjustment to the State and Local Tax (SALT) deduction cap. Previously capped at $10,000, the new law introduces a tiered system based on income. Starting in 2025, the maximum SALT deduction increases to $40,000 for joint filers and $20,000 for those filing separately.

However, the expanded cap begins to phase out gradually for households with MAGI over $500,000.  importantly, no taxpayer will receive less than the original $10,000 cap during the transition period. Once your household MAGI is above $600,000, you’ll be limited to a $10,000 SALT deduction.

What this means for you:

If you itemize and live in the tri-state with high property or income taxes (like many of our clients do), this expanded deduction could offer a valuable boost in net income. It will also influence how we approach your year-end planning, especially if you’re considering charitable contributions, donor-advised funds, or bunching deductions.

3. Limitations on Wagering Losses

A not-so-fun update for our clients who enjoy gambling:

Before 2025 if you had $10,000 of gambling winnings, but $10,000 in gambling losses – your taxable gambling income would be zero.

Starting in 2026, individuals will only be eligible to deduct 90% of their losses. Using the example above ($10k winnings & $10k in losses) only $9,000 of the losses would be deductible – resulting in $1,000 of taxable gambling winnings.

Looking Ahead

We’re continuing to review the new legislation and how it may affect each of you individually. If you have questions about what the Big Beautiful Bill could mean for your specific situation, whether it’s related to tax planning, retirement strategy, or anything in between, don’t hesitate to reach out.