OBBBA brings sweeping tax changes for 2025—boosting educator deductions, 529 plans, small biz stock, families, gamblers, and overtime earners:
- OBBBA makes significant changes to the educator expense deduction—for 2025 and beyond
- Free starter money for newborns
- Congress added a last-minute change to the OBBBA, which could significantly impact gamblers
- OBBBA makes Section 529 plans more valuable than ever by expanding the types of expenses you can pay with these funds
- OBBBA expands the tax benefits of qualified small business stock
- OBBBA includes several permanent changes that directly affect taxpayers who itemize deductions
- Do you regularly earn overtime pay? If so, the OBBBA may help lower your federal income tax bill
Changes To The Educator Expense Deduction—For 2025 And Beyond
The One Big Beautiful Bill Act (OBBBA) makes significant changes to the educator expense deduction—for 2025 and beyond. If you are a teacher, a coach, a counselor, or some other school professional, here’s what you need to know to maximize your tax savings.
Current Rule for 2025
For 2025, eligible educators may claim an above-the-line deduction of up to $300 for classroom-related expenses.
An above-the-line deduction reduces your adjusted gross income (AGI), which is always a tax advantage
Unfortunately, any expenses above $300 are not deductible in 2025 because the law permanently disallows them as miscellaneous itemized deductions.
To qualify as an eligible educator, you must work at least 900 hours during the school year as a K-12 teacher, instructor, counselor, principal, or aide at a state-recognized school.
Allowable expenses include:
- books and classroom supplies, excluding athletic supplies for health and physical education (PE) courses;
- computer equipment, software, and related services;
- other instructional equipment and supplementary materials; and
- professional development courses directly tied to your teaching.
Big Enhancements Starting in 2026
Beginning in 2026, the OBBBA expands and improves the deduction as follows:
- Keeps the $300 above-the-line deduction in place
- Allows expenses above $300 as itemized deductions (if you itemize)
- Expands the definition of “eligible educator” to include coaches and interscholastic sports administrators
- Expands deductible expenses to include athletic supplies for health and PE courses
- Broadens eligible use from “in the classroom” to “as part of instructional activity”
Example. Sally, an 11th-grade teacher, buys a projector for $1,400 in 2026. She deducts $300 above the line and, because she itemizes, deducts the remaining $1,100 on Schedule A. Under prior law, only $300 would have been deductible.
Planning Tip
The enhanced rules help only if your total itemized deductions exceed the standard deduction. With the OBBBA’s expansion of the state and local tax (SALT) deduction, more taxpayers may qualify to itemize starting in 2026.
Regardless of your situation, keep detailed receipts for all educator-related expenses so you can claim every dollar you are entitled to
Takeaway
For 2025, the maximum deduction remains $300.
Beginning in 2026, the OBBBA makes educator deductions far more valuable by preserving the $300 above-the-line write-off and allowing additional itemized deductions, while also broadening the eligibility criteria and the types of expenses that qualify.
OBBBA Introduced A Brand-New Savings Vehicle: Trump Accounts
The One Big Beautiful Bill Act (OBBBA) introduced a brand-new savings vehicle: Trump Accounts. At first glance, they appear to be traditional IRAs, but they come with special rules for beneficiaries under the age of 18. Used wisely, they can provide a powerful head start on your child’s financial future.
Free Starter Money for Newborns
As part of a pilot program, parents of U.S. citizen newborns in 2025-2028 can elect to enroll their child in a Trump Account. Once the parent makes the election, the federal government will deposit $1,000 of free seed money into the account.
Starting July 4, 2026, parents, grandparents, or others may contribute up to $5,000 per year (indexed for inflation beginning in 2028) until the year the child turns 18. The $1,000 government contribution does not count against this limit. To participate, your child must have a Social Security number when you make the election.
How Trump Accounts Work
- Contributions by individuals made before the year the child reaches age 18 are not deductible, but funds inside the account grow tax-deferred.
- No withdrawals are permitted until the child reaches the age of 18.
- When the child reaches 18, the Trump Account automatically converts into a traditional IRA, subject to the normal rules governing IRA contributions and distributions.
- At that point, your child must have earned income to continue contributing. The account can later be converted into a Roth IRA if desired.
Investments and Employer Contributions
Until the child turns 18, the account can only hold “eligible investments”—low-cost index mutual funds and ETFs that meet IRS guidelines.
Employers may also contribute up to $2,500 annually (indexed for inflation after 2028) to Trump Accounts set up for under-age-18 employees or dependents of employees. These contributions are tax-free to the employee and deductible for the employer as fringe benefits.
State, local, or nonprofit organizations may also make contributions under future IRS rules.
Why This Matters
Over time, Trump Accounts can grow into substantial savings.
For example, if you contribute $5,000 annually for 17 years, plus the $1,000 government seed, and the account grows at 5% per year, it could be worth about $138,000 by the time your child turns 18. If left invested until your child reaches age 60, that balance could grow to over $1.2 million.
Unlike 529 plans or Coverdell accounts, Trump Accounts don’t require your child to use the funds for education. Unlike custodial accounts or trusts, they offer tax-deferred growth and avoid many of the kiddie tax pitfalls.
Bottom Line
Trump Accounts may not be perfect, but with free starter money, meaningful contribution limits, potential employer or community support, and decades of tax-deferred compounding, they can be a strong wealth-building tool for children.
Do You Like To Gamble? If So, Congress Has Some Bad News For You
The One Big Beautiful Bill Act (OBBBA), recently passed, limits how much you can deduct for gambling losses starting in 2026. Both casual and professional gamblers may deduct only 90% of their losses against their winnings. The remaining 10% of losses disappear permanently—you can’t use them in future years.
Congress added this last-minute change to the OBBBA, which could significantly impact gamblers.
What This Means for You
Right now, gamblers may deduct losses only up to the amount of their winnings. Casual gamblers may deduct losses only if they itemize personal deductions. Beginning in 2026, you won’t even deduct all your losses.
This rule could force you to pay tax on “phantom income”—money you never really earned.
For example, if you win $10,000 and lose $10,000 in 2026, you’ll report $10,000 in gambling income but deduct only $9,000 in losses. That leaves you with $1,000 in taxable income, even though you broke even.
Current Efforts to Reverse the Law
Gamblers across the country have expressed outrage, and lawmakers have already introduced three bills to eliminate this 10% haircut. Whether Congress will act remains uncertain.
What You Should Do Now
Regardless of what happens in Congress, you need accurate records of your gambling activity. Keep detailed records of your wins and losses, especially losses.
Track your gambling by session, not by individual bet. At year’s end, add up all winning sessions separately from all losing sessions.
Don’t rely on casino win/loss statements—they often inflate winnings and underreport losses.
OBBBA Makes Section 529 Plans More Valuable Than Ever
Section 529 plan accounts—also called “qualified tuition plans” (QTPs)—have long provided a powerful tax-advantaged way to save for education expenses for children, grandchildren, and even yourself.
While contributions to these accounts are not federally tax-deductible, the money in them grows tax-free, and withdrawals remain tax-free when used for qualifying education expenses.
The recently enacted One Big Beautiful Bill Act (OBBBA) makes Section 529 plans more valuable than ever by expanding the types of expenses you can pay with these funds.
Expanded Education Uses
Historically, families used Section 529 funds primarily for college costs, with up to $10,000 per year available for K-2 tuition.
Beginning July 5, 2025, you may also use Section 529 funds to cover a wide range of qualified post-secondary credentialing expenses. These include costs for professional and occupational licenses, certificates, and credentials offered by four-year universities, community colleges, trade schools, technical schools, and other recognized providers.
You may also use Section 529 funds for continuing education courses if you already hold a degree or credential.
Examples include:
- Fees for a state license for barbers or hairstylists
- Continuing education courses for medical doctors
- The cost of the tools required for a welding certificate
Section 529 plans have evolved from college savings tools into accounts for career and lifelong learning.
Who Can Benefit
Although many families open Section 529 accounts for children and grandchildren, adults may also use them. You can set up an account for yourself or your spouse to fund continuing education or professional credentialing.
Because no time limit applies, you can leave the money in the account until you need it, or transfer it to another beneficiary.
In addition, you can roll over up to $35,000 of Section 529 funds into a Roth IRA
Expanded K-12 Benefits
The OBBBA also broadens tax-free withdrawals for K-12 education. Beyond tuition, you may now use Section 529 funds for books, online materials, tutoring, standardized test fees, and therapy for students with disabilities. Starting in 2026, the annual withdrawal limit for K-12 expenses doubles to $20,000.
OBBBA Expands The Tax Benefits Of Qualified Small Business Stock
Do you own stock in a high-growth small business? Or are you a founder, an investor, or an employee of one? If so, you need to understand how the One Big Beautiful Bill Act (OBBBA) expands the tax benefits of qualified small business stock (QSBS).
What QSBS Is
“QSBS” refers to stock issued by regular C corporations. When the corporation and the shareholder meet specific requirements, QSBS owners can avoid federal tax on most or all of their gains when they sell the stock. This can mean tax-free profits worth tens of millions of dollars.
Which Companies Qualify
Not all businesses may issue QSBS. The law excludes certain industries, including finance, insurance, farming, professional services (such as law, accounting, and consulting), and hospitality.
Additionally, only smaller companies are eligible. Previously, a company could not exceed $50 million in total assets when issuing QSBS. The OBBBA raises that cap to $75 million, giving larger businesses access to this powerful tax benefit.
New Holding Period Rules
You must hold QSBS for a minimum period before you can exclude gains from tax. The five-year requirement remains in place for the full 100% tax exclusion. However, the OBBBA introduces new flexibility for OBBBA-qualified QSBS: you can now receive partial exclusions if you hold stock for only three or four years.
Higher Exclusion Limits
Before the OBBBA, the law allowed you to exclude from tax the greater of $10 million or 10 times your basis in the stock. The OBBBA increases the dollar limit to $15 million while keeping the 10-times-basis rule. This change delivers another significant win for QSBS owners.
Effective Date
All these enhancements apply to QSBS issued on or after July 5, 2025. Together, they represent the most significant upgrade to QSBS benefits in more than a decade. For many investors, these rules could transform successful small business investments into tax-free windfalls.
Example. Suppose you invest $100,000 in QSBS shares in 2026 and sell them in 2031 for $1.1 million. Because you held the stock for five years, you can exclude your $1 million gain from federal tax. This saves you from paying both the 20% federal long-term capital gains tax and the 3.8% net investment income tax—$238,000 in tax savings.
OBBBA Includes Several Permanent Changes That Directly Affect Taxpayers Who Itemize Deductions
The recently enacted One Big Beautiful Bill Act (OBBBA) includes several permanent changes that directly affect taxpayers who itemize deductions. Some provisions take away opportunities, while others preserve valuable tax breaks. Here’s what you need to know—and how you can plan to win.
Permanent Repeal of Miscellaneous Itemized Deductions
The Tax Cuts and Jobs Act (TCJA) suspended miscellaneous itemized deductions for 2018-2025. The OBBBA makes that suspension permanent.
This means you can no longer deduct unreimbursed employee business expenses, investment expenses, or other items previously subject to the 2% adjusted gross income (AGI) floor.
If you incur employee business expenses, the solution is straightforward: have your corporation reimburse you so the expense gets properly deducted
Itemized Deductions That Remain
Many important deductions remain available. You may still claim:
- mortgage interest;
- state and local taxes (SALT);
- charitable contributions;
- medical expenses, including health insurance premiums; and
- personal casualty and theft losses.
These deductions continue to appear on Schedule A of Form 1040, subject to existing limits.
New Limits for High-Income Taxpayers
Starting in 2026, high-income taxpayers in the 37% bracket face a new reduction in itemized deductions. The OBBBA caps the benefit of itemized deductions at no more than 35% of their value.
For example:
- If your taxable income barely crosses into the 37% bracket, your deductions will be reduced modestly.
- If you have significant income, your deductions may be reduced or even eliminated.
In short, the higher your income above the 37% threshold, the greater the haircut on your itemized deductions.
Planning Strategies
To protect your deductions, use these strategies:
- Avoid unreimbursed employee expenses by arranging corporate reimbursements.
- Monitor your taxable income to reduce the risk of crossing into the 37% bracket. For 2025, this threshold starts at $626,350 for single filers and $751,600 for joint filers (adjusted annually for inflation).
Takeaway
The OBBBA reshapes itemized deductions for the long term. While some opportunities have disappeared, key deductions remain, and planning strategies still exist to maximize your tax benefit. By structuring expenses properly and managing taxable income, you can continue to win under the new rules.
The New Overtime Deduction
Do you regularly earn overtime pay? If so, the One Big Beautiful Bill Act (OBBBA) may help lower your federal income tax bill.
New Overtime Deduction
Before 2025, the IRS taxed every dollar of your overtime pay as ordinary income.
Beginning this year (2025) and continuing through 2028, the OBBBA allows a new temporary deduction for qualified overtime income:
- Up to $12,500 each year for single filers
- Up to $25,000 each year for married joint-filers
This deduction applies whether or not you itemize deductions
What Counts as Qualified Overtime Income
Qualified overtime income includes only the extra pay you earn for overtime hours—generally, the portion above your regular hourly rate under the Fair Labor Standards Act.
For example, if your regular rate is $25 per hour and you receive $37.50 for overtime, the extra $12.50 per hour counts as qualified overtime income
Important: This deduction does not reduce your adjusted gross income (AGI). It also does not exempt your overtime pay from payroll taxes or, in many cases, state and local taxes.
Income Phase-outs
The deduction begins to phase out when your modified adjusted gross income (MAGI) exceeds:
- $150,000 for single filers, or
- $300,000 for married joint-filers.
The deduction decreases by $100 for every $1,000 of income above these thresholds. Phase-out ends at $275,000 for single filers and $550,000 for joint filers.
Because these thresholds are high, most overtime earners will qualify for the full deduction.
Key Restrictions and Requirements
- You must file jointly to claim the $25,000 married joint-filer deduction.
- You must include your valid Social Security number on your tax return.
- Your employer must report your qualified overtime income on your W-2 or another IRS-specified statement.
- Business owners cannot pay themselves “overtime” to claim the deduction, since overtime law excludes owners who actively manage their corporations.
Contact your tax and financial advisors to determine the best moves for your situation.