Dec 2, 2025
The One Big Beautiful Bill Act (OBBBA) is a massive re-write of the federal tax code. The legislation offers several new credits and deductions that could potentially lower your tax bill in the year ahead. However, it also includes some traps that could limit or even eliminate the tax savings you enjoy.
Many of these changes are coming in 2026, so you still have time to prepare and adjust your spending plans to avoid these pitfalls. Here are the top three traps you should keep an eye on.
Trap 1. Seniors deduction income thresholds
Perhaps the most noteworthy new deduction unveiled in the OBBBA was the additional seniors deduction. (1) Individual taxpayers over the age of 65 can claim up to $6,000 in extra deductions on the Social Security, while a married couple filing jointly can claim up to $12,000 together under this new rule.
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However, the deduction is available only through 2028, which means if you’re over the age of 65 but delaying Social Security benefits until age 70, you could be leaving money on the table.
There are also income thresholds to consider. The deductions are phased out for annual incomes over $75,000 for singles (or $150,000 for married seniors filing jointly), and are fully phased out at $175,000 or $250,000 respectively.
If you plan to realize certain capital gains or have been deploying a Roth conversion strategy, these could put you over the income thresholds and reduce your deductions by thousands of dollars. Avoid this trap by lowering and spreading out tax gain harvesting and Roth conversions over multiple years.
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Trap 2. Missing out on SALT deductions
The OBBBA’s changes to the State and Local Tax (SALT) deduction presents both opportunities and challenges, especially for people living in states or cities with higher local taxes. (2)
Starting in 2025, the cap for deducting these taxes has been raised from $10,000 to $40,000. The caps are expected to be raised 1% every year through 2029, before reverting back to $10,000 in 2030.
The primary beneficiaries of this change are families that earn six-figures or more and live in high-tax states like New York, California, New Jersey and Connecticut, according to the Bipartisan Policy Center. (3)
However, the deduction is phased out for incomes above $500,000. That means realizing a big investment gain, selling rental property or receiving a big bonus from your employer could push you over the income threshold. Missing out on this limited-time deduction could be an expensive mistake.
Trap 3. Charitable donations trap
If you itemize your deductions, the OBBBA has introduced a new floor for deductions related to charitable contributions. (4) Starting January 1, 2026, only donations exceeding 0.5% of your adjusted gross income can be deducted from your taxes.
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For instance, if you earn $150,000, you can claim a deduction for charity only in excess of $750. The higher your gross income, the higher your charitable floor.
With this new rule coming into effect next year, some taxpayers may find it more beneficial to donate in 2025 instead. Other taxpayers could wait until their AGI is low enough to cover their charitable giving in the future.
If you make frequent donations, neglecting this new floor could be an expensive error.
Bottom line
The OBBBA is so wide-ranging that there could be just as many pitfalls as benefits for some taxpayers. With many months to go before the next tax season, this could be the right time to start planning and adjusting your spending and income plans accordingly.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Thomson Reuters (1, 2); Bipartisan Policy Center (3);Journal of Accountability (4)
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
