Logic Lane Explains OBBBA

It’s a crisp fall morning on Logic Lane, and the neighborhood has a brand-new arrival: OBBBA, the One Big Beautiful Bill Act. The neighbors aren’t quite sure what to make of it, or how to pronounce it. Abba? Oba? Obababa? However you say it, OBBBA comes with quirky tax laws, interesting new deductions, and plenty of planning opportunities.

Clarifying Colin hits pause: “Hold on. I know what a deduction is. But before we dive into OBBBA, I need you to define it…slowly. Not because I’m confused, obviously, but because I need to make sure you know.”

Sure, Colin. A deduction is the IRS’s way of saying, “You can reduce your income by this amount before we tax it.” Every taxpayer gets to lower their income by either the standard deduction or their itemized deductions, whichever is larger.

Said another way, think of it like coupons. The standard deduction is that built-in discount everyone gets, kind of like when you punch in your phone number at the grocery store and instantly save a set amount. You don’t have to think about it, you just get it. Itemized deductions, on the other hand, are like stackable coupons, promo codes, and rewards in the supermarket’s app. They can give you extra savings, but they’re constantly changing, have requirements to use them, regularly expire, and not always worth the effort unless they really add up.

In recent years, the standard deduction has become so high that over 90% of taxpayers stopped “coupon-clipping” because the savings through the standard deduction was higher than itemizing. OBBBA shakes things up with new deductions for tips, overtime, seniors, and even car loans, plus plenty of fine print and expiration dates. At the end of the day, deductions are just Congress’s way of nudging behavior and handing out perks. Knowing which moves you can make to take advantage of these tax planning opportunities is key to growing and protecting your wealth. The goal is to pay what you owe, but there’s no need to leave the IRS a tip.

So pour your coffee, grab your readers, and let’s meet the newest cast of Logic Lane as they navigate OBBBA.

 

1. Sam and Sandy Silver – The Senior Sleuths 

Sam and Sandy Silver, both 66, love their Costco runs. They don’t just shop there, they treat it like a sport. And nothing thrills them more than a coupon that lets them either spend less or walk out with even more.

That’s exactly what OBBBA just handed them: an additional $6,000 deduction each through 2028. Stack that onto the regular standard deduction for seniors of $34,700 for a total $46,700 deduction. This “senior coupon” applies whether they itemize or not, so long as their income stays under $150,000 as a married couple. Above that, the coupon starts to shrink, until it’s gone at $250,000 of income. Sam opines, “Like a free sample tray that runs out just as you reach it.”

With $120,000 of retirement income, and their $46,700 senior coupon, the Silvers are only taxed on $73,300 of their income, keeping them neatly in the 12% tax bracket. Instead of pocketing the savings, they do what every savvy Costco shopper does, use the deal to buy more. They optionally and opportunistically convert $20,000 from their IRA to a Roth IRA, filling up their 12% tax bracket and creating $20,000 more taxable income in 2025.

While they will owe 12% federal tax on the $20,000 conversion ($2,400), they don’t want to waste the 12% rates and they know they are setting themselves up for tax-free growth later. For the Silvers, the deduction isn’t just about saving money, it’s about loading up the cart while the price is right. And their kids? Assuming mom and dad don’t spend their Roth IRA money, they’re grateful for the tax-free inheritance headed their way, so much so that they might even spring for a Costco churro for Mom and Dad next trip.

 

2. Sal and Teresa – The SALT Survivors 

Just a few doors down, Sam and Sandy’s younger neighbors, Sal and Teresa, are wrestling with a very different problem, property taxes that feel like a second mortgage. With a combined income of $400,000 and a $1 million home, they’ve been closing their eyes as they agree to pay the government and sign their tax return each April. Under the old $10,000 SALT (State And Local Tax) cap, it didn’t matter that they paid $20,000 in property taxes plus $40,000 in state income tax, they could only deduct $10,000 of it. For tax payers in states like New York, California, Minnesota, New Jersey, and Connecticut, this low cap poured “salt” into an open tax wound.

Along comes OBBBA with a five year coupon and some short term relief for our SALT Survivors. Sal and Teresa, can now deduct $40,000 instead of just $10,000. That’s a $30,000 additional “coupon.” At their marginal tax rate of 32%, this additional coupon reduces their federal tax bill by roughly $9,600 a year. The final amount of savings will depend on all their other deductions because they’re now going to benefit from itemizing. This means that every $100 deduction they find is worth $32 in real savings. Mortgage interest, charitable contributions, big medical bills, and those little tax-friendly odds and ends matter again. Teresa wishes she could hear more but she is already busy searching her email inbox for documentation of all her charitable contributions to her nieces’ Jump Rope For Heart requests.

Of course, not everyone on Logic Lane is celebrating. Sal’s brother and sister in-law, Richie and Regina Rich as he jokingly calls them, live a few minutes away and pull in over $700,000 a year. Above $500,000 of income, the $40,000 SALT deduction disappears until it’s completely gone at $600,000 of income, and you are right back at the $10,000 SALT cap. That is a lot of numbers, but essentially if you make too much money, you don’t get this coupon. Richie moans about the unfairness of his taxes at every family barbecue, usually while flipping his delicious $80 Wagyu burgers. Sal just grins and says, “Buddy, there are plenty of states with lower taxes, but then you wouldn’t have the joy of seeing me multiple times a week. Consider it a brotherly love tax.” Richie rolls his eyes, mutters something about moving to Florida, and Sal helps himself to a second burger.

 

3. Great Grandma & Grandpa Gazillionaire 

Across the street, Sal’s extended family tree includes the legendary Great-Grandma and Grandpa Gazillionaire. At 97 years old, they are proving that the best tax strategy might just be…staying alive. The longer they live, the larger their estate tax exemption grows.

Clarifying Colin perks up again, “Estate Tax Exemption. Obviously everyone knows what that means, but just to be sure, can you explain it…slowly.”

Sure, Colin. Think of the estate tax exemption like a giant coupon from Congress that you cash in at your death. A decade ago, that coupon was worth about $5 million per person. By 2026, it grows to $15 million each, so together Grandma and Grandpa can shield $30 million of their fortune from estate tax. That’s not just a coupon, that’s a Black Friday deal.

Here’s how it works: Say at their deaths that everything they own (their estate) is worth $50 million. They hand the IRS their $30 million coupon, which wipes out estate taxes (not income taxes) on that portion. The remaining $20 million? That gets rung up at full price, about a 40% estate tax, or $8 million, not including any state taxes, which may be more. Painful, but far better than paying 40% tax on the entire $50 million.

The Gazillionaire heirs? They’re cheering for every extra year Grandma and Grandpa lives, because each birthday balloon inflates the exemption a little more under OBBBA. It’s the rare party where everyone’s rooting for more candles on the cake and fewer taxes on the estate.

 

4. Grandpa Gus – The Ride or Retire Car Buying Decision 

Next up is Grandpa Gus, the retired engineer on Logic Lane. At 72, he’s got two big hobbies, chauffeuring his grandkids to soccer games and reading the IRS website. He is also in the market for an SUV and is trying to figure out how to optimize the new auto incentivized parts of OBBBA.

Gus first pulls out his calculator to see if he should finance the SUV for personal use and get the personal auto loan deduction under OBBBA.  If Gus buys a new car under 14,000 pounds, assembled in the U.S., OBBBA lets him deduct up to $10,000 of loan interest each year through 2028.

At 7% interest on an $80,000 SUV and a 5 year car loan, that equates to a monthly payment of about $1,600 of which about $450 is interest. Over the course of a year, Gus would pay $450 x 12 months = $5,400 in interest. Unlike other coupons, you get this one whether you take the standard deduction or itemize your deductions, and the phaseout starts at $200,000 of income for a married couple. Gus is married and his retirement income is $200,000, which translates into saving 22% in federal taxes on $5,400 of interest or about $1,200 less Gus will owe in Federal taxes.

Gus scratches his head…so I will be paying a total of $95,000 over the next 5 years, an average of $3,000 per year in additional interest, to finance this $80,000 car to save $1,200 this year in taxes? And less savings next year since my interest will be less? He asks his dog lying next to him, “Did Math change since I stopped working or is this probably not a good decision? If I go this route, I think I will just pay cash and avoid the $15,000 additional payments in interest.”

On the other hand, Gus is tempted by his neighbor’s idea to sign up as an Uber driver. If Uber Gus buys a car, USA assembled or not, over 6,000 pounds and uses it mostly for ridesharing (or any work), OBBBA lets him take 100% bonus depreciation on the business portion in year one. Gus buys the same SUV and still drives his grandkids around for free, but 60% of the time he is charging to drive other people around. What does 100% bonus depreciation mean? It means that in 2025 with an $80,000 vehicle purchase over 6,000 pounds, used 60% for work, that Gus can reduce his taxable income by 60% x $80,000 = $48,000 deduction. At his 22% bracket that means he would owe 22% x $48,000 = $10,560 less in taxes. Now that is a nice coupon!

Gus jokes with his grandkids: “Do you want Grandpa to be your free chauffeur… or everybody’s chauffeur?” If he decides to take out a high interest car loan, he is rewarded with a small tax savings. If he joins signs up for rideshare, he might score a big tax break but also inherit strangers who talk loudly on their phones and trash his car. On Logic Lane, that’s what passes for suspense.

 

5. Double Shift Dana 

While Gus debates car loans and Uber driving, Dana across the street is juggling something even harder: two jobs and too little sleep. Dana is the queen of the hustle on Logic Lane. By day, she waits tables and by night, she covers overtime shifts no one else wants. Her motto? “Sleep is optional, receipts are not.” Thanks to OBBBA, Dana is getting a break on her taxes. Through 2028, she can deduct up to $25,000 total of tips and overtime pay, in addition to the standard deduction. If her income is below $150,000 ($300,000 if married) she gets to stack coupons and save more in taxes.

Dana earns $75,000 in wages and $25,000 in tips and overtime. When she goes to file her taxes, she gets to reduce her $100,000 of total income by $25,000 under OBBBA plus the standard deduction of $14,100 as a single filer, a total of $39,100 of coupons. At the 22% tax bracket the additional $25,000 of coupons saves her $5,500 in taxes. Dana laughs: “I’m not rich, just tired. But at least now my exhaustion is tax-deductible.”

 

6. Charlene – The Charitable Champ 

Charlene is a sharp, generous neighbor on Logic Lane with a big income and an even bigger heart. She also proudly states, that, “Rich people don’t give cash to charity, they give appreciated stock. Why? Because it’s the perfect tax trifecta.”

• She avoids capital gains tax on the appreciation of the stock
• She still gets a full charitable deduction against her ordinary income
• By funneling it into her Donor-Advised Fund (DAF), she can dribble out donations on her own timetable, supporting causes when and how she chooses.

But Charlene sees the storm clouds of 2026. Under OBBBA, the tax game changes for high earners like her. First, the new 0.5% AGI floor means that on her $1M income, the first $5,000 of giving doesn’t count. Second, even when it does count, all her itemized deductions, including charitable contributions, are capped at 35% instead of her 37% bracket.

What does this mean? Previously, Charlene’s $100,000 charitable contribution would have reduced her taxable income from $1,000,000 to $900,000. A nice coupon! She would be paying 37% taxes on $100,000 less money, saving herself $37,000 in taxes.

Under OBBBA, using the same numbers, she will pay more in taxes. Her $100,000 is only $95,000 now thanks to the 0.50% floor. And, even though she is in the 37% bracket, she can only use the 35% bracket for her deduction. She is now saving only 35% in taxes on her $95,000 contribution, a tax savings of $33,250 instead of $37,000.

Charlene scratches her head at the complicated math created by OBBBA to make her charitable contributions less beneficial to her. But, not one to be a victim, Charlene acts now. In 2025, she makes a larger-than-usual stock gift to her DAF while the old rules still apply. She gets the full deduction, avoids capital gains, and fills her DAF with enough to fund years of charitable giving. She adds in a “Hiya! Take that OBBBA,” just for good measure.

 

7. Baby Dawn – The New Arrival

Meet Baby Dawn, who arrived with a full head of hair, and parents secretly hoping her first word will be “compounding.” Lucky for her, OBBBA just unveiled something brand-new called Trump Accounts, magical little savings vehicles for kids under 18 that start growing right alongside them.

For babies like Dawn, born between January 1, 2025 and December 31, 2028, the government offers a $1,000 “kick-start” contribution. But it’s not automatic, you only get it if the parents (or someone else) contribute first. Think of it like a matching gift: the family must put money in to unlock the one time $1,000.

Each year, a total of up to $5,000 can be contributed to Dawn’s account. That $5,000 cap includes everyone’s deposits—Mom, Dad, grandparents, generous neighbors, and even an employer, who can chip in up to $2,500 of that total. The money goes into a simple investment menu, plain vanilla index funds, where it can quietly compound as Dawn grows up.

At age 18, Dawn’s Trump Account automatically converts into a traditional IRA. From then on, normal IRA rules apply: withdrawals are taxable as income, and taking money out before age 59½ could trigger a 10% penalty.

If Mom and Dad consistently contribute $5,000 per year and the account grows at, say, 8% average annually, Baby Dawn could have a surprisingly solid nest egg of about $200,000 with only $91,000 of contributions by the time she is 18. Because nothing says ‘welcome to the world’ quite like a head start on retirement.

 

8. Maggie & Mike Middleclass – The Busy-Bee Parents 

Maggie and Mike live on the cul de sac of Logic Lane with three kids, ages 6, 10, and 14. Their household income hovers around $120,000, which means they’re not coupon-clipping at the grocery store, but they’re not Richie Rich either. For once, OBBBA’s family-friendly perks fit families like theirs.

Child Tax Credit: OBBBA slightly increases the CTC to $2,200 per child in 2025. With three kids, that’s $6,600 shaved directly off their tax bill, not just reducing the amount they are taxed on. Even better, the phaseout doesn’t start until $400,000 for married couples, so Maggie and Mike qualify for the full amount.

Child & Dependent Care Credit: Between summer camp, after-school care, and a babysitter here and there, Maggie and Mike spend about $8,000 on childcare in a year. The IRS caps the credit at $6,000 of expenses for two or more kids. Because their income is $120,000, they’re above the phase-down ranges, which means they’re at the 20% floor rate. Their credit works out to 20% × $6,000 = $1,200. Not huge, but as Mike says, “That’s a soccer tournament weekend paid for.”

Education Credit: Their 14-year-old is taking dual-enrollment college courses at $3,000 a semester. Thanks to the American Opportunity Tax Credit (AOTC), they are eligible for a credit of $2,500 per student, per year. The AOTC phases out between $160,000–$180,000 AGI for married couples — so at $120,000, Maggie and Mike get the full $2,500.

529 Plans: OBBBA expands 529 plans so they now cover up to $20,000 (increased from $10,000) a year of K–12 tuition plus broader qualified expenses like tutoring and testing.

In Conclusion: On Logic Lane, deductions feel like coupons, estate taxes blow away with birthday candles, and even babies root for compounding. But OBBBA is fresh off the press, and the IRS still must spell out the fine print. A CPA would remind you that while the neighbors on Logic Lane keep it entertaining, before chasing deductions, check with your financial advisor and tax professional. The only guarantees from the neighbors here? Sarcasm, puns, and a reminder that everyone’s financial situation is different.

Learn more about the author, Christy Raines CFP® at www.discovermypath.com. To inquire about services or join our waitlist for comprehensive financial planning and investment management, please email . We would love to hear from you.

This material and the hypothetical examples presented are intended for informational/educational purposes only and should not be construed as tax/legal/investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. No specific investments were used in these examples. Actual results will vary. Past performance is no guarantee of future results. Please contact your financial professional for more information specific to your situation.

Azimuth Wealth Management, Inc. does not provide tax or legal advice.