The TCJA Is Gone. Here’s What the New Tax Law Means for Every Retirement Plan You Manage.

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The Tax Cuts and Jobs Act expired. The One Big Beautiful Bill Act replaced it. And every retirement plan you built over the last eight years just changed.

Not in theory. In actual dollars. The brackets shifted. The SALT cap restructured. A new senior standard deduction appeared. QBI thresholds moved. And the planning strategies that worked under TCJA (front-loading Roth conversions into the 22% bracket, managing the SALT cap at $10,000, timing QBI deductions around the old phaseouts) all need to be recalculated under the new numbers.

If you haven’t rerun your clients’ projections under the OBBBA, you’re working with outdated math. Here’s what changed, what it means for retirement income planning, and where the new opportunities are.

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What Changed: TCJA vs. OBBBA Side by Side

Federal Income Tax Brackets (2025 vs. 2026)

The OBBBA preserved the general rate structure but adjusted thresholds. For advisors, the key changes are in the brackets where most retiree clients fall: 12%, 22%, and 24% (or higher).

Tax Rate	2025 (TCJA, Final Year) MFJ	2026 (OBBBA) MFJ	Change
10%	Up to $23,850	Updated threshold (CPI-adjusted)	Slight increase
12%	$23,851 to $97,000	Updated threshold	Slight increase
22%	$97,001 to $206,700	Updated threshold	Slight increase
24%	$206,701 to $394,600	Updated threshold	Slight increase
32%	$394,601 to $501,050	Updated threshold	Slight increase
35%	$501,051 to $751,600	Updated threshold	Slight increase
37%	Over $751,600	Updated threshold	Slight increase

Note: Exact 2026 thresholds are derived from IRS Revenue Procedures and OBBBA statutory text. Income Lab’s tax engine carries the full 2026 constants from Revenue Procedure 2025-32 and the OBBBA legislative text.

The SALT Cap: New Structure, New Planning Considerations

The TCJA’s flat $10,000 SALT cap has been replaced:

• 2026 SALT cap: $40,400 (up from $10,000 under TCJA; the base was $40,000 in 2025 with a 1% annual increase built into the statute)
• Phaseout: the enhanced cap is reduced by 30% of MAGI above $500,000 ($250,000 MFS), but cannot drop below $10,000
• Temporary provision: the enhanced cap applies 2025 through 2029, then permanently reverts to $10,000 starting in 2030

Sources: IRS Schedule A Instructions, Tax Foundation OBBBA FAQ

For retirees in high-tax states (California, New York, New Jersey, Connecticut), this is a significant change. A retired couple in New York paying $18,000 in state income tax and $22,000 in property tax had $30,000 of deductions stranded under TCJA’s $10,000 cap. Under OBBBA, they can deduct the full $40,000.

The retirement planning impact: The higher SALT cap changes the standard-vs-itemized deduction calculus for many retirees. Clients who were taking the standard deduction under TCJA may now benefit from itemizing. This affects:
– Charitable giving strategies (bunching may be less necessary)
– Roth conversion math (higher deductions reduce the tax cost of conversions)
– State residency planning (the penalty for living in a high-tax state is smaller)

The New Senior Standard Deduction: A Temporary Roth Conversion Window

OBBBA introduces a $6,000 additional standard deduction per taxpayer age 65 and older for tax years 2025 through 2028. This is new; it didn’t exist under TCJA. And it’s temporary.

For a married couple where both spouses are 65+, that’s $12,000 in additional deduction space. This directly creates Roth conversion headroom that didn’t exist before. The right Roth conversion software can model these interactions across the full window.

The planning opportunity nobody is talking about: A couple in the 22% bracket with $12,000 of additional deduction space can convert an extra $12,000 to Roth at zero incremental tax cost (the conversion income is offset by the senior deduction). Over the four-year window (2025-2028), that’s $48,000 of “free” Roth conversions for a couple, assuming they have the bracket room.

At 22%, $48,000 of conversions normally costs $10,560 in federal tax. The senior deduction eliminates that cost entirely. For clients with significant traditional IRA balances, this is a time-limited opportunity that disappears after 2028.

The catch: The deduction phases out at 6% of MAGI above $75,000 (Single) / $150,000 (MFJ). For a married couple with $200,000 MAGI, the phaseout reduces the deduction by 6% x ($200,000 minus $150,000) = $3,000 per person. Their $12,000 combined deduction drops to $6,000. At $250,000 MAGI, the deduction is fully phased out.

This phaseout creates an implicit marginal rate bump: every additional dollar of income in the phaseout zone reduces the deduction by $0.06, which at the 22% bracket means an extra $0.0132 of tax per dollar (22% x $0.06). That’s a 1.32 percentage point effective rate increase across the phaseout range. Not enormous, but enough to shift the optimal Roth conversion amount.

Note: This is technically a separate “additional deduction” available to both itemizers and standard deduction filers, not an increase to the standard deduction itself. Sources: IRS OBBBA deductions for seniors

QBI Deduction Changes

The Section 199A Qualified Business Income deduction was made permanent under OBBBA (it was set to expire at the end of 2025). Key changes:

• Made permanent: The 20% QBI deduction no longer sunsets
• Widened phase-in range: The income range over which upper-income limitations phase in expanded from $50,000/$100,000 to $75,000/$150,000 (Single/MFJ). This means the W-2 wage test and qualified property test phase in more gradually.
• $400 minimum deduction: Taxpayers with $1,000+ of active QBI receive at least a $400 deduction regardless of limitations

For advisor clients who own businesses, rental properties, or S-corps, the permanence removes the urgency to accelerate QBI income before a sunset. But the wider phase-in range changes the marginal rate calculations for clients in the limitation zone.

For retirement planning: Many retirees have rental income or small business income that qualifies for QBI. The permanent deduction means this tax benefit continues indefinitely, which affects long-term Roth conversion math (since QBI reduces taxable income, it reduces the tax cost of conversions in years when QBI is available).

Sources: Tax Foundation Section 199A analysis

A New Non-Itemized Charitable Giving Deduction

OBBBA also introduced a new $1,000/person non-itemized “above the line” deduction for cash donations to charity. This means that those who did not have enough in deductions to itemize will now have an opportunity to deduct charitable deductions even if they take the standard deduction.

Note that the OBBBA also tweaked slightly the itemization of charitable donations, including introducing a new 0.5% of AGI floor on deductions, which effectively pushes the cap on annual itemized charitable deductions to 60.5% and makes carryforward math a bit more complex.

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Five Things Every Advisor Should Do Right Now

1. Reproject Every Medicare-Eligible Client’s IRMAA Exposure

The bracket changes and deduction changes alter projected MAGI. A client whose MAGI was $3,000 below an IRMAA tier boundary under TCJA math may now be above it under OBBBA math (or vice versa). The IRMAA two-year lookback means 2026 income affects 2028 premiums.

Run the numbers under the new law. Don’t assume last year’s projections still hold. For a complete breakdown of the 2026 IRMAA tiers and planning strategies, see our IRMAA brackets guide.

2. Recalculate Roth Conversion Capacity

The optimal Roth conversion amount is a function of the current tax bracket, IRMAA constraints, ACA subsidy limits (for pre-65 retirees), and projected future rates. Every one of these inputs changed under OBBBA.

For many clients, the “fill the 22% bracket” strategy that was standard under TCJA now has different boundaries. The bracket is wider or narrower depending on other deduction changes. The conversion ceiling (the maximum amount before triggering the next IRMAA tier or losing the ACA subsidy) has shifted.

The clients who benefit most from recalculation: those in the 22% bracket with significant traditional IRA balances and 5-10 years until RMDs begin. Income Lab’s Tax Lab can model these interactions across multiple years and scenarios.

3. Revisit the Charitable Strategy

Under TCJA, the $10,000 SALT cap pushed many retirees to the standard deduction, which meant charitable contributions had no incremental tax benefit unless they bunched (donated two years’ worth in one year to exceed the standard deduction threshold).

Under OBBBA’s $40,400 SALT cap, more retirees will itemize. And even those who don’t itemize will have access to a $1,000 (single)/$2,000 (joint) above the line non-itemized deduction. This means:
– Annual charitable giving becomes deductible again for more clients
– QCD strategies (for clients 70+) remain powerful but the relative advantage vs. itemized deductions has shifted
– Donor-advised fund bunching may be less necessary for some clients

Review each client’s charitable giving relative to the new standard deduction threshold.

4. Reassess State Residency Planning

The TCJA’s punitive $10,000 SALT cap drove meaningful migration to no-income-tax states (Florida, Texas, Nevada). The OBBBA’s $40,400 cap significantly reduces this incentive.

For clients considering relocation, the math has changed. A California couple paying $35,000 in state income tax was losing $25,000 in deductions under TCJA (only $10K deductible). Under OBBBA, they deduct the full $35,000. The tax cost of staying in California just dropped by $5,500 to $8,750 per year (depending on bracket).

This doesn’t eliminate the case for low-tax states, but it weakens it for clients whose primary motivation was the SALT cap. For a full breakdown of how each state treats retirement income, see our state taxes in retirement guide.

5. Model 2025 vs. 2026 Side by Side for Every Client Meeting

The single most valuable planning conversation you can have right now: show your client their tax situation under the old law versus the new law. For most clients, the numbers are different enough to warrant action.

This is not a one-time exercise. Some OBBBA parameters are fixed and others are adjusted annually, and the interactions between provisions (brackets, SALT, senior deduction, QBI, IRMAA, ACA) create a moving target. Annual reanalysis is the new standard of care.

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The Bigger Picture: Why Static Tax Plans Are Now Dangerous

The transition from TCJA to OBBBA is the most significant tax law change since 2017. But it won’t be the last. Tax law is a moving variable, and retirement plans that assume static rates are plans that will be wrong.

The advisors who thrive in this environment are the ones who can model forward: project tax liability under multiple scenarios, stress-test strategies against bracket changes, and show clients the downstream impact of today’s decisions on next decade’s outcomes.

This is the difference between reactive tax planning (filing the return efficiently after the fact) and proactive tax planning (making strategic decisions today that optimize the next 20 years). Your clients are paying you for the latter. The question is whether your tools can deliver it.

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Two Clients, Two Different Impacts: OBBBA Scenarios

Scenario 1: The Roth Conversion Window That Opened

David and Susan, ages 66 and 67, both on Medicare. Combined MAGI of $185,000 (pension, Social Security, small IRA distribution). Under TCJA, they took the standard deduction and had about $12,000 of room in the 22% bracket for Roth conversions.

Under OBBBA, three things changed simultaneously. The new $12,000 combined senior standard deduction (both 65+) creates additional deduction space. The slightly wider 22% bracket gives them more room before hitting 24%. And their IRMAA exposure shifted because projected MAGI is now lower after deductions.

The result: they can convert roughly $24,000 more per year than they could under TCJA, at the same effective tax cost. Over the four-year window (2025-2028) while the senior deduction is available, that’s nearly $96,000 of additional Roth conversions. At 22%, the senior deduction alone saves them $21,120 in federal tax on those conversions.

Scenario 2: The High-Tax-State Couple Who Stays Put

Frank and Maria, ages 71 and 69, live in New Jersey. Combined income of $220,000 (RMDs, Social Security, rental income from an S-corp). Under TCJA, they paid $28,000 in state and property taxes but could only deduct $10,000. They seriously considered relocating to Florida.

Under OBBBA, the $40,400 SALT cap lets them deduct the full $28,000. That’s $18,000 more in deductions, saving them roughly $4,320 per year at the 24% bracket. The relocation savings that looked like $12,000 per year under TCJA now look like $7,680. Factor in the cost and disruption of moving, and the financial case for relocation weakened substantially.

Meanwhile, their rental income qualifies for the permanent QBI deduction, which reduces taxable income further. And New Jersey’s $100,000 retirement income exclusion (for residents 62+) shelters a significant portion of their RMDs from state tax. The combination of OBBBA changes and New Jersey’s own exemptions changed their planning picture entirely.

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Why This Matters for Your Planning Software

The transition from TCJA to OBBBA is exactly the kind of structural change that separates forward-looking planning tools from backward-looking ones.

If your retirement planning software can’t model the new bracket structure, the updated SALT cap, and the temporary senior deduction together, your projections are working with outdated assumptions. Every Roth conversion recommendation, every withdrawal sequence, every spending capacity estimate needs to reflect the current law.

Income Lab’s Tax Lab and retirement paycheck-driven planning framework are built for this kind of analysis: modeling how income decisions interact with bracket boundaries, and how changes in tax law affect the long-term retirement income picture. The system’s approach to dynamic, ongoing monitoring via Retirement GPS means plans don’t just get built once and forgotten. They adapt as the world changes.

The OBBBA is a change. There will be more. The question is whether your planning process can absorb them without starting from scratch.

Watch: Tax-Smart Distribution Planning with the Income Lab Tax Center to see how Income Lab’s Tax Center models bracket management, Roth conversion strategies, and IRMAA optimization under the current tax law.

See how Income Lab handles tax-aware retirement planning in a live demo.

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Key Takeaways

1. Every projection built under TCJA assumptions is now outdated. Brackets, SALT, QBI, and standard deductions all changed. Rerun the numbers.

2. Roth conversion windows shifted. The optimal conversion amount under OBBBA is different from TCJA for most clients. Recalculate before executing 2026 conversions.

3. The SALT cap increase ($10K to $40.4K) changes the itemization calculus. More retirees will itemize. This affects charitable, state residency, and mortgage interest strategies.

4. The new senior standard deduction creates a new planning variable. Watch for the phaseout range creating implicit marginal rate bumps.

5. Annual reanalysis is now the standard of care. The transition from TCJA to OBBBA proves that tax law is a variable, not a constant. Plans that don’t account for legislative change are incomplete.

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Next Steps

See how the OBBBA affects your clients’ plans. Income Lab models the full OBBBA tax changes alongside retirement income projections, so you can show clients exactly how the new law changes their spending capacity, Roth strategy, and lifetime tax picture.

Schedule a Demo →

Get the TCJA vs. OBBBA Quick Comparison. A side-by-side reference sheet with the key changes that affect retirement planning, formatted for client conversations.

Download the Comparison →

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Sources:
– IRS Revenue Procedure 2025-32: 2026 federal income tax bracket thresholds and standard deduction amounts
– Tax Foundation OBBBA Analysis: Comprehensive breakdown of OBBBA provisions, SALT cap, and QBI changes
– IRS OBBBA Deductions for Seniors: Official guidance on the new senior standard deduction
– Tax Foundation Section 199A Analysis: QBI deduction permanence and updated phase-in thresholds
– IRS Schedule A Instructions: SALT deduction rules and limitations under OBBBA
– Congressional Research Service: TCJA to OBBBA Transition: Legislative history and provision comparisons

Continue Reading

• IRMAA Brackets 2026: Complete Guide for Financial Advisors
• State Taxes in Retirement: The Complete Advisor Guide
• Book a demo to model OBBBA impact for your clients

Frequently Asked Questions

Did the TCJA tax rates expire in 2026?

No. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently extended the TCJA’s lower rate structure. The 10/12/22/24/32/35/37% brackets are no longer scheduled to sunset. However, the OBBBA added new provisions (SALT cap changes, senior deduction, QBI permanence) that change the planning landscape significantly. Every projection built under TCJA assumptions needs recalculation.

What is the new SALT cap under OBBBA?

The OBBBA raised the SALT cap from $10,000 to $40,400 for 2026 (the base was $40,000 in 2025 with a 1% annual increase). The enhanced cap is reduced by 30% of MAGI above $500,000 but cannot drop below $10,000. This is a temporary provision: the enhanced cap applies 2025-2029, then permanently reverts to $10,000 starting in 2030. For retirees in high-tax states, this significantly changes the standard-vs-itemized deduction calculus.

What is the new senior standard deduction under OBBBA?

OBBBA introduced a $6,000 additional standard deduction per taxpayer age 65+ for tax years 2025-2028. For a married couple both 65+, that is $12,000 in additional deduction space. The deduction phases out at 6% of MAGI above $150,000 (MFJ) or $75,000 (single). This creates a temporary Roth conversion window: clients can convert an extra $12,000 per year at zero incremental tax cost during the four-year window.

How does OBBBA affect Roth conversion planning?

The optimal Roth conversion amount changed under OBBBA for most clients. The bracket thresholds shifted slightly, the new senior deduction creates additional conversion headroom for clients 65+, and the higher SALT cap changes the itemized deduction calculus. Some OBBBA parameters are fixed and others are adjusted annually. Advisors should recalculate conversion capacity for every client, especially those in the 22% bracket with significant traditional IRA balances and 5-10 years until RMDs begin.

What is the new OBBBA charitable giving deduction?

OBBBA introduced a $1,000/person non-itemized ‘above the line’ deduction for cash donations to charity. This means taxpayers who take the standard deduction can now deduct charitable contributions up to $1,000 (single) or $2,000 (joint) without itemizing. OBBBA also introduced a new 0.5% of AGI floor on itemized charitable deductions, which effectively pushes the cap on annual itemized charitable deductions to 60.5% and makes carryforward math more complex.