Debra Taylor: How OBBBA Is Making Advisors Rethink Tax Planning

Taylor also has multiple titles in her personal life. The mother of three lives in Upper Saddle River, New Jersey, with her husband, dog and cat. In addition to spending time with her family, she also enjoys exercising, traveling and reading.

With these areas of expertise, Taylor had a lot to say about changes to the tax code in an interview with ThinkAdvisor.

She discusses the most important changes she saw this year, some of the most important provisions that were set to expire and what advisors engaged in tax management should look out for before 2027 rolls around.

Here are highlights of our conversation:

THINKADVISOR: What is the most important tax code change that you saw this year that wasn't there last year?

DEBRA TAYLOR: This is huge because this is the first year that we've had the One Big Beautiful Bill Act. Remember, it was signed into law last July, so we didn't even have a full year to process OBBBA. And so tax returns are obviously still getting completed, even though it's May, because these days a lot of folks go on extension. But, we're seeing that there could be some surprises coming from these tax returns.

THINKADVISOR: What is one of the major changes to the provisions of the Tax Cuts and Jobs Act of 2017 that were updated by last summer's legislation?

TAYLOR: One of the most impactful and perhaps, at least at one time, controversial provisions from the TCJA is the state and local tax limitation. Going into TCJA, we had an unlimited SALT deduction.

When TCJA was passed, it created that $10,000 limitation. Obviously, that was very upsetting to a lot of the blue states. Then OBBBA comes along and increases that SALT deduction up to $40,000. But remember that you can only get that deduction if you make under $500,000, and between $500,000 and $600,000, that SALT limitation phases out back to $10,000.

But what you have then is a powerful tax torpedo that occurs between $500,000 and $600,000 because you go from a $40,000 potential SALT deduction down to $10,000.

THINKADVISOR: If you had to predict what the biggest tax changes would be next year, what do you think those would be?

TAYLOR: A lot of the provisions in the OBBBA have these modified adjusted gross income limitations. This is very much a moving target over the next few years. It's, in a way, changed how tax planning and tax return review is done because we need to be thinking about things in a multi-year approach. Not just, "Hey, did we get a deduction for this year?" But then, we're going to lose that deduction for the next two years and we would have been better off if we sort of massaged the income or spread the income out in a slightly different way.

One of the things we need to think about then is multi-year tax planning. And remember that a lot of the most publicized OBBBA provisions are temporary. These are things then that over the next few years, we need to rethink how we're approaching our deductions and income. Some of these could very well go away in 2029 or at the end of 2028.

What I'm referring to is that overtime pay deduction, the tip income deduction, the enhanced additional senior deduction, which is huge. That's $6,000 per person age 65 and over. So that's $12,000 for a senior couple. That goes away at the end of 2028. And then the car loan interest deduction.

Let's even throw in there the Trump accounts, the $1,000 government contribution. Starting in July, people will be able to take advantage of that. Some of these "sexier provisions" are what I'll call them, are expiring at the end of 2028 or the end of 2029.

Every single year, then, people are going to need to be managing their income and deductions so that they can qualify for these provisions. For example, on the enhanced additional senior deduction, that phases out fully at $250,000. You end up setting up a little bit of a collision course, because you've got this senior couple and they want their $12,000 enhanced senior deduction, right? That's super powerful for them. However, we might be guiding them on doing a Roth conversion because they also have this huge traditional IRA account that has gone up significantly over the last five or 10 years.

If you start doing these Roth conversions, now of a sudden, they're going to be losing out on these provisions that just went into effect that can have huge tax savings for them.