OBBBA Tax Changes for the CFP Exam: 2026 Quick Reference

The CFP Board released a roughly forty-page briefing on the One Big Beautiful Bill Act. For candidates studying for the CFP exam, the testable surface is much smaller than forty pages. This is the focused reference.

OBBBA was signed July 4, 2025. It made permanent most of the individual provisions in the 2017 Tax Cuts and Jobs Act that were scheduled to sunset at the end of 2025, and it added several new provisions. The CFP exam tests 2026 law, so every dollar threshold a candidate computes uses the OBBBA-era number, not the pre-OBBBA number.

Key Concept

Five OBBBA items show up disproportionately on CFP question banks: the $40,000 SALT cap, the new senior bonus deduction, the child tax credit bump to $2,200, the permanent $15 million estate exemption, and the new 0.5% AGI floor on cash charitable contributions.

The Twelve Changes That Matter

The list below walks each OBBBA change in the order it touches a 1040, then handles the estate-side items.

1. SALT cap raised to $40,000 (with phase-down)

State and local taxes (income or sales, plus property) deductible up to $40,000 per return, $20,000 MFS. Above $500,000 MAGI the cap drops by $100 per $1,000 of additional MAGI, floor at $10,000 above $800,000 MAGI.

For example: an MFJ filer with $650,000 MAGI sees an effective cap of $40,000 minus $15,000 = $25,000.

Common Trap

The phase-down is gradual, not a cliff. Question stems with high-income filers often expect candidates to run the arithmetic, not just default to $40,000.

2. Standard deduction permanent at TCJA-doubled levels

Filing Status 2026 SD
Single $16,100
MFJ $32,200
HoH $24,150
MFS $16,100

Without OBBBA, these would have dropped to approximately half on January 1, 2026.

3. NEW senior bonus deduction (age 65+)

OBBBA replaced the prior small additional standard deduction at age 65 with a flat dollar bonus:

  • Single age 65+: $2,000 extra
  • MFJ, per spouse 65+: $1,600 (so $3,200 if both spouses are 65+)
  • HoH age 65+: $2,000

An MFJ couple both age 67 takes a 2026 standard deduction of $32,200 plus $3,200 = $35,400. The bonus phases out for AGI above $200,000 single / $400,000 MFJ.

This is the single biggest change in how retired clients decide between standard and itemized.

4. Child tax credit raised to $2,200

Per qualifying child under 17. Refundable portion near $1,700. Phase-out unchanged: $50 reduction per $1,000 of MAGI above $200,000 single / $400,000 MFJ.

5. NEW tip income exclusion

Up to $25,000 of qualified tip income per worker excluded from federal income tax. FICA still applies. Phases out above $150,000 single / $300,000 MFJ MAGI.

6. NEW overtime pay exclusion

Up to $12,500 single / $25,000 MFJ of the premium portion of overtime pay (the "half" in time-and-a-half) excluded from federal income tax. FICA still applies. Same phaseout thresholds as tips.

Note

Both tip and overtime are exclusions from gross income, not above-the-line deductions. They reduce AGI directly because the income never enters the return.

7. NEW non-itemizer charitable deduction restored

Cash gifts to qualified public charities deductible above the line up to $1,000 single / $2,000 MFJ. Replaces the expired CARES Act caps of $300 / $600. Not available for gifts to donor-advised funds.

8. NEW 0.5% AGI floor on itemized cash charitable

Cash gifts below 0.5% of AGI no longer produce an itemized deduction. Above the floor, the deduction equals the gift minus the floor.

A $400,000 AGI filer who donates $5,000 cash deducts $5,000 minus $2,000 = $3,000. A $400,000 AGI filer who donates $1,500 cash deducts zero (below the $2,000 floor).

9. NEW 35% top-bracket cap on itemized charitable benefit

For filers in the 37% bracket, the value of the itemized charitable deduction is capped at 35 cents on the dollar. A $10,000 cash gift produces $3,500 of tax savings in the top bracket, not $3,700.

10. AMT phase-out reset to flat thresholds

2026 AMT exemption: $90,100 single / $140,200 MFJ. Phase-out begins at $500,000 single / $1,000,000 MFJ. These thresholds are flat, not indexed.

11. Estate, gift, and GST exemption permanent at $15,000,000

Per person, indexed for inflation going forward. The TCJA sunset to approximately $7,000,000 on January 1, 2026 is gone. Rate above the exemption is unchanged at 40%.

Key Concept

The bypass trust still has value under OBBBA permanence because it shifts post-death appreciation outside the survivor’s estate. The DSUE under portability does not index between the first and second death.

12. Section 199A QBI permanent at 20%

The 20% deduction on qualified business income from pass-through entities is now permanent. Phase-in limits for specified service trades or businesses (SSTBs) continue to apply, with 2026 income thresholds inflation-indexed.

What OBBBA Did NOT Change

Knowing the items that stayed the same prevents wrong-answer construction. Common stems include exam traps that assume an OBBBA change that did not happen.

  • NIIT is still 3.8% on the lesser of net investment income or MAGI excess over $200,000 single / $250,000 MFJ. Thresholds remain unindexed.
  • Capital gains brackets (0/15/20%) and breakpoints structurally unchanged.
  • Estate tax rate above the exemption: still 40%.
  • Kiddie tax mechanics: first $1,400 tax-free, next $1,400 at child’s rate, above $2,800 at parents’ marginal rate.
  • Annual gift exclusion: still inflation-indexed; $19,000 for 2026.
  • Roth IRA income phase-outs: continue to inflation-index.
  • Roth conversion rules: unchanged. No income limit on conversions.
  • Section 121 home-sale exclusion ($250,000 single / $500,000 MFJ): unchanged.
  • 1031 like-kind exchange (real property only): unchanged.
  • Retirement plan contribution limits: these are SECURE 2.0 and inflation indexing, not OBBBA.

Worked Example: SALT Phase-Down in Practice

The Aldermans file MFJ in 2026. AGI $650,000. State income tax $30,000. Property tax $18,000. They want to know whether to bunch property taxes into one year.

Step 1. Base SALT cap = $40,000.

Step 2. Phase-down. MAGI excess = $650,000 minus $500,000 = $150,000. Cap reduction = $150,000 times $100 per $1,000 = $15,000.

Step 3. Effective SALT cap = $40,000 minus $15,000 = $25,000.

Step 4. Total SALT incurred = $30,000 plus $18,000 = $48,000. They can deduct $25,000. Excess $23,000 produces no federal tax benefit.

Step 5. Bunching analysis. If the Aldermans paid double property tax in 2026 ($36,000) and nothing in 2027, their 2026 SALT would still cap at $25,000. Bunching does not help once they are already past the cap. The planning move is to lower MAGI in 2026 if possible, which raises the effective cap.

Worked Example: Charitable Floor

Same Aldermans. AGI $650,000. Cash charitable contributions $4,000.

Step 1. 0.5% AGI floor = $3,250.

Step 2. Deductible portion = $4,000 minus $3,250 = $750.

Step 3. The $4,000 cash gift produces only $750 of itemized deduction.

If Carl is in the 32% bracket, the deduction saves $750 times 32% = $240 in federal tax. Not zero, but materially less than the $1,280 of tax savings a filer without the floor would have computed.

How to Study OBBBA for the CFP Exam

OBBBA is not a separate exam section. It is the 2026 tax law that pervades the Tax Planning and Estate Planning sections of the exam. The practical study moves:

  1. Run drill questions on the OBBBA dollar values until you can recite them cold. The list above contains the twelve numbers that matter. Practice until they come out without thinking.
  2. Practice the SALT phase-down arithmetic. This is the most computation-heavy OBBBA item on the exam. The question stem will hand you MAGI; you compute the effective cap.
  3. Re-run the standard-vs-itemized decision for retired clients. The senior bonus changes the floor. A client who used to itemize for medical may now take the standard.
  4. Practice the 0.5% charitable floor. The arithmetic is simple but the exam often tests it as a trap: candidates compute the full gift and forget to subtract the floor.
  5. Internalize what did NOT change. NIIT, kiddie tax, 1031, Section 121, Roth conversion rules. Questions often plant a wrong-answer choice that assumes one of these moved when it did not.

Practice OBBBA-anchored CFP questions on FreeFellow (all free, no signup required to browse).

Putting It All Together

For a candidate, OBBBA changes the answer to roughly twelve specific dollar-value questions on the CFP exam. Memorizing those twelve numbers handles roughly 80% of OBBBA-flavored items. Practicing the SALT phase-down and the 0.5% charitable floor arithmetic handles most of the rest.

The remaining 20% lives in scenario questions where two or three OBBBA items interact, for example: a retired MFJ couple with $650,000 MAGI deciding between standard and itemized, or a high-net-worth couple modeling whether to keep a bypass trust under OBBBA permanence. Those scenarios reward candidates who internalized the changes as a system rather than as twelve isolated numbers.

If you found the Board’s briefing too long, the right framing is: OBBBA is a small set of moves, each with clean math. Learn the moves, practice the math, watch the unchanged items for traps. That is the test.