\n These and other indefinite provisions will be on autopilot for the\n foreseeable future. They will change only when new congressional\n legislation passes and is signed into law by the president. This brings\n more certainty to financial planning.\n <\/p>\n
\n The OBBBA also introduces temporary measures for the 2025\u20132028 tax years:\n A big boost in the tax deduction for seniors aged 65 and older, new tax\n deductions for tips and overtime pay, and the first auto loan interest\n payment deduction since the 1980s.\n <\/p>\n
\n Furthermore, a provision that had haunted foreign individual investors,\n governments, and companies in allied countries\u2014Section 899, known as the\n \u201crevenge tax\u201d\u2014was stripped from the bill. After aggressive lobbying by\n industry and foreign groups, Treasury Secretary Scott Bessent negotiated a\n compromise with G7 countries.\n <\/p>\n
\n We think the individual taxpayer OBBBA provisions, along with pro-business\n measures, helped boost the U.S. stock market as the bill worked its way\n through the House of Representatives and Senate, and likely have\n contributed to the market\u2019s good vibes in recent weeks.\n <\/p>\n \n
One Big Beautiful Bill Act: Select provisions impacting individuals<\/h3>\n \n \n \n Income tax rates and brackets<\/strong><\/td>\n \n 2017 TCJA provisions extended indefinitely. But increases\n the inflation adjustment by an extra year for the three lowest\n income tax brackets (10%, 12%, and 22%).\n <\/td>\n <\/tr>\n \n Standard deduction<\/strong><\/td>\n \n 2017 TCJA provision extended indefinitely and with an increase\n starting in 2025 at $31,500 for joint filers, $23,625 head of\n household, $15,750 all others. Inflation-adjusted thereafter.\n <\/td>\n <\/tr>\n \n Personal exemption<\/strong><\/td>\n \n Eliminated; amount set to zero. But higher deduction for age 65\n and older (see below).\n <\/td>\n <\/tr>\n \n Seniors deduction<\/strong><\/td>\n \n Increases extra standard deduction for seniors age 65+ to $6,000\n for individuals and $12,000 for joint filers, for itemizers and\n non-itemizers. Phaseout begins when adjusted gross income exceeds\n $75,000 for single filers, $150,000 for joint filers. Available\n 2025\u20132028, not indefinite.\n <\/td>\n <\/tr>\n \n State and local tax (SALT) deduction<\/strong><\/td>\n \n Temporarily increases cap on itemized SALT deduction to $40,000\n for 2025; increases by further 1% per year through 2029. Subject\n to phaseout for incomes above $250,000 for single filers and\n $500,000 for joint filers. In 2030, the maximum deduction drops to\n $10,000.\n <\/td>\n <\/tr>\n \n Alternative minimum tax (AMT)<\/strong><\/td>\n \n 2017 TCJA provisions extended indefinitely. But exemption phaseout\n thresholds revert back to 2018 levels of $500,000 for single\n filers and $1 million for joint filers (previously $1,252,700);\n indexed for inflation thereafter. SALT deduction disallowed under\n AMT calculation. For more on AMT, including impact on municipal\n bonds, see\n this RBC article <\/rbc-icon><\/a\n >.\n <\/td>\n <\/tr>\n \n Lifetime estate and gift tax<\/strong><\/td>\n \n 2017 TCJA provision extended indefinitely and increases lifetime\n exemption to $15 million for single filers and $30 million for\n joint filers in 2026; inflation-adjusted thereafter.\n <\/td>\n <\/tr>\n \n Capital gains and dividends<\/strong><\/td>\n \n 2017 TCJA provisions extended indefinitely. Current rates (0%,\n 15%, or 20%, depending on income) and TCJA modified breakpoints\n (income ranges where rates kick in) remain.\n <\/td>\n <\/tr>\n \n Home mortgage interest deduction<\/strong><\/td>\n \n 2017 TCJA provision extended indefinitely; applicable up to\n $750,000 principal amount.\n <\/td>\n <\/tr>\n \n Child tax credit<\/strong><\/td>\n \n 2017 TCJA provision extended indefinitely and increased to maximum\n of $2,200 per child in 2025; inflation-adjusted thereafter.\n <\/td>\n <\/tr>\n \n Auto loan interest deduction<\/strong><\/td>\n \n New twist on an old (pre-1986) deduction. Interest will be\n deductible up to $10,000 per year for itemizers and non-itemizers\n for purchased (not leased) new autos with final assembly in the\n U.S. Phaseout begins when adjusted gross income exceeds $100,000\n for single filers and $200,000 for joint filers. Available\n 2025\u20132028, not indefinite.\n <\/td>\n <\/tr>\n \n Tips (gratuities) deduction<\/strong><\/td>\n \n New deduction of up to $25,000 of tip income within certain\n industries for itemizers and non-itemizers. Phaseout begins when\n adjusted gross income exceeds $150,000 for single filers and\n $300,000 for joint filers. Available 2025\u20132028, not indefinite.\n <\/td>\n <\/tr>\n \n Overtime pay deduction<\/strong><\/td>\n \n New deduction of up to $12,500 of overtime pay for individuals and\n $25,000 for joint filers from federal income tax. Available\n 2025\u20132028, not indefinite.\n <\/td>\n <\/tr>\n <\/table>\n \n Note: For the items \u201cextended indefinitely,\u201d there is no sunset\n provision. These can only change if a new act of Congress is signed\n into law by the president.\n <\/p>\n
\n Source – Tax Foundation, Kiplinger, Forbes, Congress.gov, Tax Policy\n Center, Thomson Reuters, RBC Wealth Management. This information does\n not constitute tax advice, and the One Big Beautiful Bill Act and IRS\n tax code are more complex than this summary table.\n <\/p>\n <\/div>\n\n\n\n\n
\n Highlights for businesses, including companies listed on U.S. stock\n exchanges\n <\/h2>\n
\n The OBBBA includes pro-business measures that we view favourably. Two stand\n out:\n <\/p>\n
\n - \n
Immediate expensing of domestic research and development (R&D)\n and equipment<\/strong\n >\n (short-lived assets) costs<\/strong> was reinstated and extended\n indefinitely. This reverses the TCJA\u2019s five-year requirement. The\n nonpartisan Tax Foundation correctly notes that this essentially\n eliminates a tax penalty for capital investment. The organization\n assesses that this business provision has \u201cthe most bang for the buck,\u201d\n potentially boosting long-term GDP growth by 0.7 percent.\n <\/li>\n - \n
Bonus depreciation for improvements made to qualified properties <\/strong\n >(warehouses, data centers, factories, other facilities, for example)\n was 60 percent in 2024 and was set to phase down incrementally to zero\n percent by 2027. The OBBBA reinstates bonus depreciation at 100 percent\n for properties placed in service after January 19, 2025. This rate is\n indefinite, so the level won\u2019t change until new legislation passes and\n is signed by the president. While this will come at a cost for the\n federal budget, it should free up capital for reinvestment and boost\n free cash flow and economic growth. The Tax Foundation wrote, \u201cPermanent\n 100 percent bonus depreciation would reduce federal revenue by $432.4\n billion over a decade ($242.7 billion dynamically) but boost long-run\n GDP by 0.4 percent.\u201d\n <\/li>\n <\/ul>\n \n Among companies listed on U.S. stock exchanges, we think those in the\n Industrials sector and those tied to the artificial intelligence buildout\n are the most obvious near- and medium-term beneficiaries of these changes.\n <\/p>\n \n
Lowlights for green\/clean energy<\/h2>\n
The industry that took the biggest hit in the OBBBA was clean energy.<\/p>\n
\n The RBC Capital Markets Global Commodity Strategy team said the bill will\n \u201cdrastically shift near-term investments and the broad energy landscape.\u201d\n It reduces clean energy incentives that were included in the Inflation\n Reduction Act signed by former President Joe Biden, and expands subsidies\n for oil production, pipeline projects, and coal.\n <\/p>\n
\n The new legislation speeds up terminations and phaseouts of many renewable\n energy tax credits, including for wind and solar projects. Because of\n this, our commodity team anticipates \u201can acceleration of clean energy\n projects in the twelve months following bill passage, likely stressing an\n already full project pipeline and vulnerable supply chains.\u201d\n <\/p>\n
\n But it seems like this news was priced into many clean energy stocks ahead\n of time. The NASDAQ Clean Edge Green Energy Index was weak earlier in the\n year and declined alongside the broader market in the spring, only to\n rebound sharply since the market\u2019s April 8 low, significantly outpacing\n the S&P 500.\n <\/p>\n \n
Problems with deficit projections, and what about tariff revenue?<\/h2>\n
\n The cumulative deficit projections associated with the OBBBA vary\n significantly, whether from the official Congressional Budget Office\n score, estimates from congressional committees, the Trump administration\u2019s\n forecast, or estimates from nonpartisan tax organizations.\n <\/p>\n
\n One of the discrepancies comes from how economic growth is forecast over\n the budget period, as this impacts the amount of revenue collected.\n Specifically, there are major disagreements about the economic benefits\n (or drags) from the OBBBA\u2019s tax provisions and business incentives. This\n is a decades-old debate in Washington with partisan overtones that we\n don\u2019t think will be resolved anytime soon.\n <\/p>\n
\n Estimates for inflation and the cost of debt servicing during the budget\n period are also swing factors. Another uncertainty is the savings\n associated with the controversial cuts to Medicaid and the Supplemental\n Nutrition Assistance Program (once known as food stamps), along with any\n potential costs that may be incurred from people losing those benefits.\n <\/p>\n
\nWe think it\u2019s best to view the potential deficit impact in terms of a broad range. RBC Global Asset Management Inc.\u2019s Chief Economist Eric Lascelles estimates the OBBBA could cause the cumulative deficit over the next decade to rise between $2.8 trillion and $4 trillion over and above what would have occurred had the legislation not passed. This range includes the more credible estimates in Washington, in our view.\n <\/p>\n
\n Lascelles notes that tariff revenue could offset a sizeable chunk of this.\n Therefore, he said the deficit \u201cshouldn\u2019t actually increase by several\n trillion dollars over the 10-year time horizon.\u201d\n <\/p>\n
\n Even so, the $37 trillion level is a worrisome starting point. According\n to Lascelles\u2019 Fiscal Health Index, the U.S. is currently in the worst\n position among major developed and emerging economies, with a public debt\n level that is \u201calready fairly burdensome from a debt-servicing\n perspective.\u201d\n <\/p>\n \n
Top and bottom three countries in terms of fiscal health<\/h3>\n
\n Note: For the items \u201cextended indefinitely,\u201d there is no sunset\n provision. These can only change if a new act of Congress is signed\n into law by the president.\n <\/p>\n
\n Source – Tax Foundation, Kiplinger, Forbes, Congress.gov, Tax Policy\n Center, Thomson Reuters, RBC Wealth Management. This information does\n not constitute tax advice, and the One Big Beautiful Bill Act and IRS\n tax code are more complex than this summary table.\n <\/p>\n <\/div>\n\n\n\n\n
\n Highlights for businesses, including companies listed on U.S. stock\n exchanges\n <\/h2>\n
\n The OBBBA includes pro-business measures that we view favourably. Two stand\n out:\n <\/p>\n
- \n
- \n
- \n
\n Among companies listed on U.S. stock exchanges, we think those in the\n Industrials sector and those tied to the artificial intelligence buildout\n are the most obvious near- and medium-term beneficiaries of these changes.\n <\/p>\n \n
Lowlights for green\/clean energy<\/h2>\n
The industry that took the biggest hit in the OBBBA was clean energy.<\/p>\n
\n The RBC Capital Markets Global Commodity Strategy team said the bill will\n \u201cdrastically shift near-term investments and the broad energy landscape.\u201d\n It reduces clean energy incentives that were included in the Inflation\n Reduction Act signed by former President Joe Biden, and expands subsidies\n for oil production, pipeline projects, and coal.\n <\/p>\n
\n The new legislation speeds up terminations and phaseouts of many renewable\n energy tax credits, including for wind and solar projects. Because of\n this, our commodity team anticipates \u201can acceleration of clean energy\n projects in the twelve months following bill passage, likely stressing an\n already full project pipeline and vulnerable supply chains.\u201d\n <\/p>\n
\n But it seems like this news was priced into many clean energy stocks ahead\n of time. The NASDAQ Clean Edge Green Energy Index was weak earlier in the\n year and declined alongside the broader market in the spring, only to\n rebound sharply since the market\u2019s April 8 low, significantly outpacing\n the S&P 500.\n <\/p>\n \n
Problems with deficit projections, and what about tariff revenue?<\/h2>\n
\n The cumulative deficit projections associated with the OBBBA vary\n significantly, whether from the official Congressional Budget Office\n score, estimates from congressional committees, the Trump administration\u2019s\n forecast, or estimates from nonpartisan tax organizations.\n <\/p>\n
\n One of the discrepancies comes from how economic growth is forecast over\n the budget period, as this impacts the amount of revenue collected.\n Specifically, there are major disagreements about the economic benefits\n (or drags) from the OBBBA\u2019s tax provisions and business incentives. This\n is a decades-old debate in Washington with partisan overtones that we\n don\u2019t think will be resolved anytime soon.\n <\/p>\n
\n Estimates for inflation and the cost of debt servicing during the budget\n period are also swing factors. Another uncertainty is the savings\n associated with the controversial cuts to Medicaid and the Supplemental\n Nutrition Assistance Program (once known as food stamps), along with any\n potential costs that may be incurred from people losing those benefits.\n <\/p>\n
\nWe think it\u2019s best to view the potential deficit impact in terms of a broad range. RBC Global Asset Management Inc.\u2019s Chief Economist Eric Lascelles estimates the OBBBA could cause the cumulative deficit over the next decade to rise between $2.8 trillion and $4 trillion over and above what would have occurred had the legislation not passed. This range includes the more credible estimates in Washington, in our view.\n <\/p>\n
\n Lascelles notes that tariff revenue could offset a sizeable chunk of this.\n Therefore, he said the deficit \u201cshouldn\u2019t actually increase by several\n trillion dollars over the 10-year time horizon.\u201d\n <\/p>\n
\n Even so, the $37 trillion level is a worrisome starting point. According\n to Lascelles\u2019 Fiscal Health Index, the U.S. is currently in the worst\n position among major developed and emerging economies, with a public debt\n level that is \u201calready fairly burdensome from a debt-servicing\n perspective.\u201d\n <\/p>\n \n
Top and bottom three countries in terms of fiscal health<\/h3>\n
- \n
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