The One Big Beautiful Bill Act’s (OBBBA) Impact On FIRE Seekers
Key Takeaways
On July 3, the House narrowly passed the One Big Beautiful Bill Act (OBBBA) with a 218–214 vote. According to the nonpartisan Congressional Budget Office (CBO), the bill will add an estimated $3.3 tri...
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real estate
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July 7, 2025
11:28 AM
Financial Samurai
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On July 3, the House narrowly passed the One Big Beautiful Bill Act (OBBBA) with a 218–214 vote
According to the nonpartisan Congressional Budget Office (CBO), the bill will add an estimated $3. 3 trillion to the budget deficit over the next 10 years
Trump signed the bill the next day on July 4
To help pay for it, OBBBA cuts funding to Medicaid, SNAP (food assistance), and clean energy tax credits, while also raising the federal debt ceiling by $5 trillion
Unfortunately, the CBO also estimated that 11. 8 million people could lose health insurance coverage because of the legislation’s Medicaid cuts and other visions
A recent Quinnipiac University poll found that 53% of registered voters oppose the bill, while only 27% support it
In other words, it’s deeply un, but all we can do now is examine its implications
If you have a job with health and retirement benefits, and you're pursuing financial independence or early retirement (FIRE), this bill should work in your favor
Because when taxes go down, your ability to, invest, and build wealth goes up
Key visions of OBBBA That Affect FIRE Seekers For background, I helped kickstart the modern-day FIRE movement in 2009 when I launched Financial Samurai and began sharing my journey to escape the finance industry and retire early
In 2012, I negotiated a severance package and haven’t returned to full-time work since
Instead, I’ve focused on writing for this site, publishing books, and fatherhood
Everything I write is based on firsthand experience because money is too important to leave to guesswork
The road to financial independence is full of twists and turns, so it’s important to stay ready for change
Here are the key tax and savings visions from the OBBBA that can help FIRE ers accelerate their journey
Slightly Greater Risk Of Losing Affordable Health Insurance The most commonly asked question for those considering early retirement is: Do I have enough money
A close second is: How will I afford health insurance
Is one of the few developed countries where affordable health care is closely tied to employment
If you retire before age 65—when Medicare kicks in—you’ll need to get health insurance through the Affordable Care Act (ACA) marketplace
Previously, if your household income exceeded 400% of the Federal Poverty Level (FPL), you were ineligible for premium subsidies
This is called the subsidy cliff
However, after previous legislation, subsidies are now based on a sliding scale, and there is no longer a hard income cutoff at 400% FPL
This means even higher-income early retirees may still qualify for subsidies—especially if ACA premiums exceed 8. 5% of their income
Multiply by 4 to get the maximum income your household is able to earn to receive healthcare subsidies That said, depending on who you ask, between 10 and 16 million people may lose health insurance coverage over the next decade
One major reason is the planned reduction in enhanced ACA tax credits—particularly for those earning more than 400% of the Federal Poverty Level (which is $124,800 for a family of four in 2025)
On average, these enhanced tax credits have reduced premium payments by $705 per year for eligible enrollees
Other contributing factors include: A shorter open enrollment window (reduced from January 15 to December 15, starting November 1), so stay organized New income verification requirements for those applying for premium tax credits, and Restrictions on coverage for DACA recipients. 25X Household Expenses In Investments Is Uncomfortably Low If you rely on health insurance subsidies to make early retirement feasible, try to keep your income under 400% of the FPL
Otherwise, you may face significantly higher premiums—or be forced to work longer
One workaround is to start a small with your spouse or partners, allowing you to get group health insurance and deduct the cost from your income, effectively reducing your premiums by your ’s marginal federal tax rate
However, this apach only makes sense if the earns enough to justify the expense
For context: when my wife retired in 2015 and I could no longer piggyback on her employer-subsidized plan, we began paying $1,680/month for a Gold plan for just the two of us
Today, with a family of four, we’re paying $2,500/month for a Silver plan
It’s a steep cost, but one we’ve accepted as the price of financial freedom
After not having a day job since 2012, I truly do not believe having an investable net worth equal to 25X annual household expenses is enough to comfortably retire early
You can see the evidence by men who claim FIRE and still pressure their wives to work, or those who claim FIRE and still earn supplemental income, me
You need a greater cushion if you want to feel comfortable, something closer to 35X annual expenses or more
Before you retire early, do the ing: Estimate your total household income post-retirement
Compare it against the 400% FPL threshold to determine if you qualify for ACA subsidies
Input a realistic annual healthcare cost into your retirement budget and multiply it by 25X to 50X to ensure you have enough in investments
Go on a health kick during your last working year—get in the best shape of your life to minimize future medical expenses
Here’s the thing: at a 4% rate of return, you’d need $3,120,000 in investments to generate $124,800 a year (400X of FPL for a household of four)
The $3,120,000 doesn't even include the value of your primary residence, which could easily be worth over $1,000,000
So if you and your spouse retire early with two dependents, do you really need health care subsidies as multi-millionaires
Some might even argue that accepting health care subsidies with a seven-figure net worth is immoral
Child Tax Credit Increased The credit increases to $2,200 per child (up from $2,000), adjusted for inflation
Phases out starting at $400,000 (MFJ) or $200,000 (others)
Valid Social Security numbers are still required
As a parent of two young children, achieving FIRE without kids is far easier than doing so with them
Maintaining FIRE is also more challenging once you have children, as your biggest expenses—housing, healthcare, and education—are the ones most impacted by inflation
This gives parents a little more breathing room while raising kids, especially in high-cost areas
A $200,000 to $400,000 income phaseout is still quite generous, even for those living in high-cost areas. 529 Plan Expansion Now allows tax-free distributions for private and religious K–12 schooling
Also covers postsecondary credentialing expenses, aligning with the Lifetime Learning Credit
This may not feel entirely new, since we already know that up to $10,000 a year from a 529 plan can be used for private K–12 education
However, the OBBBA now firmly cements this flexibility into law
For FIRE-minded parents, try to contribute enough to match the current 4-year cost of your target college
If you can get there, the growth of your 529 plan has a decent chance of keeping up with tuition inflation
Just keep in mind for those looking to gain free money for college: a large 529 balance will ly reduce eligibility for need-based financial aid, though it won’t affect merit-based aid
SALT Deduction Cap Raised Increases the SALT cap to $40,000 from $10,000, rising 1% annually through 2029
Reverts back to $10,000 in 2030
Begins phasing down for incomes over $500,000
If you in a high-tax state, this vides meaningful short-term relief
Raising the SALT (State and Local Tax) deduction cap should also vide a valuation boost to real estate in high cost of living cities
As someone who has d in New York City and San Francisco since 1999, raising the SALT deduction cap is beneficial to my family
The next city we're seriously considering is Honolulu, which also has higher-than-average income taxes
Although Hawaii does have the lowest perty tax rate in the nation
AMT Relief Made Permanent AMT exemptions are now permanently indexed to inflation. 2025 figures: $88,100 (single), phased out at $626,350 $137,000 (MFJ), phased out at $1,252,700 This tects more upper-middle-class families from surprise tax bills as incomes rise
The income figures for AMT exemptions look to be quite generous
New “Trump Accounts” for Kids Tax-advantaged accounts for children under 8
Contribute up to $5,000/year, grows tax-deferred until age 18, however, the contribution isn't a tax deduction Can be used for college, first, or starting a
Qualified withdrawals will be treated as capital gains and taxed at the applicable long-term capital gains rate
A $1,000 government seed contribution (free money) for qualifying kids born between January 1, 2025–2029
These accounts mote long-term saving and from an early age—a core value of the FIRE movement
I’m just not sure how the posed $1,000 contribution per child born during this period will be funded
However, any initiative that encourages people to have more children and invest in their future is a step in the right direction
I recommend that every FIRE parent open both a custodial investment account and a custodial Roth IRA for their children as early as possible
The earlier you start contributing—and encouraging your children to earn income—the stronger their financial habits and the greater their potential to build lasting wealth
Custodial accounts also make it easier to buy the dip
Even if you’re hesitant to invest for yourself, it’s often easier to stay brave when you're for your children's future
So in total, we can invest in a 529 plan, custodial investment account, custodial Roth IRA, and “Trump Account” for each child
Temporary Tip Income Deduction Up to $25,000 in tips deductible from 2025–2028
Applies to non-itemizers in tipped industries
Still reportable for payroll taxes and state/local taxes
If you’re side hustling or in service work while building up savings, this is a nice perk
Although, I'm not sure most people who earn tips pay taxes on those tips in the first place
Temporary Overtime Pay Deduction Deduct up to $12,500 (or $25,000 MFJ) of overtime pay from 2025–2028
Phases out at $275,000 (single) or $550,000 (MFJ)
This is a great tax break for those putting in extra hours to escape the rat race faster
To this day, I don’t know anyone who works 40 hours a week or less and also wants to retire early
In fact, since the pandemic, more people are working multiple remote jobs to double or even triple their income
The 40-hour workweek is an outdated construct
If you want to earn more than the average person, you’ll ly need to work more than the average person
And if overtime pays more and is now less taxed—great
Thanks to the OBBBA, there’s now even more incentive to put in extra hours and reach financial freedom sooner
Car Loan Interest Deduction (Temporary) Deduct up to $10,000 in interest on U. -assembled vehicles (2025–2028)
Phases out at $100,000 (single) or $200,000 (MFJ)
RVs and campers excluded
If you need a car but hate the idea of non-deductible debt, this vision takes a bit of the sting out
That said, hopefully everybody s my 1/10th rule for car buying and doesn't take out a loan to buy a depreciating asset
Owning too much car is a top wealth killer in America
If you need to buy a car, be sure to my House-to-Car Ratio formula to stay on track for FIRE
Aim for a ratio of at least 20 if you don’t want to work forever
The average American has a ratio of between 8 – 10, and your goal is to try and thoroughly be above average
Federal Estate Tax Exemption Made Permanent Exemption locked in at $15 million/person for 2026 and beyond, adjusted for inflation
This is up from $13. 99 million/person in 2025
Although the estate tax only affects 1% of households, this is a nice win for those in the Fat FIRE camp who are seeking to create generational wealth
Shooting for a net worth equal to the federal estate tax exemption threshold is one net worth target to shoot for
If the estate tax exemption amount wasn't ext beyond 2025, it would have dropped in half starting in 2026 and beyond
If so, the “death tax” would have ensnared a lot more households, especially due to inflation and the rise of risk assets
Social Security Tax Deduction (Good For Traditional Retirees) One of the more visions of the OBBBA is the $6,000 “senior deduction” for Americans aged 65 and older
While it doesn’t fully eliminate taxes on Social Security, it does help—by increasing the percentage of seniors who owe no taxes on their benefits from 64% to 88%, according to estimates by President Trump’s Council of Economic Advisers
In other words, around 14 million more seniors are expected to see some relief from taxes on their Social Security income
But as always, not everyone benefits
The full $6,000 deduction applies only to seniors making up to $75,000 as individuals or $150,000 for joint filers
The deduction then begins to phase out, disappearing entirely at $175,000 for singles and $250,000 for couples
For context, the median income for seniors in 2022 was roughly $30,000
So while the senior deduction makes for great headlines, the truth is that most seniors already pay little to no taxes on their Social Security
As such, the actual benefit may be marginal for the typical retiree
Given that Social Security is underfunded by 25% and jected to run out of full benefits by 2034 if no changes are made to eligibility or payouts, expanding deductions now puts even more strain on the system
It’s great if you can collect the money today, but not so great for future generations
Owner Wins That Support Financial Independence Seekers One of the best ways to achieve financial independence is by starting a and building equity
I dedicate a chapter to entrepreneurship in my USA TODAY bestseller, Millionaire Milestones: Simple Steps to Seven Figures
The crux of the chapter is how equity can multiply as your revenue and fits grow—un a salaried job, where income is largely linear and tied to time. 20% Pass-Through Deduction Made Permanent The Section 199A deduction s on
Applies to income from LLCs, S corps, sole ps
The posed increase to 23% was cut, but 20% remains locked in
This is a major win for entrepreneurs, freelancers, and side hustlers—all pillars of FIRE strategy
It is unwise to only rely on your day job to achieve financial independence
The more income s you have, the better
Section 1202 Stock Gains Exclusion Keeps the tiered QSBS rules: 50% exclusion for 3+ years 75% for 4+ years 100% for 5+ years Increases gain exclusion cap to $15 million (from $10 million), inflation-adjusted
The higher QSBS exclusion cap of $15 million is ideal for FIRE folks in startups as angel investors
At the margin, this change should encourage more people to invest in early-stage companies, which is great for the startup ecosystem
It’s similar to how owners can sell their primary reside.
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