🏔 The OBBB Phaseout Cliff: Why Smart Timing Can Make or Break Your Biggest Tax Breaks

You’ve read the headlines—SALT cap raised! Tip income is tax-free! Trump Accounts for kids!
But here’s what the headlines forget to mention: Most of the juiciest new tax breaks in the One Big Beautiful Bill (OBBB) phase out or disappear completely once your income passes a certain threshold. Sometimes it’s not a gentle slope—it’s a sudden drop-off.

Let’s talk about these “cliffs,” who needs to worry, and how you can plan to capture every dollar in savings.

🍌 The Biggest OBBB Tax Breaks With Income Phaseouts

Some of the most valuable new deductions and credits get smaller—or vanish—if your adjusted gross income (AGI) is too high:

• SALT Cap:
  Up to $40,000 deduction—but phases out after $500,000 AGI (married filing jointly).

• Tip Exclusion:
  Up to $25,000 in tax-free tips per worker—but phases out at $150,000 (single) or $300,000 (MFJ).

• Child Care Credits/Trump Accounts/EITC/Opportunity Zones:
  All have similar phaseouts or income “cliffs.”

• R&D Credits and Some Business Write-Offs:
  Certain phaseouts for larger or high-income businesses.

🦍 What’s a “Cliff” and Why Does It Matter?

A phaseout is when your deduction or credit gradually shrinks as your income goes up.
A cliff is when you lose the whole thing in one step—ouch.

That means a few thousand dollars of extra income could cost you tens of thousands in lost tax breaks.

Example:

• Make $495,000 MFJ? Get the full $40K SALT deduction.

• Make $501,000? Sorry, it’s gone.

• Tip exclusion? Hit $151K single? Poof.

🏗 How to Plan Around Phaseouts (and Keep More in Your Pocket)

1. “Bunch” Deductions and Expenses

• If you’re close to a phaseout threshold, try to accelerate deductible expenses into one year (or defer income to another) to keep your AGI low enough to qualify.

• Example: Prepay property taxes, stack business purchases, or defer a client payment into next year.

2. Spread Out Income Strategically

• Time bonuses, capital gains, or big sales over two years if you’re bumping up against a cliff.

• Example: Delay invoicing or postpone a property sale until January.

3. Watch Entity Choices and Payroll

• S-Corp owners: Review W-2 vs. K-1 distributions to control AGI.

• Partnerships: Consider how guaranteed payments, draws, or pass-through income show up on your return.

4. Use Retirement Plans to Lower AGI

• Max out 401(k) or SEP IRA contributions to reduce AGI and qualify for more credits.

🦔 Hedgi’s Phaseout Survival Tips

• Check your AGI throughout the year—don’t wait until tax time!

• Let Hedgi run phaseout “what-if” scenarios to show where you stand—and what strategies could get you under the threshold.

• Ask your CPA before making big moves—timing is everything.

🦍 Bottom Line: A Little Planning Goes a Long Way

The new law gives out huge tax breaks—but only if you stay under the line.
If you’re close to a phaseout, a few small moves can make a big difference in your after-tax cash.

Want help running phaseout scenarios, or not sure how to “bunch” expenses the right way? Drop a question below or DM Hedgi—let’s make sure you don’t slip off the cliff!