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.

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!