The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made major changes to the U.S. tax system by temporarily raising the SALT (state and local tax) deduction cap. This deduction lets taxpayers subtract the amount they pay in state and local taxes from their federal taxable income. From 2025 to 2029, the cap increases from $10,000 to $40,000 for individuals and to $20,000 for married people filing separately. However, this only fully applies to people earning less than $500,000 a year, with smaller increases for higher earners. The law also includes inflation adjustments and keeps current federal tax brackets as they are, avoiding an earlier plan that would have raised taxes on some households. This change is expected to help many taxpayers in high-tax states and could influence how people plan their finances over the next few years.

In 2025, American consumer spending is slowing down as higher import tariffs and global uncertainty change the way people use their money. Experts from major financial firms like Morgan Stanley and EY predict that spending growth will fall from 5.7% in 2024 to just 3.7% in 2025, with an even lower rate of 2.9% expected in 2026. One major reason is the sharp increase in tariffs—taxes on imported goods—which now average 18.6%, the highest in nearly a century. These costs make everyday items and big purchases like cars and appliances more expensive. As a result, people are thinking twice about spending and are shifting their lifestyles to save more and spend less.