The legislation dubbed the “Big Beautiful Bill” has made major changes to the U.S. tax code, and whether you’re a retiree, business owner, or investor, these updates could have a direct impact on your financial plan. As a financial advisor, I’ve broken down what I believe are the most relevant provisions so you can understand what’s changed.
Here’s what you need to know:
Individual income tax rates made permanent: Individual tax rate reductions from the 2017 Tax Cut and Jobs Act, which were set to expire in 2025, were extended and made permanent.
Standard deduction increased: The standard deduction was raised for those who don’t itemize. The standard deduction will be $15,750 for individuals and $31,500 for couples in 2025.
Charitable deduction increased: There is a charitable deduction for those who don’t itemize. The limit is $1,000 for single filers and $2,000 for joint filers.
Senior deduction introduced: The legislation introduces a $6,000 deduction for seniors aged 65 and older. Deductions start to phaseout/decrease at $75,000 for single filers and $150,000 for joint filers.
Child tax credit increase: The $2,000 child tax credit is increased to $2,200 permanently. It is subject to income thresholds.
Estate and gift tax exclusion extended: Extends the increased estate and gift tax exclusion amounts to an inflation-adjusted $15 million after the 2025 tax year.
State and local tax deduction (SALT) cap raised: Raises the SALT cap to $40,000 in 2025. If Modified Adjusted Gross Income (MAGI) is over $500,000, then the cap is gradually reduced by 30%. The cap and income thresholds will increase by 1% annually.
No tax on tips and overtime: Through 2028, provides deductions for up to $25,000 in qualified tips and $12,500 in overtime pay for single filers and $25,000 for joint filers. The deductions phase out at $150,000 for single filers and $300,000 for joint filers.
Coverage of 529 plans expanded: Starting in tax year 2026, individuals will be able to withdraw up to $20,000 annually for K-12 expenses. Tax-exempt distributions from 529 plans can now be applied to elementary and secondary school expenses including tuition, study materials and credentialing exam fees.
Trump Accounts:
- Eligible children born in the US between January 1, 2025, and December 31, 2028, automatically receive a $1,000 government deposit into a new “Trump Account”.
- Parents, employers, or others can contribute up to $5,000 per year, with employer contributions up to $2,500 being tax-free.
- Funds must be invested in low-cost mutual funds or certain ETFs; earnings grow tax-deferred, and withdrawals can begin at age 18 for specified purposes (education, home purchase, job training), after which accounts convert to a traditional IRA with standard tax rules.
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