Tax Policy Changes: Larger Deductions and Permanent Cuts

The recently enacted "One Big Beautiful Bill" was signed into law on July 4, 2025. This comprehensive legislation introduces changes across tax policy and spending, and it's important to understand how these shifts may impact your personal financial situation and investment strategies. I would like to summarize key provisions and potential implications.

Tax Policy Changes: Larger deductions and permanent cuts may create greater opportunities for our clients in the distribution phase.

At StrongBridge Wealth Advisors one priority we keep front and center for our clients is tax retirement income planning strategies. During the accumulation phase we help our clients plan for building pre-tax, after-tax, and Roth accounts. In retirement we work with our clients and their tax professionals to distribute these funds to reduce the tax implications while helping to meet their goals. The OBBB makes changes to the tax landscape, largely by making permanent many provisions of the 2017 tax cuts and introducing new deductions that may allow greater taxable distributions or Roth conversions in their preferred tax bracket.

Tax cuts and enhanced standard deduction:

• The individual income tax rates established in 2017 are now permanent.
• The standard deduction is increased to $15,750 for single filers and $31,500 for married couples filing jointly for 2025-2028 and then will be adjusted for inflation for the 2026 tax year and beyond.
• Enhanced Deduction for Seniors: For 2025-2028, a new $6,000 deduction is available for taxpayers aged 65 and older, phasing out for incomes above $75,000 ($150,000 for couples).

New deductions:

• Auto Loan Interest Deduction: While many of our clients pay cash for new vehicles for some using low interest auto loans may afford an opportunity to spread out the tax impact of distributions over more than one tax year. Starting in 2025 the interest incurred on loans for U.S.-assembled vehicles can be deducted up to $10,000 annually for 2025-2028, subject to income phase-outs. ($100,000 or $200,000 joint).

State and local tax (SALT) deduction cap increase:

• The cap on the SALT deduction is temporarily raised from $10,000 to $40,000 for taxpayers earning under $500,000 (for 2025-2029), before reverting. This may offer relief for many taxpayers in high-tax states such as Wisconsin, allowing them to deduct a larger portion of their state and local taxes from their federal income.

By studying the changes made by the OBBB and working together with their tax professionals we aim to help our clients implement strategies that can decrease the impact taxes have on their wealth over their lifetime.

The "Big Beautiful Bill" is a complex piece of legislation with far-reaching effects. This article is part of a short series intended to highlight potential impacts of the OBBB for people like our clients. Watch for the following related topics and how they may have changed:

• Investment portfolio strategy
• Estate planning considerations
• Explore expanded wealth transfer strategies
• Business financial decisions and business tax planning strategies