The Big Beautiful Bill Explained

The short of the Big Beautiful Bill is that unless you are on Medicaid, you should not be negatively impacted. The biggest winners of this bill were small business owners and seniors (aged 65+ in 2025) who earn less than $75k/year ($150k married filing jointly). 

The taxable income reductions will create planning opportunities for individuals who qualify for the $6k/person bonus starting this year. These updates from the bill may mean that Roth Conversions or IRA distributions (which could help reduce future Required Distributions later in life) can be done at little to no cost for seniors. We will work with our clients throughout the year to determine if and how they can take advantage of the new laws.

Below is a summary of some of the key provisions in the recent legislation that have the potential to affect the most people:

• Tax Rates – The bill makes tax rates that were reduced back in the 2017 Tax Cuts and Jobs Act “permanent” (i.e., until overturned by future legislation).

·         What this means for you: The almost 3% tax cut for individuals (depending on income) that occurred in 2017 will stay in place. This will cause no real change to your tax return, but could have meant a tax increase if these cuts were not extended. Additionally, a 7% tax cut that was put in place for corporations was extended, which was well received by the market in the short run.

• Standard deduction – The tax bill from 2017 raised the amount of income exempt from taxes for all filers (i.e., the standard deduction). This has been made “permanent”.

·         What this means for you: This bill meant that nearly 90% of filers no longer needed to keep up with their itemized deductions as the standard deduction was now greater than most peoples' mortgage interest, charititable giving, healthcare costs, etc… If this were to sunset, individuals would most likely owe more in tax unless they typically had more than $15.7k in deductions ($31.5k for married couples).

• New Special Personal Income Exemption (for years 2025 – 2028). Not a surprise as this expiry leads up to the next election...

·         What this means for you:

·         Who is eligible: Individuals aged 65 and older. There is no requirement to have started Social Security, but if you started Social Security and are younger than 65, you do NOT qualify.

·         Deduction amount: Up to $6k/person.

·         Income limitations: The full deduction is available for singles with modified adjusted gross income (MAGI) up to $75k and married couples filing jointly with MAGI up to $150k. The deduction phases out at $60 per $1k earned over these thresholds.

·         Duration: This deduction is temporary and available for tax years 2025 through 2028.

·         This $6k bonus is in addition to the existing $2k standard deduction for those age 65 or older.

·         While this exemption can reduce the tax burden on Social Security benefits for many, it doesn't eliminate them.

• Charity will be rewarded

·         Up to $2k for married couples and $1k for individuals in charitable donations will be deductible, no matter whether you itemize your taxes or not.

• These tax cuts will only last through President Trump’s term

·         No tax on overtime - This allows workers to deduct overtime pay from taxable income for tax years 2025-2028. The deduction is capped at $12,500 and decreases for those making more than $150k/year.

·         No tax on tips - This allows workers to deduct tips from taxable income for tax years 2025-2028. The deduction is capped at $25k and decreases for those making more than $150k/year.

·         No tax on car loan interest - For tax years 2025-2028, this provides a deduction of up to $10k for loan interest on new vehicles that undergo final assembly in the U.S.

·         “Trump accounts” - Create new tax-advantaged savings accounts for children, with a government contribution of $1,000 per child born from 2024 to 2028.

• Some other highlights

·         All Bronze ACA Health plans will be eligible for Health Savings Accounts starting in 2026.

·         A work requirement of 20 hours per week was added to Medicaid, which probably means most people will make too much to stay qualified for Medicaid. This is projected to provide $317 billion in savings. To counteract this $23 billion was set aside into a “Rural Health Fund” to support rural healthcare costs.

·         The $7,500 Clean Vehicle Credit will be terminated on September 30th, 2025. If you are in the market for an EV, now may be the time to buy.

·         $45 billion was allocated to attempt to finish the construction of a wall at our southern border, and another $45 billion was allocated to increase immigrant detention capacity.

·         Alaska Senator Lisa Murkowski did her constituents well by holding out. There are a few provisions that offer special incentives for Alaska-based fishing & whaling companies. 

• Some relatively small items that will probably make the news…

·         $150M for the 250th 4th of July celebration next year.

·         $275M for Kennedy Center Renovations.

·         $2B reduction in funding to the Bureau of Consumer Financial Protection.

·         $4.8B for prison funding.

·         $23B for Coast Guard Enhancements.

·         $12B for Air Traffic Control Enhancements.

·         Increased Fees for Travel Visas ($250 for students/work, $30 for visitors, as well as $40 for travel authorization).

·         Shipments from other countries worth less than $800 were duty-free; this will no longer be the case because companies like TikTok Shop and Shein have made it tough for American-based businesses to compete with cheap imported goods.

·         We will no longer need a tax stamp for certain firearms and accessories.

·         Gamblers will only be able to use 90% of losses to offset taxable winnings.

·         The purchase of business assets can be fully depreciated in the year the asset(s) are put in service.

Because of our personal involvement in our clients' financial futures, we will begin to determine if and how the Big Beautiful Bill can benefit their families. This is part of the value we add to their lives, and we are always available for questions or concerns.

If you are not a client and want to discuss this bill, your tax situation, retirement, estate plan, or anything finance-related, please schedule a call with our team.

Schedule A 15-Minute Call With Our Team

Source: https://www.congress.gov/bill/119th-congress/house-bill/1/text

Disclosures: Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.