Thoughts on the Big Beautiful Bill
This week, congress and President Trump approved and signed into law Bill Number H.R 1, otherwise known as the Big Beautiful Bill (BBB).
The news surrounding this bill has been widespread, focusing on benefits and drawbacks, financially and otherwise, related to the details within. Noise aside, there are many aspects of this bill that will affect all Americans. At the very least, American citizens should understand the parts of the bill that affect them directly (most notably, taxes). Taxpayers should also be aware of details that are more targeted in nature. These specifics should be weighed carefully along with the taxpayer’s situation to make best use (or avoid) their intended benefit.
As I see it, here are the most applicable parts of BBB as they apply to personal financial situations. I’ve included some details and thoughts on each, but please reach out with any questions or to find out how you may potentially benefit.
Permanent extension of TCJA
The most universally relevant part of this bill is the permanent extension of the marginal tax rates from the Tax Cuts and Jobs Act (TCJA) of 2017. Originally meant to expire this year, the TCJA dramatically changed the landscape of income taxation.
Most notably:
Lower marginal tax rates: Lower taxes are now permanent.
For Everman clients, this has been the assumption we have been using already.
Higher standard deduction: Taxpayers will continue to have the option to take historically high standard deductions.
Small business tax deduction: 20% deduction on Qualified Business Income for pass through entities, favoring small business owners.
For Specified Service Trades or Businesses (SSTBs), this deduction phases out above certain incomes.
Not only do these rates mean lower taxes in the short term, they also extend Roth opportunities for savers who are hoping for a tax free retirement. Roth contributions and conversions make the most sense at lower tax brackets.
Social Security Tax Deduction
The BBB created a new (temporary) tax deduction for seniors who are receiving social security. Limits apply, but this tax cut is meant to further extend the tax efficiency of Social Security.
Must be 65 or older.
Can deduct up to $6,000 (single) or $12,000 (married) or Social Security income.
Available regardless if the taxpayer uses standard deduction or itemizes.
Phase out of the deduction begins at AGI of $75,000 (single) and $150,000 (married).
This benefit further complicates the tricky nature of Social Security taxation. For those currently withdrawing retirement funds from both tax-deferred and tax-free retirement accounts, this deduction may allow for weighted withdrawals from tax-deferred accounts and preservation of tax-free income in the future.
It is important to note that this deduction is currently set to expire in 2028. For those already receiving Social Security or those approaching age 65, this benefit should be considered. For the rest of us, we’ll watch for a possible extension in 2028.
Expanded SALT Deduction
The deduction for State and Local Tax (SALT) has increased from $10,000 to $40,000.
For taxpayers who itemize, all state and local taxes (to potentially include sales tax) is deductible. However, until 2025, this deduction was capped at $10,000. For taxpayers in higher local tax situations, this meant paying federal income tax on dollars used to pay state and local taxes over $10,000.
This benefit is currently set to expire in 2030.
The deduction begins to phase out at AGI of $500,000 (married and single)
Editorial note: This increase is long overdue and (in my opinion) does not go far enough. Regardless of income and wealth, paying federal taxes on dollars used to pay state and local taxes (which are already overlapping federal taxes!) does not make sense. This increase is progress in the right direction for taxpayers residing in high tax areas who itemize.
Estate and Gift Tax Exemption
Along with the permanent tax rates listed above, taxpayers with large legacy goals will continue to benefit from permanent increased lifetime gift and estate tax exemptions. These limits apply to the gifts a taxpayer may give tax free, including the value of the estate they leave behind for their heirs. Taxpayers can still give up to $19,000 a year, per recipient, without using any of their lifetime exclusion.
Lifetime limit increased to $15,000,000 (single) and $30,000,000 (married)
Benefit is permanent and will adjust for inflation
Prior to the TCJA of 2017, taxpayers with large estates were forced to seek complicated trust or gifting strategies to avoid a potential 40% tax on their estate. The TCJA significantly raised these thresholds, allowing for expedited use of lifetime exemptions. However, these permanent higher limits now allow for more extended legacy strategies over a taxpayer’s lifetime.
Editorial note: Again, this increase does not go far enough. While taxation on dollars used to pay state and local tax is ethically complicated, gift and estate tax is even more morally objectionable. Any amount of wealth has already been subject to taxation presumably. Any additional taxes, regardless of the high threshold, amounts to double taxation.
Tip and Overtime Pay
For earners who receive compensation from overtime and tips, up to $25,000 of this income can be deducted from income tax.
Limit is $12,500 for single earners, $25,000 for married.
Deduction expires in 2028.
Deduction amount begins to phase out at MAGI of $150,000 (single) and $300,000 (married).
Auto Loans
Taxpayers who finance a new auto purchase may be eligible to deduct up to $10,000 of interest. Details:
Final assembly of the automobile must be in the United States.
Deduction is available for all taxpayers regardless if they itemize deductions or not.
Deduction is temporary (expires in 2028).
Deduction begins phasing out for MAGI over $100,000 (single) and $200,000 (married).
This benefit should be considered when purchasing a car over the next few years. The deduction is temporary, so careful consideration should be made regarding the life of the loan and related interest rates. Of course, the benefit itself should be considered along with other facts and considerations, including what type of car to purchase, new vs used, the overall price, and whether to finance.
NEW Tax-Advantaged Savings Account for Children
A new child savings account (Trump account) is available for children born in 2025-2028. Benefits and drawbacks of this bill are significant and should be weighed carefully against other types of savings accounts for children. Details include:
A one-time $1,000 tax-free government seed contribution.
Up to $5,000 can be contributed per child per year.
Contributions are made after tax.
All funds must be invested in a low-cost US equity index fund.
All growth is tax-deferred.
Qualified withdrawals are taxed at preferred long term capital gains rates (15% for most).
Most common uses: first time home purchase, higher education, starting a small business. Other qualified uses: medical costs above 7.5% AGI, disability, or death.
Non-qualified withdrawals are taxed at normal income rates with a potential 10% penalty.
Invested funds are treated as “child assets” for financial aid eligibility.
The benefits and drawbacks of this account should be weighed heavily when considering contributions above the $1,000 government seed contribution. Other investment vehicles, including 529, UTMA/UGMA, or Roth IRAs may be more beneficial to you child’s situation and intended use of the funds. Reach out today to learn more.
Sources:
H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act. Congress.gov, Library of Congress. Accessed July 6, 2025. https://www.congress.gov/bill/119th-congress/house-bill/1/summary/00Garrett Watson, Huaqun Li, Erica York, Alex Muresianu, Alan Cole, Peter Van Ness, Alex Durante. "One Big Beautiful Bill Act Tax Policies: Details and Analysis." Tax Foundation, July 3, 2025. Accessed July 6, 2025. https://taxfoundation.org/research/all/federal/big-beautiful-bill-senate-gop-tax-plan/The One Big Beautiful Bill: Legislation for Historic Prosperity and Deficit Reduction. The Council of Economic Advisers, June 2025. Accessed July 6, 2025. https://www.whitehouse.gov/wp-content/uploads/2025/03/The-One-Big-Beautiful-Bill-Legislation-for-Historic-Prosperity-and-Deficit-Reduction-1.pdfDisclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial, investment, legal, or other professional advice. While we strive to ensure the accuracy and completeness of the content, we make no guarantees regarding its reliability or suitability for any particular purpose. Readers should consult with a qualified financial advisor before making any investment decisions. As a fiduciary Registered Investment Advisor (RIA), we are committed to acting in your best interests. However, past performance is not indicative of future results, and all investments carry risks, including the potential loss of principal.
