How Does the Big Beautiful Bill Affect Taxes?

The One Big Beautiful Bill Act was recently passed. This brings sweeping tax changes that impact individuals, families, and businesses across the U.S. Whether or not you agree with it politically, the bill introduces several key provisions that are likely to benefit many taxpayers. Here’s a high-level look at what you need to know.

Key Tax Provisions Made Permanent

Several elements from the 2017 Tax Cuts and Jobs Act (TCJA) have now been made permanent:

  • Income Tax Brackets: The current brackets will remain in place, including the 37% top bracket.
  • Estate and Gift Tax Exemption: Increased to $15 million, indexed for inflation.
  • Child Tax Credit: Increased permanently to $2,200 per child, with a refundable portion of $1,700.
  • Charitable Contribution Limit: Permanently raised to 60% of adjusted gross income (AGI).
  • Miscellaneous Deductions: These, including tax prep and investment fees, are now permanently eliminated.
  • AMT Exemption: The higher thresholds ($500,000 for single, $1 million for joint) are also now permanent.

New and Temporary Deductions

They introduced or expanded some deductions and credits, but only through 2028.

  • Senior Deduction: An additional $6,000 deduction for seniors, phased out starting at $150,000 (joint filers).
  • No Tax on Tips: Up to $25,000 in tips are tax-free with income limits.
  • Overtime Deduction: Overtime pay up to $25,000 (married filing jointly) is tax deductible.
  • Auto Loan Interest Deduction: Up to $10,000 in interest on qualifying auto loans can be deducted.

Reminder: Just because you can deduct auto loan interest doesn’t mean it’s a good reason to take on debt. The financial benefit is not dollar-for-dollar.

Increased SALT Deduction Limit

The state and local tax (SALT) deduction cap has been raised from $10,000 to $40,000, retroactive to January 1. However, it’s phased out for incomes above $500,000 (married filing jointly).

Charitable Giving Adjustments

  • Floor for Deductions: Beginning next year, you must exceed a 0.5% AGI threshold before charitable deductions count.
  • Above-the-Line Charitable Deductions: If you don’t itemize, you can still deduct up to $1,000 (single) or $2,000 (joint) in charitable gifts annually.

New “Trump Accounts” for Children

For children born between 2024 and 2028, the government will contribute $1,000 to a new savings account invested in index funds. Parents can contribute up to $5,000 per year per child, and employers can contribute up to $2,500 tax-free.

Budgetary Concerns and Broader Impacts

While many working-class families benefit from this bill, the Congressional Budget Office estimates it will add $2.4 to $3.8 trillion to the federal deficit over the next decade. Lawmakers partially offset the bill with cuts to Medicaid, not Medicare. Critics argue that it may not be fiscally sustainable, but others hope economic growth will help balance the books in the coming years.

How will the Big Beautiful Bill impact you?

While this legislation brings financial relief and opportunity to many households, especially those earning under $150,000 annually, it also raises important questions about long-term fiscal responsibility. Financial advisors and taxpayers alike will be watching closely and strategizing around these changes.

Shawna Theriault, CFP®, CPA, CDFA®
Senior Financial Advisor, Wiser Wealth Management

Casey Smith
President, Wiser Wealth Management

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