You've likely heard about the "One Big Beautiful Bill Act," which was signed into law on July 4, making many of the 2017 Tax Cuts and Jobs Act provisions permanent. Given the bill's length (887 pages) and complexity, we wanted to help simplify and share some key information that may impact your tax situation and personal finances.1 The uncertainty around future taxes has been a topic of discussion for the past few years, impacting financial strategy considerations among individuals, families, and small business owners. The One Big Beautiful Bill Act addresses much of this uncertainty by making many of the TCJA provisions permanent, adding a degree of clarity to future tax policy. This comprehensive legislation includes many tax provisions beyond just making the 2017 tax cuts permanent – everything from a senior "bonus" and larger state and local tax deductions to breaks for tip income, overtime pay, and auto loans. It even created a new tax-advantaged savings account for children.2 With so much to digest, we've boiled down the key most relevant provisions to individuals and families. Key Changes for You and Your FamilyTax Rates Made Permanent: The favorable tax rates from 2017 are now permanent, providing some clarity for your long-term tax management.2 Estate Tax Exemptions: Estate and gift tax exemptions permanently increase to $15 million for individuals ($30 million for married couples) in 2026.3 SALT Deduction Relief: The state and local tax deduction cap increases from $10,000 to $40,000 starting in 2025 (through 2029), which could affect those in higher-tax states.4 Higher Standard Deductions: Starting in 2025, standard deductions increase to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married couples filing jointly.3 Senior Bonus Deduction: If you're 65 or older, you can claim an additional $6,000 deduction (through 2028) if your income is under $75,000 ($150,000 for married couples).4 Enhanced Child Tax Credit: The child tax credit permanently increases to $2,200 per qualifying child, with the refundable portion reaching up to $1,700 for 2025.4 529 Modifications: Starting in 2025, 529 plan withdrawals can be used tax-free for a broader range of educational expenses, including tutoring, curriculum materials, educational therapies, and non-college credentials like licensing programs.5 Child Savings Account: Every child born in the U.S. between January 1, 2025, and December 31, 2028—with at least one parent having a Social Security number—will automatically receive a $1,000 deposit funded by the Treasury, unless their family opts out.4 Families can contribute up to $5,000 per year, and employers can add up to $2,500 (within that $5,000 limit). The funds must be invested in a low-cost U.S. equity index fund and grow tax-deferred; qualified withdrawals will be taxed at the long-term capital gains rate.6,7,8,9 Small Business Owners Take NoteIf you own a business, several provisions could benefit you:
Important Considerations While these changes provide welcome tax relief, many of the new provisions are temporary and expire in 2028. This creates potential uncertainty that we'll need to monitor and prepare for in your financial strategy.6,8 What This Means for You These tax changes may impact your financial, investment, and estate management decisions. The key is understanding how they specifically apply to your situation and adjusting your strategy accordingly. We're here to help you navigate these changes. We can work with your tax advisor and other professionals to help your financial strategy take full advantage of these new opportunities while preparing for future changes. We'd be happy to discuss how these changes might impact your specific situation. Please don't hesitate to reach out to schedule a consultation. |
1. CNBC, June 18, 2024 |
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.