What the “One Big Beautiful Bill” Means for Your Finances

Key Tax and Planning Changes Taking Effect in 2025 and Beyond

On July 4, 2025, President Trump signed a sweeping piece of legislation, the “One Big Beautiful Bill”, into law. While the name may be unconventional, the bill itself includes a wide range of changes that will affect household budgets, tax planning, and investment strategies for years to come. 

While many of the new provisions offer near-term benefits, the legislation also includes significant federal spending cuts—particularly in areas like food assistance, Medicaid, and clean energy programs. For many of our clients, these don’t pose immediate financial consequences, but they may affect charitable planning, family support strategies, and long-term federal debt levels.

At Legacy, we’ve reviewed the bill in detail to help you understand what’s changing, what’s temporary, and what it means for your financial plan. We’ll assume you have better things to do than read all 1,116 pages of the final Senate approved bill (but it’s here if you change your mind 😊). 

Below, we’ve summarized the most important takeaways—organized by what takes effect now vs. what’s coming next year or later. We’ve bolded each topic, so feel free to skim and find the details on what means the most to you and your family.

What’s Changing This Year (2025)

No Changes to Individual Tax Rates

Income tax brackets used today were put in place by the 2017 Tax Cuts and Jobs Act (TCJA) which was slated to sunset in 2025. This bill makes TCJA tax brackets permanent, meaning there will be no substantial change to tax rates. To be fair, “permanent” only means “until a future Congress changes the rules”, but at least we have clarity for the foreseeable future.

Why it matters: We’ll continue using current brackets when modeling long-term cash flow and Roth conversion strategies.

SALT Deduction Cap Increased to $40,000

Those who itemize deductions can deduct state and local taxes (SALT) paid, but that deduction has been capped. The bill raises the SALT deduction cap from $10,000 to $40,000.

Who benefits: Clients in higher-tax states or large property tax bills may be able to deduct significantly more on their federal returns.

New Deduction for Auto Loan Interest

You may now deduct up to $10,000 per year in interest paid on car loans for new, U.S.-assembled vehicles. This benefit phases out for higher earners (over $100k single / $200k joint filers) and sunsets after 2028. To qualify, vehicles must also be purchased after December 31, 2024. Notably, this deduction is available whether you itemize or not.

Planning tip: This is a limited-time incentive. If you’re in the market for a new vehicle, talk with us before choosing to finance or buy new to make sure it makes sense for your situation.

“Trump Accounts”

This bill includes new government-established accounts for qualifying children funded with $1,000. Much remains unclear in terms of how these accounts would work, but we will watch developments closely. The intent seems to be to provide a government-established account for any (US citizen) child born after December 31, 2024, and before January 1, 2029. 

Future contributions of up to $5,000 annually per child can be made by family, employers, etc. on a tax-deferred basis similar to an IRA until the child is 18. After 18, the money can be used on a restricted basis by the child until age 25, at which time it would become fully available.

Action item: We’ll help evaluate how (or whether) these new accounts should factor into your college or savings strategy. 

Additional Deduction Available for Seniors (over 65)

Seniors age 65 and older who don’t exceed qualifying income thresholds will receive a bonus tax deduction up to $6,000 (single) or $12,000 (joint) whether they itemize or not. The full deduction is allowed if their modified adjusted gross income is under $75,000 (single) or $150,000 (joint). The deduction phases out completely for incomes of $175,000 and $250,000, respectively, and will be available through 2028. It’s notable that this provision is not directly related to receiving Social Security benefits. While there was much talk about “no taxes on Social Security” during congressional negotiations, the final bill didn’t tie the deduction to receiving benefits.

What this means: This could lower the tax burden on seniors, especially those with modest investment income. We’ll assess whether this affects your withdrawal strategy or Roth conversion timing. 

New Deductions for Overtime and Tip Income

Employees making under $150,000 (single) and $300,000 (joint) may now deduct declared tips and overtime income—up to an annual cap. This deduction runs through 2028, and taxpayers don’t need to itemize to qualify. This benefit is capped at $25,000 of tips (regardless of filing status); for overtime the cap is $12,500 (single) and $25,000 (joint).

Who should care: This is a potential planning opportunity for clients in service or hourly-based professions.

What’s Coming or Expiring Later

Several provisions are set to expire after 2028, unless Congress takes further action. These include:

• The higher SALT cap
• The auto loan interest deduction
• The age 65+ income deduction
• The expanded child tax credit
• The tip/overtime income deduction
  

What we’re watching: These benefits are valuable now, but temporary. We’re incorporating them into multi-year tax projections to help clients take advantage while they’re available.

Charitable Deduction for Non-Itemizers

Good news and bad news here. First, the good news:

Starting 2026, the Big Beautiful Bill reinstates an above-the-line charitable deduction for those who don’t itemize:

• Single filers can deduct up to $1,000
• Married couples filing jointly can deduct up to $2,000
  

The bad news:

The bill establishes a 0.5% AGI floor for charitable deductions for those who itemize deductions. This means that someone with a $250,000 adjusted gross income won’t get to deduct the first $1,250 in donations for the year. This limits higher income donors in terms of how much they can save on taxes by giving.

Premium Tax Credits and the ACA

Starting in 2026, the premium tax credits that help reduce the cost of Affordable Care Act (ACA) marketplace insurance will return to pre-2021 levels—effectively expiring the enhanced credits that were established by the American Rescue Plan and extended under the Inflation Reduction Act.

What to watch:

• Marketplace premiums may increase substantially for many enrollees—especially affecting those who retired prior to Medicare eligibility
• This could impact overall tax planning; for example, modeling an HSA strategy or evaluating whether to accelerate income under the current enhanced credits
• We’ll work with you to forecast the impact and explore options like early enrollment, alternate plans, adjustments to withdrawal strategy.

Health Savings Account (HSA) Enhancements

• Taxpayers enrolled in Medicare Part A can continue contributing to HSAs if they maintain a high deductible health plan (HDHP)
• ACA Bronze and Catastrophic plans now qualify as HDHPs 

What to Do Next

This legislation introduces several tax-saving opportunities, but many are short-lived. Here’s how we can help you make the most of them:

• Run updated tax projections for 2025–2028
• Evaluate vehicle financing decisions strategically
• Optimize Roth conversion timing and withdrawal strategies
• Review charitable giving and ESG investing in light of policy changes
• Review funding for children/dependents’ education and future needs.

Let’s Talk

As always, we’re here to help you make confident decisions with your finances. If you have questions about how the One Big Beautiful Bill affects you or your family, please don’t hesitate to reach out. We’ll continue to keep a close eye on additional guidance from the IRS and changes that may emerge in the second half of the year.

Brooklyn Maldonado, CFP®