Congress passed a $4.5 trillion tax bill that will change financial planning for millions.
From bonus depreciation to PTET to a much higher SALT cap...
Here’s what’s inside the Big Beautiful Bill and how it could impact you:
Permanent 2017 Tax Cuts
The lower brackets we currently have, will stay for good.
They currently are: (10, 12, 22, 24, 32, 35, 37%) vs would have sunset to (10, 15, 25, 28, 33, 35, 39.6%)
This means lower taxes for the vast majority of people.
Standard Deduction
The higher, double, standard deduction becomes permanent and will even increase to $15,750 for a single filer, $23,625 for a head of household, and $31,500 for married individuals filing jointly for this year.
It will then adjust for inflation yearly.
State and Local tax deduction limitation (SALT cap)
The SALT cap increases $40,000 for those filing jointly. This exists till you cross $500,000 of income then it starts to phase out.
Pass through entity tax elections (PTET)
PTET will continue to exist. This one really surprised me. It seemed like everyone thought this would go away, but it will stay in force which is great for business owners in high tax states.
You will still be able to pay your state taxes through the business and deduct them federally.
Bonus Depreciation
Everyone’s favorite part of the tax code is back, 100% bonus deprecation. It is effective for this year on any properties bought after 1/20/25.
This is great for those real estate investors, business owners, etc.
Estate Exemption
For years, people were talking about the estate exemption being cut in half, but this bill stopped that.
The estate and gift tax will be moved to $15mil per person and will adjust higher for inflation yearly.
Qualified Business Income Deduction
Not a whole lot changed here. I was hoping for the elimination of SSTB, but that did not happen. It stays at 20%, but starting in 2026, there is a wider phaseout of $150k vs $100k.
Expanded QSBS
This one is awesome for tech employees, founders, C Corp owners, etc. QSBS will now apply to more businesses and be even more impactful.
Here’s the few changes:
Section 179
It will now be increased to $2.5mil with a phaseout at $4mil.
Interest Expense
The 30% of EBIDTA limit that was created will be extended and made permanent.
Opportunity Zones (OZ)
A permanent OZ policy becomes in force. It creates a rolling 10 year OZ designation starting in 2025.
You will now get recognition in 5 years and a 10% basis step up at 5 years.
Alternative minimum tax (AMT)
Makes permanent the higher AMT exemption. But it does revert phaseout levels back to 2018 at $500,000 for individuals and $1mil for married filing jointly.
HSAs
HSAs will be available for more plans now. It will be included in Bronze and Catastrophic plans.
Dependent Care FSA
Finally, the $5,000 limit will be increased. Starting in 2026, you will be able to do $7,500 if married filing jointly.
Charitable Deductions
In the bill, there is a new $2,000 above the line charitable deduction for those who are married filing jointly ($1,000 single).
On top of that there is a .5% AGI floor on itemized deductions for charity.
Child Tax Credit
Makes permanent the TJCA child tax credit and increases it to $2,200 per child starting in 2026. It will go up with inflation as well.
Car Loan Interest Deduction
You can now deduct up to $10,000 of interest paid, even if you do not itemize. But this starts to phase out at $200,000 and fully phases out at $250,000.
Tips and Overtime pay
People are a little confused on what this means. It really is a deduction.
This creates an above the line deduction for 2025-2028 for tips up to $25,000 if married ($12,500 single) and then the same for overtime.
It does start to phase out at a MAGI of $300,000 married ($150,000 single).
Individual trust accounts
This is a strange one. The bill created a new tax advantaged account for those under 18. It can be used for education, small business investments, or a first home purchase.
You can contribute up to $5,000 and it comes with a $1,000 contribution from the government for children born between 12/31/24 and 1/1/29.
This bill no doubt will keep taxes lower for real estate investors, business owners, tech employees, mid to high earners, etc.
Whether you like it or not, this is what taxes will look like for at least the next 4 years, and you need to plan accordingly.
Financial Advisor