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The New Tax Bill and How It Will Affect You

In order to preserve key elements of the 2017 tax cuts, as well as introduce new tax policies, lawmakers passed the One Big Beautiful Bill, which was signed into law by President Trump on July 4, 2025.  While there are 940 pages in the bill, we wanted to pass along some of the key elements which may impact you: 

 

  • Permanently extends the current tax brackets, with inflation adjustments, starting in 2026.
  • Makes permanent the increased standard deduction and annually adjusts it for inflation.  Starting in tax year 2025, the standard deduction is increased to $15,750 for individual filers/$31,500 for joint filers.   
  • Temporarily adds a $6,000 deduction for individuals 65 or older through 2028 that phases out when modified adjusted gross income (MAGI) exceeds $75,000 individual/$150,000 joint filers.  
  • Increase of SALT (state and local taxes) deduction from $10,000 to $40,000 through 2029, phasing out at $500,000 modified adjusted gross income (MAGI) before returning to $10,000.
  • Permanently extends the increased child tax credit.  The nonrefundable child tax credit is increased to $2,200 per child beginning in tax year 2025 and indexed for inflation.  
  • Creation of permanent charitable deduction.   For tax years after 2025, a deduction of up to $1,000 for single /$2,000 for joint filers can be claimed for certain charitable contributions for those who don’t itemize their deductions. 
  • Creates a floor on charitable contributions for those that itemize of 0.5% starting in 2026.  So, a filer with $300,000 of MAGI would get no deduction for the first $1,500 of charitable donations.
  • Temporarily makes up to $25,000 of tip income deductible for individuals for tax years 2025 through 2028 that phases out at MAGI levels above $150,000 single /$300,000 joint filers. 
  • Temporarily makes up to $12,500 single/$25,000 joint filers of overtime compensation deductible for tax years 2025 through 2028 that phases out at MAGI levels above $150,000 single/$300,000 joint filers.
  • Temporarily makes auto loan interest deductible for new autos with final assembly in the United States for tax years 2025 through 2028.  The deduction is limited to $10,000 and phases out when MAGI exceeds $100,000 single/$200,000 joint filers.   
  • Permanently increases the estate tax exemption to an inflation adjusted $15million per person starting in 2026, which means couples with assets under $30million will not be subject to estate tax. 
  • The 20% Qualified Business Income deduction (QBI) for certain business owners was made permanent.
  • Removes many green energy tax rebates for individuals.   The $7,500 electric vehicle tax credit will end September 30, 2025. The deadline for qualifying energy-efficient home improvement credits is now December 31, 2025.  
  • Introduction of child savings accounts named “Trump accounts”, which can be opened for any child under the age of 18 starting in 2026.  It also creates a program that enables the federal government to contribute $1,000 per eligible child born between 2025 and 2028. 

 

Moving forward

The individual impact of the bill will vary, although most tax payers will see some reduction in taxes.  Most of it was just an extension of the 2017 tax cuts, which were set to expire at the end of 2025. The permanent increase of the estate tax exemption may be a relief to some that worried about it reverting back to much lower levels.  Many taxpayers over the age of 65 will also see a bigger tax savings with the increased standard deduction.      

There has been a lot of talk on the long-term impact of this bill as some estimate the cost to be in excess of $4trillion over the next 10 years.  There were also cuts made to Medicaid, healthcare subsidies provided by the Affordable Care Act and other government programs to help fund the bill that will impact many Americans.  If you were looking to take advantage of any “green” tax credits, be sure to know the cutoff dates as most will be gone after this year.  

So far, investors seem pleased as the S&P 500 has rallied to a new all-time high after pulling back 19% only a few months ago.   This last quarter was the first time since 1938 that the S&P 500 was both up and down at least 10% in the same quarter. It has happened only four other times in history, with 2025 being the only time the S&P 500 finished higher for the quarter.  (Source: Bespoke)    While we may sound like a broken record, it shows the value of staying the course and not bailing out when markets pullback.

While markets seem to be in rally mode at this time, tariff talk has started to ramp back up with many extensions pushed out to August 1st.  Earnings season is about to kick off with many investors waiting to see what impact tariffs may have had and what the outlook from CEO’s is moving forward.   Headlines around the Federal Reserve are expected to ramp up as most expect rate cuts later this year and into 2026. This could potentially lead to an increase in volatility later this year as markets are once again trading at valuations that are expensive versus historical measures and seem to be disregarding the potential impact if higher tariffs are implemented and the Federal Reserve holds off on cutting rates.          

Please reach out if you have questions, and we will be sure to get in touch should anything need to be changed based on market conditions or changes to tax policy.  

This material is meant for general illustration and/or informational purposes only.  Views expressed in this newsletter may not reflect the views of Osaic Wealth, Inc.  It is our goal to help investors by identifying changing market conditions.  However, investors should be aware that no financial advisor can accurately predict all of the changes that may occur in the market.   This material should not be relied upon as investment advice.  Investors should note that there are risks inherent in all investments, such as fluctuations in investment principal.   There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. This article contains forward looking statements and projections.  Past performance is no guarantee of future results.  Neither Osaic Wealth, Inc. nor its representatives provide tax or legal advice.  If you don’t wish to receive marketing emails from this sender, please reply to this email with the word REMOVE in the subject line.