Congress recently passed the President’s “Big Beautiful Bill,” a comprehensive tax law that introduces significant changes for individuals, business owners, and investors. While many taxpayers will benefit from reduced taxes and new deductions, several provisions include income-based limits and marriage penalties that can reduce their effectiveness.  Most of the changes are extensions of the bill President Trump enacted in his first term, which will keep the lower tax rates permanent.  They were set to expire originally.

Below is a summary of the most relevant changes that may impact your financial planning:

Expanded SALT Deduction (State and Local Taxes)

• The deduction limit increases from $10,000 to $40,000 per return beginning in 2025, through 2029.
• It phases down for households with modified adjusted gross income (MAGI) over $500,000 and drops back to $10,000 by $600,000.
• A marriage penalty remains: two unmarried filers can claim $80,000 combined, while married joint filers are capped at $40,000.

New Senior Deduction

• Taxpayers aged 65 and older are eligible for a new $6,000 deduction per person ($12,000 if both spouses are over 65), effective 2025 through 2028.
• The deduction phases out starting at $75,000 (single) and $150,000 (joint) and is eliminated at $175,000 (single) or $250,000 (joint).

Qualified Business Income (QBI) Deduction

• The 20% deduction for pass-through business income is now permanent.
• Starting in 2026, phaseout thresholds increase to approximately $275,000 for single filers and $550,000 for joint filers.

New Deductions for Tips, Overtime, and Car Loans (Available 2025–2028)

• Tips Deduction: Up to $25,000 of tip income; phases out between $150,000–$400,000 (single) and $300,000–$550,000 (joint).
• Overtime Deduction: Applies to the “half-time” portion of overtime pay; limited to $12,500 (single) or $25,000 (joint). Similar phaseout ranges apply.
• Car Loan Interest: Deduct up to $10,000 of interest for U.S.-assembled new vehicles. Phases out between $100,000–$150,000 (single) and $200,000–$250,000 (joint).

Capital Gains Planning Opportunities

Opportunity Zones

• Investors can defer capital gains by rolling them into a qualified Opportunity Zone fund.
• A 10% tax reduction applies after 5 years, increased to 30% for rural investments under the new law.
• After 10 years, gains on the Opportunity Zone investment itself are entirely tax-free.
• These changes are projected to save taxpayers $41 billion through 2034.

Planning insight: This is particularly attractive for business owners planning a liquidity event or anyone with large gains from the sale of appreciated assets.

Qualified Small Business Stock (Section 1202)

• The capital gains exclusion cap increases to $15 million or 10x the original investment, whichever is greater.
• Investors may now qualify for a partial exclusion after just 3 years, down from 5.
• Slightly larger businesses now qualify under expanded eligibility rules.
• Projected tax savings: $17 billion.

Planning insight: A powerful tool for entrepreneurs, investors, and startup founders, especially in tech and venture-backed sectors.

Estate Tax and Step-Up in Basis Enhancements

• The estate tax exemption increases to $15 million per person, indexed for inflation, with no expiration date.
• More than 99.8% of estates will avoid estate tax under the new thresholds.
• The step-up in basis at death remains, meaning heirs do not pay capital gains tax on appreciated assets held until death.

Planning insight: Consider shifting appreciated assets into taxable accounts to benefit from the step-up in basis and revaluate trust structures for long-term tax efficiency.

Planning Considerations

If you have questions about how these changes affect your tax strategy, investment planning, or estate plan, please don’t hesitate to reach out. We’re happy to walk through personalized strategies that make sense for your situation.