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Congress recently passed a sweeping tax and spending policy bill with lots of long-term implications. Much of the news coverage has focused on its difficult legislative path and the potential political, economic and social consequences. But like many people, you’re probably wondering what this new legislation means for you and your family.
The full answer depends on the makeup of your family and the unique details of your finances. We will spend time with each of our clients individually to plot out specific courses of action. In the meantime, we want to highlight a few immediate implications worth considering:
The Key Benefit of Almost Any Tax Legislation: Certainty
On the whole, financial planning is a lot easier to do when you know what the tax code will look like in the future. With several tax provisions from previous legislation set to expire, Americans were stuck making important financial decisions with incomplete information. The passage of this bill removes much of that uncertainty.
In some cases, the bill preserves the status quo by making temporary provisions “permanent.” The lifetime estate and gift tax exemption was scheduled to sunset in December, dropping the exemption to $6 million from nearly $14 million. Instead, that higher exemption has been made permanent and will increase next year to $15 million ($30 million for married couples).
The legislation also makes permanent the larger standard deduction—which will increase next year to $15,750 ($31,500 for married couples)—and the lower maximum mortgage interest deduction of $750,000.
Business owners can plan with the knowledge that the Section 199A deduction for qualified business income is now permanent and remains capped at 20%.
Time Is Running Out on Some Eco-Friendly Tax Incentives
Other recently enacted tax provisions are being cut short by the legislation. The bill brings a premature death to electric vehicle tax credits, which will expire at the end of September—seven years earlier than planned.
A suite of tax credits for clean-energy upgrades and energy-efficient residential and commercial properties are likewise on borrowed time. The expiration dates for these are staggered. If you’re planning a switch to solar or wind power, that credit expires at the end of December. Other credits will sunset later, but the clock is ticking to take advantage of any of them.
Complex Tax Law Requires Care and Expertise
Certainty doesn’t necessarily mean simplicity. Case in point: The bill’s temporary increase of the state-and-local-tax (SALT) deduction limit to $40,000 begins to phase out dramatically once modified adjusted gross income (MAGI) exceeds $500,000. Every dollar of income above that threshold decreases the maximum deduction by 30 cents. That is, until income reaches $600,000, at which point the limit has dropped all the way back down to $10,000—where it was before the bill passed. As a result, some taxpayers whose incomes fall within the SALT phaseout range may face more complicated decisions when considering financial moves that increase their income.
Individual Tax Changes
Tax Rate Brackets Locked In
• The current tax brackets introduced under the Tax Cuts and Jobs Act—10%, 12%, 22%, 24%, 32%, 35%, and 37%—are now permanent.
Standard Deduction Bump
• Beginning in 2025, the standard deduction will increase to $31,500 for joint filers and $15,750 for single filers. These amounts will be indexed for inflation.
SALT Deduction Cap Increased
• The state and local tax (SALT) deduction cap has been raised to $40,000 and will remain in place through 2029.
• A phaseout begins at $500,000 of modified adjusted gross income (MAGI). The cap will return to $10,000 starting in 2030.
Above-the-Line Charitable Deduction Reintroduced
• Taxpayers can now deduct up to $2,000 (married filing jointly) or $1,000 (single and other filers) for charitable donations without itemizing.
New Tip and Overtime Deduction
• A temporary deduction is available through 2028 for up to $25,000 in reported tip income and $12,500 in overtime wages.
• The deduction phases out for those earning over $150,000 (single) or $300,000 (joint).
• The IRS will define eligible "tip-based" occupations, such as waitstaff and barbers.
Estate and Gift Tax Exemption Boost
• The lifetime estate and gift tax exemption is now $15 million per person or $30 million per couple, with inflation indexing moving forward.
No Change to Social Security Taxation
• Despite public speculation, Social Security income remains taxable; however, the standard deduction for seniors has been expanded under the new law.
Additional Tax and Financial Provisions
End of Green Energy Credits
• Federal tax incentives for electric vehicles, solar panels, wind projects, and energy-efficient upgrades are being phased out between September 2025 and December 2027.
• Taxpayers should complete these projects as soon as possible to take advantage of the remaining benefits.
New Deduction for Car Loan Interest
• A limited deduction for interest paid on certain car loans is now available, subject to income thresholds and reporting requirements.
Revised Rules on Gambling Losses
• Starting in 2026, only 90% of gambling losses may be deducted, and only to the extent of gambling winnings.
Business Tax Updates
Full Deduction for Domestic Research & Development Costs (Section 174)
• U.S.-based research and experimental expenses can once again be fully deducted.
• Small businesses (those averaging under $31 million in gross receipts) may amend their 2022, 2023, and 2024 tax returns to retroactively capture deductions they may have missed.
100% Bonus Depreciation Returns
• Businesses can now fully expense the cost of equipment, vehicles, and qualified improvements placed in service on or after January 19, 2025.
• This benefit applies to qualified production property used in industries like manufacturing, farming, and refining, and will remain in effect through 2030.
Permanent 20% QBI Deduction (Section 199A)
• The deduction for qualified business income from pass-through entities such as S corporations, partnerships, and sole proprietorships is now permanent.
Qualified Small Business Stock (QSBS)
• Tiered gain exclusions are now based on holding period (up to 100%) with higher per-issuer caps and asset thresholds.
California PTE Deduction Remains Untouched
• The federal government will continue to allow California's pass-through entity (PTE) workaround, with no federal limitations imposed.
Expanded Business Interest Deduction
• Deduction limits on business interest expense are loosened by allowing the add-back of depreciation, amortization, and depletion when calculating deductibility.
Excess Business Loss Rules Extended
• The excess business loss (EBL) limitation is now a permanent part of the tax code. However, any disallowed losses will now roll forward as net operating losses (NOLs) for future use.
ERC Claims Limited
• Employee Retention Credit (ERC) claims for Q3 and Q4 of 2021 that are filed after January 31, 2024 will be disallowed.
• The IRS now has up to six years to audit or assess these claims, as the statute of limitations has been extended.
How We’re Helping Clients Respond to These Changes
Proactive Tax Planning
• As we review your prior tax returns, we’ll be incorporating these new rules into our year-end tax planning strategies and conversations among us and with your CPA if needed.
Personalized Analysis
• We’re evaluating the law’s impact on each client’s specific situation—whether you’re supporting a family member with disabilities, retired, approaching retirement, or considering transitioning ownership of your business.
Advanced Financial Modeling
• Using our financial planning software, we’re modeling projections to show how the law affects your taxes, retirement income, or estate plan—both with and without strategy adjustments.
• We're analyzing impacts on Required Minimum Distributions (RMDs), IRA/401(k) strategies, Social Security timing, and reviewing the impact of Roth conversions.
Professional Coordination
• We’ll work closely with your CPA and estate attorney to ensure your financial, tax, and legal strategies are aligned.
• If your estate plan, charitable goals, or trust structures are affected, we’ll coordinate across your advisory team to prevent gaps or redundancies.
Finding Strategic Opportunities
• It will be important to maintain focus on strategies such as accelerating or deferring income or deductions, capturing new tax credits, or adjusting investment portfolios to help mitigate unnecessary taxable income based on new tax law and keeping your personal and family goals in sight.
At around 900 pages total, the legislation is full of provisions that could impact your financial decisions in complex ways. That complexity can easily spark confusion. So, if you’re unsure what exactly you should be doing to adapt your financial plan to account for the new tax rules, let’s talk.
We’re on it and we’re happy to sit down and walk through what this big piece of legislation may mean for you, your money and your financial objectives.
Source: Congress.gov
