The Big Beautiful Bill

 

The Big Beautiful Bill

              What was in this Big Beautiful Bill and how does it affect you? Most of the bill affected taxes, so that is what I will focus on here.

1. The best thing it did was make the Trump tax cuts permanent. This is a big win for almost all Americans.
2. The State and Local Tax (SALT) deduction limit was increased from $10,000 to $40,000.
3. The Standard Deduction was increased from $30,000 to $31,500 effective in 2025.
4. Seniors over the age of 65 get an additional $6,000 deduction each. This was in place of the “No tax on Social Security.”
5. There’s no tax on overtime. This is limited to $25,000 for a couple and will last only for the next 4 years.
6. There’s no tax on tips. This is limited to $25,000 per person and will also expire after 2028.
7. The bill allows for the creation of “Trump accounts” where you can contribute up to $5,000 per year into a tax-deferred account for children.
8. It expanded the use of 529 Plan funds to more K-12 expenses and increased the annual limit and the uses for higher education purposes.
9. The Estate Tax Exemption was made permanent at $15 million per person. It was scheduled to drop down to $7 million in 2026.

There are many other tax changes and legislation that came from the OBBB, but these are some of the most notable for most people. The first one is a big deal for tax and financial planning. With permanent tax laws, we can plan much more accurately into the future. As with everything, the laws can be changed in the future, but having the current tax code permanent instead of expiring is a welcome relief. Many of the other tax policies are nice to see.

I don’t really like the Trump accounts. The intent is to have an account for children that works like an IRA or 401(k), but I don’t see that as an important thing to do. It just feels like the government is trying to get their hands into another place it shouldn’t be with a minor incentive. The account is only tax-deferred; it isn’t tax-free or a tax deduction. What exactly is the point? Maybe they have other plans to be presented in a future bill??? We will have to wait and see.