"One Big Beautiful Bill" - Highlights You Need to Know

July 14, 2025

President Trump signed the “One Big Beautiful Bill Act” into law on July 4^th. If you’re interested in some (not so) light reading, the bill is made up of nearly 900 pages.  For those who won’t be adding the tax and spending cut bill to your summer reading list, we will cover some highlights. Whether you're filing taxes, saving for college, or planning your estate, these new rules could have a meaningful impact on your financial picture.

Standard Deductions / Additional Standard Deduction for Individuals 65 and Older

Back in 2017, the Tax Cuts and Jobs Act nearly doubled the standard deduction. This made tax filing easier for many by reducing the need to itemize deductions. These larger deductions were originally set to expire at the end of 2025. This new bill makes the elevated standard deduction permanent and increases it for 2025 from $15,000 to $15,750 for an individual taxpayer and from $30,000 to $31,500 for a married couple filing jointly. Also, the standard deduction will be adjusted for inflation after 2025. 

Individuals 65 and older will also be eligible for a $6,000 bonus deduction through 2028. Eligibility begins phasing out at $75,000 in income for single filers and $150,000 for couples. This bonus standard deduction will supplement, not replace, the existing extra standard deduction already available for older adults. 

Estate Tax Exemption

The 2017 Tax Cuts and Jobs Act also introduced a bigger estate tax exemption. The new law makes this exemption permanent and allows people to pass $15 million per individual ($30 million for married couples) tax-free to their heirs. This dollar amount will also be adjusted for inflation moving forward. Without the change, the exemption would have expired at the end of 2025 and reverted to just over $7 million. 

Car Loan Interest

The tax bill incentivizes consumers to buy vehicles assembled in the United States by allowing a deduction of up to $10,000 per year in car loan interest payments. This benefit phases out for individuals with incomes between $100,000 and $150,000, and for joint filers between $200,000 and $250,000. 

Tax on Tips and Overtime Wages

Beginning this year, taxpayers can deduct up to $25,000 in tips, subject to an income limit of $150,000 for individuals and $300,000 for joint filers. Also starting this year, workers can deduct up to $12,500 in additional overtime pay each year, with the deduction phasing out for incomes above $150,000 ($300,000 for joint filers). Both tax deductions are available through 2028.

Charitable Contributions

The new law allows most taxpayers who take the standard deduction to also claim a charitable contribution deduction. The deduction is up to $1,000 for single filers and $2,000 for married couples filing jointly. This provision is expected to encourage more households to support charitable causes.

529 Plan Change

The final two changes we’ll discuss are top of mind for myself after having my first child this past year. The cost of college and raising children won’t be getting cheaper any time soon. The law now lets families use 529 savings for even more school-related costs. While families were previously limited to withdrawing up to $10,000 per year for elementary and secondary education, the new law increases that limit to $20,000. It also expands the definition of "qualified expenses" for K–12 education to include a wider range of non-tuition costs, such as curriculum materials, standardized test fees, online resources, tutoring, and more. We discussed another new benefit of 529 plans last year:  Unused 529 Plan Money? Consider the New Roth IRA Rollover Option. That article spoke about turning unused 529 plan funds into a retirement vehicle. The case for starting a 529 plan has grown stronger in recent years.

Child Tax Credit

The new law raises the non-refundable child tax credit from $2,000 to $2,200. It will adjust for inflation moving forward. The income begins to be phased out for individual taxpayers at an income of $200,000 and $400,000 for married couples filing jointly.

These are just a few of the changes that could impact you with the new law. Given the significant number of changes being made, it is a great time to revisit with your Advisor regarding tax, estate and investment planning to ensure your plans still align with your objectives. Your financial success matters to us!