President Trump recently signed H.R.1—the 'One Big Beautiful Bill'—into law, extending the 2017 tax cuts and making several key changes that could affect your financial planning. Below are some key highlights:
The Extension of the 2017 Trump Tax Cuts and More
In addition to the extension the Trump 2017 tax cuts, the following changes were made:
- Standard deduction: Up from $15,000 to $15,750 (single) and $30,000 to $31,500 (married filing jointly) in 2025. Indexed for inflation.
- Estate and gift tax exemption: Up from $13.99 to $15 million (single) and $27.98 to $30 million (married filing jointly) in 2026. Indexed for inflation.
- Child tax credit: Up from $2,000 to $2,200 per child and $1,700 is refundable in 2025. Indexed for inflation.
The child tax credit, available to families with qualifying children under age 17 who have a valid Social Security number, was temporarily increased from $1,000 to $2,000 by the 2017 Trump tax cuts. Starting in 2025, the new legislation will permanently raise the largest credit to $2,200 and adjusts it for inflation beginning in 2026.
- State and local tax deduction (SALT) limit: Up from $10,000 to $40,000 for joint filers through 2029 with phaseouts for higher earners. Reverts to $10,000 in 2030.
The SALT tax deduction changes will be more impactful for those that live in high tax states.
New Senior Tax Deduction
A new proposal could give older Americans a tax break starting in 2025. This “Senior Bonus,” temporary deduction would offer up to $6,000 in extra tax savings for certain individuals age 65 and older.
Here’s how it works:
· You qualify for the full deduction if your modified adjusted gross income (MAGI) is up to $75,000 (or $150,000 for married couples filing jointly).
· The deduction phases out above those income levels.
· It’s available for tax years 2025 through 2028.
This tax break could be especially helpful for middle-income retirees, according to tax policy experts. While it doesn’t eliminate taxes on Social Security benefits—a promise floated by the Trump administration—it may help offset some of those taxes indirectly via added deductions.
One potential trade-off: the deduction could slightly accelerate the depletion of Social Security trust funds, moving the estimated date from early 2033 to late 2032, according to the Committee for a Responsible Federal Budget.
New Child Savings Accounts
A new proposal would create government-funded savings accounts for children born between 2025 and 2028, each receiving a one-time $1,000 deposit from the federal government.
These tax-advantaged accounts—nicknamed “Trump accounts”—would be available to U.S. citizen children. Parents could contribute up to $5,000 per year, and employers could add up to $2,500 without it counting as income. The funds would be invested in a diversified stock index fund.
Supporters say this plan would help more Americans benefit from long-term investing and compound growth. However, some experts argue that 529 college savings plans may offer better tax benefits and higher contribution limits.
Big Changes Coming to EV and Clean Energy Tax Credits
Some major clean energy tax perks may be going away soon. A new proposal would end the $7,500 tax credit for buying or leasing a new electric vehicle, as well as the $4,000 credit for used EVs—both set to expire after September 30, 2025.
Credits for home energy upgrades, like solar panels, heat pumps, or energy-efficient windows and doors, would also be phased out by the end of 2025.
These tax breaks were originally part of the Inflation Reduction Act, which aimed to boost clean energy through at least 2032. But under the new plan, they’d be cut years earlier.
Planning Ahead
As with any major tax law change, the details matter. While some provisions may offer new opportunities, others could impact your long-term plan. It’s always a good practice to consult with your tax planning professional with details on how these changes may affect you.
About Rocklin Senavinin, CFP®
With over 25 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link.