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Key Impacts of the Big, Beautiful Bill Act Thumbnail

Key Impacts of the Big, Beautiful Bill Act

Laurence Hale, AAMS®, CRPS®
Senior Partner & Chief Investment Officer

President Trump’s One Big, Beautiful Bill officially passed in Congress and was signed by the president, which officially makes it the One Big, Beautiful Bill Act (OBBBA). The extremely large and complex piece of legislation contains tax cuts for individuals and businesses, increases spending on defense and immigration enforcement, and cuts spending on “green businesses” and Medicaid. The law will give consultants and tax advisors topics to write about for years. For now, let’s look at some of the ways the OBBBA may directly affect your pocketbook.        


Lower Taxes 

The biggest thing the One Big, Beautiful Bill Act did was extend most of the tax breaks under the Tax Cut and Jobs Act (TCJA), which was enacted during the first Trump administration and was set to expire at the end of this year. Had the OBBBA not become a law, individual and business tax rates would have jumped sharply.  

The new law also provides some new individual tax benefits. Individuals working in qualified tipped occupations can deduct up to $25,000 of tip income from their taxable income and individuals can deduct up to $12,500 of their overtime pay from their taxable income ($25,000 for those filing joint returns). Both deductions are available starting this year and continue through 2028. The deductions are available for individuals who earn up to $150,000 a year ($300,000 for joint filers) and phase out for those earning greater amounts. 

 In addition, consumers who purchase American-made cars can deduct up to $10,000 of the interest paid on their auto loans annually from 2025 through 2028. The benefit phases out for individuals with a modified adjusted gross income of $100,000 or more annually or joint filers who earn more than $200,000. 

Higher SALT Deduction 

In a move appreciated by anyone living in a state with high taxes, the One Big, Beautiful Bill Act increases the cap on the deduction for state and local taxes (SALT) to $40,000 for those filing taxes jointly and $20,000 for those filing separately. That’s a nice increase from the $10,000 cap placed on the deduction under Trump’s TCJA, but it’s still a far cry from the lack of any cap prior to the TCJA.  

The deduction is only available to those who itemize their taxes. The deductible amount and income threshold each increase by 1% annually through 2029. And the maximum deduction available is gradually reduced for joint filers with modified adjusted gross income of more than $500,000 ($250,000 for separate filers.) Less advertised: The deduction, which is available this year, reverts back to the $10,000 cap in 2030. 

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New Tax Benefits For The Young 

Under the One Big, Beautiful Bill Act, parents receive a child tax credit of $2,200 for each of their children, up from $2,000 starting in 2025. There is no stated expiration date on this credit. The credit is permanently indexed to inflation and phases out for single filers making $200,000 or more and joint filers making $400,000 or more. 

The OBBBA also creates Trump Accounts. The US government will place $1,000 into an account created for any baby born in the US between January 1, 2025 and December 31, 2028. Accounts can be opened for children born before and after those dates, they just won’t receive the seed money from Uncle Sam. Accounts can be opened for anyone up through the calendar year before they turn 18. 

Parents, relatives, and friends can contribute up to $5,000 a year in after-tax dollars to the account until the year before the child turns 18. Employers can contribute up to $2,500 a year to an employee’s account or to the account of an employee’s dependent. The accounts will be invested in a low-cost fund that tracks the US stock market and can grow tax-deferred.  

When the child turns 18, the account converts into a traditional IRA, and the beneficiary can withdraw funds at any time — with caveats. If they use the proceeds to pay for college, buy a home, or start a business, they will pay a federal income tax on the amount withdrawn. If they pull money out for any other purpose before turning 59½, they’ll pay federal income tax and a 10% tax penalty on withdrawals. If the funds are withdrawn after the person hits 59½, the withdrawal will be taxed at the federal income tax rate. The tax implications are varied and complicated, so consider talking to your financial advisor about the pros and cons of making contributions to a Trump account. It’s expected that accounts will be available through banks or other financial institutions starting in 2026.  

The One Big, Beautiful Bill Act also reduces government support of college finance. Under the Parent Plus student loan program, parents can only borrow $20,000 per student per year for college and the total amount borrowed is limited to $65,000 per student. Previously, parents were allowed to borrow an amount equal to their child’s cost of college. The change goes into effect on July 1, 2026. 

The Grad Plus loan program, which provided loans to graduate students, will be shuttered as of the 2026-2027 school year. And, students who take out loans should be aware that income-driven repayment plans will no longer be available after July 1, 2026. 

New Tax Benefits For The Old

Seniors receive new benefits under the One Big, Beautiful Bill Act, too. Couples who are 65 and older can deduct up to $12,000 from their taxable income if they make less than $150,000 annually. Accordingly, individuals can take a $6,000 deduction if they earn less than $75,000 annually. The deduction shrinks as income exceeds the noted levels. Again, less advertised is the fact that this deduction is only in effect from 2025 through 2028, unless it’s extended by Congress. 

Trump did not eliminate the tax on Social Security, as he promised during the campaign. But the new senior tax break will go a long way toward offsetting the tax that most seniors pay on their Social Security benefits. Those who won’t benefit are the poorest seniors, who never pay taxes on their Social Security benefits, and the richest seniors, who won’t qualify for the tax break. 

Understanding how the many moving parts of Trump’s One Big, Beautiful Bill Act will affect your financial plans is challenging. At WHZ Strategic Wealth Advisors, we’re happy to help. Our "Plan Well. Invest Well. Live Well.™" process includes regular portfolio reviews and strategic adjustments to keep you on track toward your goals. We're committed to being your partner every step of the way as we provide you with “Absolute Confidence. Unwavering Partnership. For Life.” Contact us for a complimentary consultation now, or give us a call at  (860) 928-2341.    


Authored by Senior Partner, Chief Investment Officer Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor.      


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