The “One Big Beautiful Bill”: What The New Proposed Tax Law Changes Mean For You

The One, Big, Beautiful Bill recently passed through the House of Representatives by a narrow margin and is now in the Senate's hands. This bill consists of extremely important tax legislation that aims to continue on and add to the current tax provisions we've grown accustomed to for the last several years under the Tax Cuts and Jobs Act. As a pre-retiree or retiree, many of the federal tax proposals in the current bill are highly relevant and could warrant adjustments to your retirement planning if passed. Here's a breakdown of the most impactful changes and how they may affect you.

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Hello and welcome to the Retired-ish Podcast. I'm your host, Cameron Valadez. In this episode, I break down the relevant tax aspects of the new proposed tax bill, dubbed "The One, Big, Beautiful Bill," and how these changes may affect you, for better or worse. However, I think for most of our listeners, it will provide some additional tax savings going forward. On May 12th, Republicans revealed their new tax legislation proposals. The proposed bill lays out the plans for extending and adding to the Tax Cuts and Jobs Act of 2017, most of which was, or rather is, scheduled to expire on December 31st, 2025, unless the bill also makes its way through the Senate and over to the President's desk to be signed into law. The current proposed legislation mainly aims to extend numerous provisions from the 2017 Tax Cuts and Jobs Act that were supposed to expire at the end of 2025, and provides for some temporary enhancements to popular provisions such as the Child Tax Credit and the State and Local Tax Deduction.

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More recently, the U.S. House of Representatives actually passed the tax bill on May 22nd, 2025, after members agreed to raise the cap on the State and Local Tax, aka SALT tax deduction to $40,000 or $20,000 for married, filing single couples, beginning in 2025, which will have an effect on many middle-class and upper-middle-class Americans. This is great news for those who have been limited to using the standard deduction in recent years, particularly those in high-income tax states and those in relatively high property taxes, which we will dive into a bit further later in the episode. For now, we wait to see what happens to the bill in the Senate's hands, and just know that some things can be changed, added, or thrown out entirely by the time the bill is passed.

We think the bill is likely to be amended once more in the hands of the Senate because some Senators have previously said that they oppose some of the provisions in the legislation that passed the House. Just so we're clear, the tax package must still pass the Senate and be signed by the President before it becomes law, which, as of this recording, we are still waiting on. In today's episode, we aren't discussing the entire bill. I only want to review the major, or core, tax components that are relevant to and can have an effect on Main Street pre-retirees and retirees who value planning for their financial future.

In other words, I won't be discussing other provisions in the bill that have to do with curtailing government spending, border security, and other non-tax related items. I will start by first reviewing the proposed changes to the current tax provisions, then go over some of the brand-new provisions that may apply to you.

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So let's start by going over some of the more meaningful changes to current provisions we have right now from the original Tax Cuts and Jobs Act. First and foremost, the current marginal tax rates and brackets that we have today would be extended permanently. And I say permanently with air quotes. While that's not technically a change, just know that these historically low tax rates will be sticking around a little bit longer. This should be beneficial to most American taxpayers and might just be the most impactful piece of the whole legislation because the tax rates and brackets affect everyone. And for those of you wondering, no, the ultra-wealthy aren't getting any additional personal income tax breaks here compared to anyone else.

And just FYI: As it relates to tax legislation, anything that mentions the word permanent actually means in place until another administration makes changes by proposing new bills to Congress in the future. There are other interesting yet temporary adjustments being proposed as well, particularly when it comes to the standard deduction, which anyone can take if it makes sense versus itemizing their deductions. The current standard deduction of $15,000 for single filers and $30,000 for joint filers would be made permanent, with a temporary increase of $1,000 for single filers and $2,000 for joint filers from 2025 through 2028, along with a “bonus deduction” of $4,000 for some taxpayers age 65 and older. This additional standard deduction for seniors over 65 is an interesting one. Remember when President Trump said he wanted to end federal taxation on Social Security? Well, this is what he got instead. That's right. So far, this $4,000 deduction is basically in lieu of the no taxation on social security benefits.

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The caveat is that this additional deduction phases out for taxpayers with incomes above $75,000 for single filers and $150,000 for married couples filing jointly. And again, the provision is temporary and applies for tax years 2025 through 2028. So yes, there are some of you that won't get any direct benefit from this provision. For example, you may be under 65 or over 65 but have other retirement income sources that put you over the threshold. Again, work with your financial advisor or tax professional to plan ahead. Since we are in 2025, if this passes and these provisions are still in the bill, you may be receiving more deductions than you thought initially. So be sure to contact your tax pro and either adjust your tax payments and withholdings or consider some other strategies before year-end.

Here are some of the more nuanced changes to some of the laws we currently have.

Number 1 is the Child Tax Credit. Under current law, the credit is $2,000 per child and is set to expire after 2025. In the new bill, they want to temporarily increase the credit to $2,500 per child for tax years 2025 through 2028 and then revert back to the $2,000 per child in the years following. This is meaningful because a tax credit is better than a deduction. It's a dollar-for-dollar savings on your actual tax bill. An additional $500 credit is $500 off your tax bill per eligible child. And this doesn't just pertain to small children. If, for example, you have a child in high school under age 17 by year-end, you may still be able to get a credit if you are able to meet the other qualifying criteria.

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Number 2 is the Estate and Gift Tax Exemptions. The estate and gift tax exemptions are amounts that an individual is able to use up before they would begin to owe what we call estate or gift taxes. These are different than income taxes that you're used to paying year in and year out. Currently, the exemption is $13,990,000 per person. It's a pretty big number. And without the bill, that would be cut in half after 2025. This would definitely make a mess of many estate plans out there and add the need for much more complicated estate planning for other families that now have net worths that would be over those limits. So, if the limits got cut in half and all of a sudden your estate is over, let's say $7,000,000, you would now have to do some more complicated estate planning. However, the bill proposes a permanent increase of the exemption to $15,000,000 per person and to have it indexed for inflation going forward.

Number 3. This is one of, if not the most, impactful changes in the bill. And that is the state and local tax, or SALT, deduction. I mentioned this briefly at the start of the episode, but currently, there is a cap on the amount of state and local tax deductions you can take when itemizing deductions on your return. The cap is currently $10,000. This has limited the amount of itemized deductions that taxpayers can take in states that have either high income tax rates and or high property tax rates. Because of this, the vast majority of Americans have been taking the standard deduction since the Tax Cuts and Jobs Act was passed in 2017. This bill hopes to change that, primarily because the original $10,000 cap didn't even adjust for inflation. The new bill proposes a permanent increase of the cap up to $40,000 or $20,000 for those filing married filing separately, subject to a phase-out when a taxpayer's modified adjusted gross income exceeds $500,000 or $250,000 for those married filing separately.

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It's also worth noting that both the $40,000 SALT cap and the $500,000 income phase-out would both increase by 1% per year from 2026 all the way through 2033. But what happens if you're over the thresholds? The income thresholds. Well, from our understanding, you will then be subject to the current $10,000 cap for these deductions. And for those of you who are small business owners, the bill would actually eliminate the pass-through entity elective tax, which was essentially a way to have state taxes paid by your business in order to receive a credit to offset your personal income taxes, and it was sort of a way to get around that $10,000 limitation with the current cap. So, sorry for you business owners, but this might be going away.

These last two proposed changes are looking good for you small business owners and even some of you landlords out there. The first is changes to the Qualified Business Income deduction. If you're a small business owner or you're active in managing your rental properties, you should be familiar with this one because it's been a relatively large deduction since 2017. Now, under the current law, there is a 20% deduction that is based on your qualified business income, wages, and assets for pass-through entities or businesses such as partnerships, S-corporations, and sole proprietors or single-member LLCs. The new bill proposes keeping the deduction and increasing it to 23% up from 20% of the net amount of qualified items of income, gain, deduction, and loss from a qualified trade or business.
So, there is a 3% increase in general, and there's also some minor changes for certain business owners such as accountants, attorneys, financial advisors, doctors, dentists, etc., whose trade relies on their skillset, and they may have been completely ineligible in the past for this deduction so there’s some additional changes there.

As I said, this is a big tax break for many, and unless the new bill passes with this provision in place, the 20% deduction was actually slated to go away beginning in 2026, which would hurt many small business owners and landlords. And for those of you wondering, this is not an enhancement of tax breaks for large corporations. The reason is that they are typically not pass-through entities like the ones I mentioned that are eligible for this deduction. This truly affects Main Street America.

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The next pro-business change has to do with what we call bonus depreciation, which can also affect some landlords as well, not just businesses. To keep it simple, bonus depreciation is a tax incentive for business owners that allows them to deduct a larger portion of the cost of certain assets, such as equipment when they are purchased. This deduction has been reduced gradually over the last few years and was supposed to go away completely by the end of 2026. This tax incentive also incentivized spending and economic activity. The new bill aims to extend this bonus depreciation and restore the deduction to an immediate 100% on qualified property placed in service after January 19, 2025, and before December 31, 2029, and certain property exchanged through December 31, 2030.

Why is this relevant to some landlords? Well, not to get too into the weeds here, but landlords can do what is called a cost segregation study on their properties when it makes financial sense. And this bonus depreciation can provide substantial upfront tax savings when those studies are done appropriately.

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Alright, so that was the good stuff, so to speak. But I want to give you both sides and run through a short list of provisions and credits that are actually set to be repealed in the new tax bill or taken away. The first one is the clean vehicle credit for vehicles acquired after December 31, 2026. Vehicles purchased in 2026 must meet the manufacturer limits. So potentially no more huge tax savings on your Teslas and such. Number two is the previously owned clean vehicle credit, which is applicable for vehicles acquired after December 31, 2025. This may hurt the resale value of your Teslas and such. Number three is the energy-efficient home improvement credit. This is applicable for property placed in service again after December 31, 2025. Number four, the residential clean energy credit, which is applicable for property placed in service after December 31, 2025. This is primarily the solar credit. For those of you thinking of getting solar, you may have to decide quickly if you want to save some money. Number five, again, that pass-through entity elective tax for business owners who were in a way avoiding that $10,000 SALT cap, that's also set to go to the wayside.

I want to note that there are even more proposed changes, mainly business-related, to the current tax laws, but those get a little too into the weeds, and I don't think they will be too relevant to listeners, so we'll skip those.

[00:15:43]
Now let's review some of the brand new provisions being proposed in the bill. The first one aims to live up to the Republicans' goal of no tax on qualified tip income. These proposed changes include a deduction for qualified tips that are earned in occupations that customarily receive cash tips. So think restaurants, hairstylists, tattoo artists, hotel services, etc. However, these tips must be reported on specific forms, such as a W-2 or 1099. And this will be interesting since many workers don't necessarily report all of their tip income, especially when it's from cash tips, and now you have to essentially report it to then be able to not include it in your taxable income. Go figure. This provision is temporary and would apply for tax years 2025 through 2028, so it's not permanent.

Number two, somewhat related to the no tax on tips, is no tax on qualified overtime compensation. The bill introduces a deduction for qualified overtime compensation, defined as overtime payments that are required and calculated as the excess over an employee's regular rate of pay. This overtime compensation must, again, be reported on form W-2, and the tax break will be in the form of a federal tax deduction. Therefore, it looks like you will still owe payroll taxes on the overtime income, such as social security and medicare taxes. This deduction is designed to help middle-income workers, such as nurses, factory workers, and first responders, who often rely on overtime pay. However, highly compensated employees are going to be ineligible for this benefit. So far, it sounds like employees can only claim the tax deduction if they make up to $160,000 a year. This provision is also temporary and applies for tax years 2025 through 2028.

Number three, I already mentioned the additional standard deduction for some seniors over 65. That one is brand new. However, we already talked about that, so I won't go over that again.

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Number four is new legislation regarding health savings accounts, aka HSAs. Under current law, individuals entitled to Medicare Part A are actually ineligible to contribute to a health savings account, even if they are still enrolled in a private high-deductible health plan. The new proposal wants to allow working seniors who enrolled in Part A that also have a high-deductible health plan to still be able to contribute to an HSA. In addition, based on your income, they want to allow for additional contributions each year to these health savings accounts. The bill currently states that individuals who make less than $75,000 a year can contribute an additional $4,300 and $8,550 for families each year if they make less than $150,000. The additional contribution amounts are phased out for individuals making $100,000 per year and $200,000 or more for families. I think this is a good one since it doesn't hurt to allow people to save more on their own for their own health care expenses later in life. But we will see what happens. Time will tell.

And number five, the last relevant new inclusion to current tax law is a new car loan interest exclusion. The bill introduces a temporary deduction for interest paid on personal vehicle loans where the final assembly of that vehicle occurs in the United States. This deduction is capped at $10,000 per year and, like most of the others, phases out for high-income earners, beginning at $100,000 for single filers and $200,000 for married couples filing jointly. This provision would also apply temporarily for tax years 2025 through 2028. So far, it looks like you would be able to take this deduction if you meet the qualifications, whether or not you itemize deductions or take the standard deduction on your future tax returns. One thing I want to make note of here is that these are all federal tax provisions. States do not have to mirror the federal tax laws, and often don't. We don't know yet what each state will do in response to any of these new provisions that remain in the bill if it's passed.

[00:20:27]
In summary, there are a whole host of changes and new additions in the latest tax bill that can provide for tax savings, either directly or indirectly, as well as estate planning considerations for pre-retirees and retirees that are part of the middle and upper middle class. It's going to be vital that you start planning with your professional advisors if and when the bill passes to ensure you're taking advantage of the new landscape. We will, of course, continue to monitor the tax legislation as it moves through Congress and will provide updates in future episodes on changes that could impact your retirement planning.

That does it for today's episode. If you find the topics discussed in today's show actionable and insightful, do yourself a favor and subscribe to or follow the show on your podcast app. That way, you can get alerts each time a new episode drops. Also, be sure to check out our free Retired-ish video newsletter to get more useful information on retirement planning, investments, and taxes once a month straight to your inbox. The newsletter will often dive deeper into some of the topics discussed on the show, as well as useful guides and charts available for download. As always, you can find links to the resources we have provided in the episode description right there on your podcast app, or you can head over to Retiredishpodcast.com/71. Thanks again for tuning in and following along. See you next time on Retired-ish.

[00:22:12] Disclosures
Cameron Valadez is a registered representative with, and securities and advisory services are oferred through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.

Neither LPL Financial nor its registered representatives offer tax or legal advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation.

The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Tax and accounting related services offered through Plan-It Business Services DBA Planable Wealth. Plan-It Business Services is a separate legal entity and not affiliated with LPL Financial. LPL Financial does not offer tax advice or tax and accounting related services.