The legislation known as the “Big Beautiful Bill” was signed into law on July 4th of 2025. It includes several benefits for Americans that may help from a financial planning perspective. This is a summary of some of the key legislative changes.
The most significant item in the bill is the permanent extension of the tax rates that were enacted in 2017. Without this extension, tax rates would have reverted to pre-2017 tax rates in which the top Federal tax rate was 39.6%, whereas the top tax rate remains at 37%.
The deduction for state and local taxes, otherwise known as the SALT deduction, will be increased to $40,000. Previously it was capped at $10,000 per year. Now taxpayers can use state and local taxes as a greater deduction which may allow them to itemize more of their taxes paid above the standard deduction. This will be in effect until 2028, with a 1% inflation adjustment increase each year.
The legislation also benefits those that work on tips, as the first $25,000 of tips are tax-deductible. This is for income up to $150,000 for single filers, and $300,000 for joint filers. This deduction expires at the end of 2028
Up to $12,500 in overtime pay is tax deductible for single filers earning up to $150,000 and $300,000 for joint filers. This will also expire at the end of 2028.
The standard deduction is increased in the bill to $15,750 for single filers and $31,500 for married filers. The head of household deduction increased to $23,625. These changes will be permanent and indexed for inflation.
In the case of those over 65, the standard deduction each person can deduct is an additional $6,000. There is an income phaseout at $75,000 for single filers, and $150,000 for joint filers. This also goes through 2028.
The estate tax exemption gets an increase to $15 million per person.
Interest on a car loan can be deductible up to $10,000 if the car was assembled in the United States. The income phaseout starts at $100,000 to $150,000 for single filers, and $200,000 to $250,000 for joint filers.
The child tax credit has increased to $2,200 from $2,000. After 2025, this will be increased annually for inflation.
The bill creates a provision for a child savings account. The account will be seeded with $1,000 for children born in the US from 2025 to 2028. The account will be tax-deferred and have a contribution limit of up to $5,000 per year.
There will be up to $5,000 credit as a voucher for education for private school or homeschooling. Eligibility for this voucher is tied to income and is limited to families making less than three times their local median income.
While there are many benefits for taxpayers to take advantage of, it’s always important to talk to your advisor if you have questions as to whether any of these will apply to you.