What the "Big Beautiful Bill" Means for You

I’m sure most of you have heard about the passing of the “Big Beautiful Bill” on July 4. The official version of the bill is 870 pages long and covers a lot of ground. Like before, I’m mostly focusing on how the bill affects people close to or already in retirement.

Please keep in mind the bill has many other significant details, including important new provisions for business owners. Please also keep in mind that there are multiple interpretations of the bill depending on the source you use. As a result, it would likely be prudent to wait at least a couple of weeks before you decide to act on any new provisions. Even more important, some well-known publications have erroneously reported on some of the benefits of the bill (this is exactly the reason why we needed to rework this newsletter three times and remove certain things!). As an example, it was reported over the weekend that the bill eliminates the Social Security Earnings Test. This has not been confirmed by other sources, so we are not commenting on this issue in this newsletter.

The bill has faced a lot of criticism, with nonpartisan estimates suggesting it could add around $5 trillion to the national debt and include major cuts to Medicaid. Reduction in Medicaid funding for hospitals and states could mean millions more Americans without insurance over the next several years.

As expected, the bill passed with very little bipartisan support and a lot of pushback from the other side. But that’s for another newsletter…

Here’s what I think are the most important parts of the bill for you.

• Continuation of many provisions of the 2017 Tax Cuts and Jobs Act (TCJA).
  • This keeps personal income tax rates lower and the standard deduction higher.

• Beginning January 1, 2026, the federal estate and gift tax exemption increases to $15 million per individual (and $30 million per married couple).
  • It will be indexed for inflation going forward.
  • This is an increase from about $13.99 million in 2025.
  • Most importantly, the new exemption is permanent. From a planning standpoint, this is a relief for a lot of people. We had a lot of conversations about what would happen if the TCJA wasn’t continued after 2025.

•  Additional deduction for retirees.
  • If you’re 65 or older, you get an extra $6,000 deduction on your taxable income (per person) from 2025 to 2028.
  • This could make Roth conversions more attractive for some people.

•  No federal taxes on Social Security for most ***
  • Most retirees, about 88%, won’t pay federal tax on Social Security if you file single and make under $75,000 or joint and make under $150,000.
  • These income limits are higher than before which is good news and gives us more planning options.

*** Important Note: We reviewed several different sources prior to finalizing this newsletter.

• To confirm, there are no actual changes to how Social Security benefits are taxed. So this is not a Social Security tax cut.
  • Here is the language from the Social Security website that clarifies exactly how such a large percentage of retirees will not be responsible for federal taxes:
  • “It (the bill) does so by providing an enhanced deduction for taxpayers aged 65 and older, ensuring that retirees can keep more of what they earned.”

• Commitment to maintain the solvency of the Social Security trust.
  • The bill says it’s going to keep the Social Security trust funds solvent at least until 2055.
  • Just so you know, before this, the trust fund was expected to run out in the mid-2030s, so this is a big potential extension.

• Adjustment to the Social Security COLA.
  • The way Social Security Cost of Living Adjustments (COLA) are calculated is changing to give more weight to healthcare and housing costs.
  • The hope is this will mean bigger annual increases for your Social Security, but we’ll have to see how it plays out.
  • For 2025, the COLA was only 2.5%.

• Increased SALT Deduction
  • The bill temporarily raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 per household from 2025 to 2029 (adjusted for inflation).
  • The increase applies for households making up to $500,000.
  • This is a big help for people in high-tax states who itemize their deduction.
  • If you have a mortgage and you’re close to retirement, this might make it less attractive to pay off your mortgage before you retire.

In summary, these changes may open the door to new planning strategies or require adjustments to your current financial plan.

Everyone’s situation is unique, so it's important to understand how these provisions apply to you.