Key Takeaways:
- Temporary or time-sensitive provisions in the One Big Beautiful Bill may require planning and decisions by the end of the year or within the designated timeframes.
- Take advantage of the new senior deduction, if you qualify, and other deductions targeting the middle-class, including deductions for overtime and tip income, before they expire in 2028.
- The permanently higher estate and gift tax exemption may change your approach to your income, withdrawal, and gift strategies.
- The increased SALT deduction could warrant itemizing deductions and bunching charitable gifts through 2029.
The One Big Beautiful Bill Act, which was signed into law on July 4, introduced significant changes related to taxes, healthcare, and retirement. Certain provisions are temporary or time-sensitive, with additional changes coming in 2026. Learn about some of the key changes in this blog post.
Proactive planning and understanding how these changes may affect your finances, family, and retirement is essential for preparing for what’s to come and leveraging all available opportunities. Continue reading for key planning actions you can take before the end of the year.
Claim the New Senior Deduction
The bill includes an additional deduction for qualifying seniors from 2025 to 2028. Single filers may claim $6,000 in addition to their standard deduction, and married couples can claim $12,000. As 2025 is the first taxable year the deduction is available, be sure to claim yours when you file your tax return, if you’re eligible. Here are other requirements to keep in mind:
- Age Requirement: You must be 65 on or before the last day of the year to qualify for the deduction.
- Income and Phase Out Requirements: To receive the full deduction, your income must be below $75,000 for single filers and $150,000 for couples filing jointly. If you’re near or above these thresholds, review your year-end income to see if you qualify for the full deduction or a reduced amount.
Optimize Your Retirement Account Withdrawals
OBBB significantly reduces taxes for many seniors, which can help reduce or eliminate the tax on their Social Security benefits. While some states still tax Social Security, the federal change simplifies income expectations for retirees but also requires them to take a strategic approach to income planning. Here’s what you can do:
- Confirm Your Benefits: Review your Social Security statement to ensure your taxable status and benefits are accurate.
- Reassess Your Withdrawals: Consider the timing of withdrawals from other retirement income sources, such as your IRA, 401(k), or pension, as they will continue to add to your taxable income.
- Timing Benefits: Evaluate when to begin taking Social Security for the maximum benefit — the longer you wait, the higher the payment. You may also consider whether to delay or accelerate your benefits for tax planning purposes to manage required minimum distributions or plan for a Roth conversion.
- Maximize Benefits: Coordinate and develop a strategic plan to optimize your benefits if you’re married filing jointly.
Review Estate Planning While the Exemption is High
The new bill has increased and made permanent the estate and gift tax exemption, which many wealthy families thought would sunset and revert to $7 million per person by 2026. This change prompts adjusting your estate plan as soon as possible while the exemption remains high, and planning for an even higher exemption in 2026. Here’s what to consider:
- New Limit: Through the end of 2025, the federal estate and gift tax exemption is $13.99 million per individual and will increase to $15 million per person, becoming permanent in 2026.
- Reassess: If you made adjustments to your gifting strategy anticipating a reduction, review your plan and make necessary changes to reflect the new policy.
- Update Essential Items: Be sure to update and align your retirement accounts, beneficiaries, and legal documents like wills and trusts.
- Plan Ahead: Certain gifting strategies, such as setting up trusts and transferring assets, may require more time to execute. Begin planning now to ensure you’re leveraging all available benefits in 2026 and can tax-efficiently pass on wealth to your heirs.
Make Year-End Moves on SALT Deductions
Another change includes temporarily increasing the state and local tax (SALT) deduction to $40,000 from $10,000, with a 1% annual increase to the deduction and income thresholds from 2026 through 2029. The higher deduction helps retirees further reduce their taxable income and increase their savings. To take advantage of the higher deduction, consider these steps:
- New SALT Amount: Calculate the new amount for your state and local taxes considering the change.
- Deduction and Gifting Strategies: A higher cap could mean that itemizing deductions may exceed the standard deduction. Consider bunching your charitable giving now through 2029 to maximize the benefit.
- Plan Ahead: The deduction will revert to $10,000 in 2030, so use this high-cap window to plan your deductions and gifting wisely.
Make Strategic 529 Savings Plan Contributions
The bill expands the ways families can use a 529 plan. New rules will enable 529 funds to cover non-tuition K–12 expenses, such as books and tutoring, as well as non-degreed programs, including certifications and apprenticeships. Leverage new flexible education planning with these steps:
- Maximize Contributions: Make contributions before the end of the year to maximize your plan’s savings and reduce your taxable income.
- Plan for Educational Expenses: Consider how to leverage your plan for non-tuition-based expenses for K–12 students.
Plan RMDs and Roth IRA Moves
The bill doesn’t directly affect required minimum distributions (RMDs) and Roth IRAs. However, other updates, including higher deductions, change how your taxable income is calculated, which could provide planning opportunities. Here’s what to consider before year-end:
- Confirm Your RMDs: If you’re of RMD age, check your distribution for 2025 and ensure you withdraw the correct amount to avoid penalties for under-payment.
- Strategically Time Withdrawals: Based on new taxable income rules, such as tax-free Social Security payments, consider adjusting the timing of RMD withdrawals or Roth conversions to help manage your tax liability and maximize Roth growth.
- Partner With a Professional: Experts, including the team of retirement planners at B&F, can guide you through the requirements and options that may benefit your situation.
Lock in Other Temporary Tax Breaks
The bill includes a few temporary tax deductions targeting middle-class workers, so it’s important to leverage them while they’re available:
- Service Worker Deductions: In addition to the new senior deduction we mentioned, you can also claim a deduction up to $25,000 if you’re a tipped worker or overtime income of up to $12,500 for singles/$25,000 for married couples.
- Plan Ahead: These deductions are set to expire in 2028, so we encourage you to work with a financial advisor and tax professional to understand how to maximize these benefits.
Work With a Financial Advisor to Implement These Steps
Staying informed about new and evolving tax legislation is a crucial component of financial planning. We are committed to keeping you current, and as financial advisors in San Diego, we can also incorporate local expertise into your planning. If you’d like to learn more about the bill or need help integrating these changes into your broader financial strategy, please contact us.