What the “One Big Beautiful Bill” Means for Your Taxes and Investments

 In this episode, George Jameson, CFP® and founder of Capital Wealth Group in Columbia, SC, breaks down the newly signed “One Big Beautiful Bill” and what it means for your taxes, investments, and retirement plan. From permanent tax cuts to rising deficits, George shares key takeaways and practical planning tips for investors and retirees. 

 Welcome to "The Retirement Guide" Podcast! I'm your host George Jameson, owner of Capital Wealth Group, a Fee Only Advisory firm. Whether you’re nearing retirement or already retired, Join me each week as we explore the world of retirement planning and equip you with the knowledge and tools you need for a successful retirement.

Thank you for tuning in to this episode of The Retirement Guide. If you enjoyed this episode, please subscribe & leave a review. If you'd like a free 30-minute retirement review, visit our website at www.capitalwealthplan.com to schedule.

This is for education only.It is not tax, legal, or investment advice. Before  acting on any information consult your tax, legal, or investment advisor.

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Transcript

George Jameson: 0:18

Hi, I'm George Jameson. A certified financial planner and founder of Capital Wealth Group. Glad you're here Today I want to break down the new tax and spending bill that was signed into law on July 4th. It's officially called the One Big Beautiful Bill and it makes some pretty big changes to our tax code and federal budget. Now I know tax policy probably isn't something you're reading about every day, but this bill has some real implications for investors. Retirees, business owners, and just about anyone who files a tax return. So let's dig in to what's in the bill, what it means for your financial plan, and how to think about it from an investing and retirement planning perspective. So why does it matter? Let's start with the big picture. Back in 2017, Congress passed the Tax Cuts and Jobs Act that gave us lower tax rates, bigger standard deductions, and several other changes, but most of those were set to expire at the end of 2025. That's what people have been calling the tax cliff. If Congress didn't act, we were going to see a pretty big tax increase starting next year. This new bill makes a lot of those provisions permanent. So whether you're retired, still working or running a small business or just getting started. This removes a lot of uncertainty around future tax rates. So let's look at the key tax changes for individuals and families. Here are the main things to know. First, the current tax brackets are now permanent, so those 10%, 12%, 22%, and so on, those are staying in place unless, of course a future Congress changes them. Next, the standard deduction is going up for single filers. Now$15,750. And for those married couples, it's$31,500, and this starts in 2025. And then third, there's a new senior bonus deduction. It is$6,000 extra if you're over age 65 and make under$75,000. That one phases out as your income increases and then goes away after 2028. And then fourth, The child tax credit is going up slightly from$2,000 to 2200, and more importantly, it's now indexed to inflation, so it should gradually rise over time. And then fifth, the alternative minimum tax, also called a MT, which used to catch some high earners by surprise has been adjusted and now made permanent with higher exemption thresholds. So bottom line, this locks in a lower tax environment for individuals for the foreseeable future. Now let's look at some other changes in the bill that may or may not affect you. Number one, the salt deduction. One big change. A lot of people in higher tax states will notice is the salt deduction cap. It's been$10,000 since 2017, which is how much you could deduct for state and local taxes. That cap just went up to$40,000 and it'll increase slightly each year through 2029 before dropping back down again. There's also a new deduction for tip income. If you earn less than$150,000 and work in a tipped job, like a waiter or waitress, you can deduct up to 25,000 in tips each year through 2028. That's a pretty niche change, but it could make a difference for service workers. Now on the flip side, some green energy tax credits are being rolled back, especially for electric vehicles and home energy upgrades. So if you're banking on those for a new electric car or some renovations, just be aware that some of those incentives are going away. Now let's talk about estate planning. The estate tax exemption was scheduled to get cut in half next year. This new bill prevents that. It makes the higher exemption levels permanent. So 15 million per person or 30 million per couple, starting in 2026. Even if you're not near that level, which most of us aren't, this still matters. Having that clarity makes it easier to plan, and it's a reminder that estate planning isn't just for the ultra wealthy. Everyone needs a plan for how assets will be passed on. Also, remember, states can have their own estate or inheritance taxes with much lower exemption amounts. So depending on where you live, this could still be a factor. And now for business owners, there are a few things worth noting. Number one, the section 1 79 deduction. That's the one that lets you write off vehicles, equipment, and business purchases. Right away, this has been doubled. You can now expense up to 2.5 million in qualifying purchases. And the second thing worth noting for business owners is the 20% pass through deduction for S Corps, LLCs, and other qualified businesses is now permanent. And then third, tax credits for domestic r and d and manufacturing are sticking around. So if you own a small business or are self-employed, these changes may reduce your tax bill and improve your ability to invest in your company. Now let's look at how we're paying for this. Now all of this sounds great, lower taxes, bigger deductions, but of course it has to be paid for somehow. The bill includes about 1.2 trillion in spending cuts, mostly from programs like Medicaid and nutrition assistance. Now, I'm not here to debate whether this is good or bad, I'm just stating the facts. It also raises the debt ceiling by 5 trillion. Which means that government can keep borrowing without another big fight in Congress, at least for a while. So the Congressional Budget Office estimates that the bill will add about three to 4 trillion to the national debt over the next 10 years. That's on top of the 36 trillion we already owe. So this does raise long-term questions about how we manage this debt, how much interest we'll be paying, and whether future tax hikes or spending cuts will be needed down the road. Alright, so what does all of this mean? If you're an investor or you're planning for retirement. First, from a planning standpoint, you now have more certainty. We don't have to worry about tax rates suddenly jumping next year. That makes it easier to make decisions about things like Roth conversions, when to draw income, what accounts to start drawing from first, or how to structure your portfolio in a tax efficient way. And then second, interest rates and inflation. More borrowing could push rates higher over time, which affects bonds, mortgages, and even stock valuations. However this may or may not come to fruition. You'll want to keep an eye on duration on your bond portfolio and stay diversified across asset classes, of course. And third, I'm not here to tell you how to invest or give you any investment advice, but small and midsize domestic businesses may benefit from the bill. Financials, may benefit due to lower corporate taxes. Sectors like defense and infrastructure may benefit. While clean energy companies could face some headwinds without those tax credits. And finally, for high net worth families, this is a good time to revisit estate strategies and make use of the higher exemption. So wrapping it up. So here's the bottom line. This bill locks in a lot of the tax breaks we've had since 2017, adds a few new ones and avoids the tax cliff that was coming next year. That's very good news for planning, but it also increases the debt, cuts back on some key programs and creates challenges down the line. From a financial planning perspective, now is the time to update your income plan, review your tax strategies, and double check your estate documents. These changes give us more clarity, but planning still matters. That's it for today. If you have any questions about how this affects your situation, feel free to reach out and if you found this episode helpful or any others, I'd appreciate it if you'd subscribe and share it with a friend. Thanks for listening. I'm George Jameson. I'll talk to you next week. Have a great day.