What Does the 2025 One Big Beautiful Bill Act Mean for Your Taxes?
July 9, 2025 - The new tax bill signed into law July 4th has implications families should consider when tax planning. As with most legislation, what comes out of the process is often different from the soundbites that describe the intent. The devil is in the details, and it will be a while before all the implications are understood. This article will not cover Medicaid, child credits, or unrelated headline grabbers, but will focus exclusively on tax changes relevant to affluent families, high-income earners, small business owners, and retirees. Here are some early thoughts on how this act may impact your taxes.
1. Tax Brackets and the Standard Deduction
What didn’t change with this law are the 2017 Tax Cuts and Jobs Act (TCJA) income tax brackets. These are now set and will not sunset at the end of this year. While managing marginal income tax brackets is a significant part of the tax planning process, trying to predict what next year’s rates are is a variable no longer in play. The top marginal tax rate will remain 37%. The standard deduction, which was doubled in the 2017 tax act, stays elevated - $31,500 for married couples in 2025 (indexed for inflation).
Planning Implications:
There is no urgency to accelerate income before a sunset date—these brackets are here to stay.
Roth conversions may still be attractive, but now require a long-term view based on retirement income, RMD planning, and expected family changes in income, not fear of imminent rate hikes.
Some families will continue “bunching” itemized deductions every few years, especially with the standard deduction locked in at high levels. More on this later.
2. SALT Deduction Cap Temporarily Increased, But Only Helps Some
The State and Local Tax (SALT) deduction cap has been increased to $40,000 with a phaseout starting at $500,000 AGI. This reverts back in 2030.
Who Benefits:
Families with AGI below $500,000, especially in high-tax states, or that have any other itemized deductions such as mortgage interest or charity
Business owners who previously elected PTE taxes (Pass-Through Entity workarounds) and may no longer need to go through the extra complexity
Who Doesn’t:
High earners above $600K
The phaseout range means there’s strong incentive to manage AGI tightly around that $500K–600K range if you're close.
For families who are charitably inclined, this may negate the need for a bunching deductions strategy.
3. QBI Deduction SSTB Planning is Impacted by a Higher Phaseout Range
There are a lot of acronyms in this headline. If you are a self-employed health care provider (physician, dentist, chiropractor, psychologist, counselor), attorney, consultant, accountant, athlete or performer, this may apply to you. For anyone who is considered to be Specified Service Trades or Businesses (SSTBs), this applies.
The QBI deduction is significant for business owners, but SSTBs are limited in their ability to get this deduction based on their adjusted gross income.
The New Rules:
Phaseout range is expanded from $100,000 to $150,000 AGI for married couples.
Why It Matters:
In the QBI phaseout zone, marginal tax rates can climb dramatically—approaching 60–70% for some.
For SSTBs with potential AGI above the bottom of the phaseout range, there is an incentive to lower income to capture the full deduction. Those affected need to manage AGI with surgical precision.
Planning Opportunities:
Evaluate increasing retirement plan contributions, especially defined benefit and cash balance plans, if you are an SSTB.
Consider entity structure reviews (S Corp vs. partnership).
Income timing and deferral strategies matter more than ever.
If charitably inclined, explore charitable giving strategies that will lower AGI.
If you’re near the phaseout range, small changes in income or deductions can result in big changes in this deduction. For SSTBs, attempting to maximize the QBI deduction is complicated. Be sure to have professional tax advice to attempt this.
4. Estate Tax Exemption Increased to $15 Million—With No Sunset
A quiet but critical change: the federal estate tax exemption rises to $15 million per person in 2025—and this time, there is no sunset. This change will make estate tax planning simpler, or not necessary for some. For others, it provides some certainty we have not had.
This is especially significant for:
High-net-worth families concerned about long-term estate planning
Business owners with illiquid estate assets (e.g., closely held businesses or real estate)
What to Consider:
This creates more breathing room for gifting strategies and family trust planning.
Even with the higher exemption, step-up in basis and asset location still require careful review.
Lifetime gifting may still make sense to remove future appreciation from your estate.
5. New $6,000 Senior Deduction Reduces Taxable Income for Retirees
Starting in 2025, taxpayers age 65 or older get an additional $6,000 deduction per person—a potentially impactful benefit. While this was touted as no tax on Social Security, it is not that simple.
This new deduction:
Is in addition to the standard deduction
Begins to phase out at $150,000 AGI for married couples
Is effective through 2028
Why It Matters:
Can reduce the taxability of Social Security for some
Creates new room for taxable Roth conversions without hitting new brackets
For retired persons doing Roth conversions or managing RMDs, opens subtle but powerful new planning lanes
6. Overtime and Tip Income: Tax-Free—but With Limits
While this subject may not impact people with significant tax planning issues, here are some details. Headlines have focused on the new tax-free treatment of overtime and tips, effective from 2025–2028:
Maximum exclusion: $25,000 per year
Phaseout starts at $300,000 AGI for married couples
Still subject to payroll taxes (FICA/Medicare)
Business Owner Takeaway:
If you employ tipped workers or hourly staff, this could influence compensation planning.
This won’t affect high earners directly, but may affect employee expectations.
Consider whether your systems can track and report this income accurately for compliance.
Need to Rethink Your Strategy?
Tax planning is a moving target that can have significant implications for families into the next generation. Sometimes tax moves are based on long term goals, plans, and views of tax policy in the future, and sometimes they are based on a game day decision based on current family dynamics. The 2025 tax bill didn’t overhaul our tax scheme—but it quietly adjusted many important pieces.
We all want to pay the government less over time. The time to develop and adjust a tax plan is often early in the year, and not at tax return time. The more time you have in a calendar year, the more runway there is to explore improvements.
At Timberchase Financial, we provide thoughtful financial advice. If you have questions or would like to explore how our CERTIFIED FINANCIAL PLANNER™ professionals may be able to help you improve your tax plan, please reach out to us.