What Does the 2025 Big Beautiful Bill Mean for Your Taxes?
July 7, 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. This article is not covering Medicaid, child credits, or unrelated headline grabbers here, but is focused exclusively on tax changes relevant to affluent families, high-income earners, small business owners, and retirees. Here are some early thoughts on how this bill may impact your taxes.
1. Individual Tax Brackets and the Standard Deduction Are Unchanged
What didn’t change with this law are the 2017 Tax Cuts and Jobs Act (TCJA) individual income tax brackets. These are now set and will not sunset at the end of this year. Managing marginal income tax brackets is a significant part of the tax planning process. This variable is no longer in play. The top marginal tax rate will remain at 37%. The standard deduction, which was doubled in the 2017 tax act, stays elevated - $29,200 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 and RMD planning, not fear of imminent rate hikes.
Some families will continue “bunching deductions” every few years, especially with the standard deduction locked in at high levels.
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 between $300,000–$500,000, especially in high-tax states
Business owners who previously elected PTE taxes (Pass-Through Entity workarounds) may no longer need to go through the extra complexity
Who Doesn’t:
High earners above $600K
The phaseout cliff means there’s strong incentive to manage AGI tightly around that $500–600K 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 Now More Critical
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. 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 Current Rules:
Phaseout now begins at $450,000 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.
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 $450K threshold, 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 above 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 triggering IRMAA or hitting new brackets
Helps manage AGI-based thresholds for Medicare and Net Investment Income Tax (NIIT)
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, comprehensive 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.