How Will the “One Big Beautiful Bill” Affect Retirement Planning and Business Owners?

Key Takeaways:

• The recently passed tax and spending bill, the “One Big Beautiful Bill,” presents tax opportunities and considerations for households, business owners, high-net-worth individuals, and families.
• While the bill will add trillions of dollars to the national debt, it’s projected to maintain the current low tax environment we’ve seen over the last several decades.
• Despite rising political tensions, it’s essential to remain even-keeled and diligent with your portfolio, sticking to investment fundamentals and a long-term perspective.

President Trump recently signed into law the “One Big Beautiful Bill,” a tax and spending bill including many provisions with various implications. Many people wonder how the new bill may impact tax planning, retirement, and other aspects of their financial lives. Let’s review some of the changes and what you can expect.

How Could the “One Big Beautiful Bill” Affect Your Financial Life?

This landmark bill represents one of the most significant pieces of tax legislation in recent years, making permanent many provisions that were set to expire while introducing new benefits and deductions. Here’s how these changes may impact different aspects of your finances, depending on your specific situation:

How Does It Impact Business Owners?

Business owners have several reasons to be optimistic about the new legislation, as it includes targeted benefits designed to encourage domestic investment and job creation:

• Enhanced Business Income Deduction: The popular Section 199A deduction, which allows many business owners to deduct up to 20% of their business income, is now permanent. Even better, the income thresholds where this deduction starts to phase out have been increased, meaning more business owners can take full advantage of this significant tax break.
• Better Equipment Write-Offs: Business owners can write off 100% of qualifying equipment purchases in the year they buy them rather than depreciating them over several years. The bill also doubles the limits for smaller equipment purchases, making it easier for businesses to invest in necessary tools and technology.
• Research and Development Benefits: Businesses conducting research in the U.S. can now fully deduct these costs immediately rather than spreading them out over multiple years, providing better cash flow and encouraging innovation.
  

How Does It Impact Retirement Planning?

Whether you’re already retired or planning for retirement, the new legislation includes several provisions that could affect your financial strategy now and in the future:

• Good News for Current Retirees: If you’re 65 or older, you may qualify for an additional $6,000 tax deduction through 2028 ($12,000 if you’re married and both spouses are 65+). This deduction phases out for higher-income households, but it could provide meaningful tax savings for many retirees.
• Estate Planning Relief: Families with significant wealth can breathe easier knowing that the estate tax exemption is now permanent and will increase to $15 million per person in 2026.

How Does It Impact Taxes?

The bill also includes a number of tax changes that will affect households across different income levels, generally providing tax relief and additional deductions for many Americans:

• Tax Rates Made Permanent: The tax rates and brackets introduced in the 2017 Tax Cuts and Jobs Act are now permanent, providing certainty for long-term financial planning.
• Higher Standard Deductions: Standard deductions will increase to $15,750 for single filers and $31,500 for joint filers in 2025, potentially reducing taxable income for many households.
• Changes to Charitable Giving: The bill significantly modifies allowable deductions for charitable giving. Beginning in 2026, taxpayers who take the standard deduction can claim an additional deduction of $1,000 for single filers or $2,000 for married couples filing jointly for charitable contributions. However, for those who itemize deductions, charitable contributions must now exceed 0.5% of adjusted gross income (AGI) to be deductible, and the maximum deduction rate is capped at 35%. These changes will require many taxpayers to reassess their charitable giving strategies.
• State and Local Tax Relief: The SALT deduction cap increases from $10,000 to $40,000 through 2029, providing relief for taxpayers in high-tax states like California, New York, and New Jersey.
• Enhanced Child Tax Credit: The child tax credit increases from $2,000 to $2,200 per child and will be indexed to inflation going forward.
• New Deductions for Workers: The bill introduces temporary deductions for tip income (up to $25,000), overtime wages, and auto loan interest (up to $10,000), though these phase out at higher income levels.

Important Note on Social Security: Despite the enhanced senior deduction, Social Security income remains subject to taxation under the same rules as before. The additional deduction doesn’t directly offset Social Security benefits.

Additional Changes from the New Tax Bill

Beyond the core tax and business provisions, the bill introduces several other notable changes that could impact families:

• More Options for Education Savings: 529 education savings plans are more flexible. You can now use these funds for a broader range of K-12 expenses like tutoring, test prep, and educational materials. The annual limit for K-12 expenses is also increasing from $10,000 to $20,000.
• New Way to Save for Kids: Starting in 2026, parents can open special “Trump accounts” for their children to jumpstart retirement savings. You can contribute up to $5,000 per year (and your child does not need to have a job), and the government will contribute $1,000 for children born in 2025-2027.

Additionally, the bill repeals some green energy tax credits and increases the federal debt limit to $5 trillion. The increase will eliminate the need for Congress to debate and approve further increases for an extended period. Overall, the new bill is projected to maintain the current low-tax environment, keeping rates below historical peaks (see chart) while providing benefits to certain taxpayers and households.

Tax Policy and Increased Borrowing

Along with new tax policy and cuts often comes increased government borrowing and reduced spending in other areas, such as Medicaid, to help offset the changes and reduced federal revenue. Over the next decade, the bill is expected to add an estimated $3.4 trillion to the national debt. While an increased deficit could have implications for interest rates and inflation, new tax cuts may also stimulate economic growth and activity. 

New Tax and Spending Budget: How CCMI Helps

As laws evolve, we’re committed to keeping you informed and explaining how they may impact your finances and portfolio. We’re closely monitoring the wealth management landscape, considering the opportunities and necessary adjustments this new bill may present. The bill’s passing has been met with mixed emotions and heightened political tensions, so it’s essential to remain even-keeled and diligent with your investment strategy. 

At CCMI, we’re sticking to the fundamentals that have served investors well for decades: a long-term perspective and diversified investments that can perform across various economic environments.

If you have questions about the bill and how it may affect your personal circumstances, please contact us; we’d be happy to be a resource.