What has become the infamous One Big Beautiful Bill has recently been signed into law on July 4th, 2025. But what does that mean for you? Here are some of the most notable changes that may create strategic financial planning opportunities for you and your family.
- "Trump Accounts" (MAGA accounts) for newborns. For children born between 2025 - 2028 the government will deposit $1,000 into a MAGA account (Money Accounts for Growth and Advancement - come on who comes up with these names?) which matures into a tax deferred IRA-like vehicle to fund education, home purchase, or business ventures. Also, any child under the age of 18 can have a MAGA account as well. Parents or other relatives may contribute up to $5,000 per year plus an additional $2,500 from employers. Though this new MAGA account has been passed, the IRS has not issued finalized tax guidance, which is anticipated by mid 2026.
- New Tax Deductions. (a) Tips and Overtime - For workers earning under $150k, they will be able to deduct up to $25k of income through 2028 (federal taxes only). They would still need to report the income for Social Security and Medicare taxes. (b) Auto loan interest - Up to $10k per year is deductible in interest on US assembled car loans. The deduction is phased out over $100k single and $200k married. This provision should make the US auto manufacturing industry more competitive. Expires in 2028. (c) Senior deduction - Senior's age 65+ now receive an additional $6,000 standard deduction. So, for married couples that means another $12k of your income could be tax free. This deduction is phased out above certain incomes ($75k single and $150k married) from 2026 to 2028. This may offer an opportunity to look at starting partial Roth IRA conversions or simply pulling money out of IRA's and reinvesting in taxable accounts with the proceeds.
- Expanded HSA (Health Savings Account) Access - Now more high-deductible health plans (HDHP) qualify for an HSA. For tax year 202 contribution limits increased to $4,300 for individuals and $8,550 for families with catch up contributions of $1,000 for those over 55. Check with your health insurance agent and see if you qualify for an HSA account. Contributions are tax deductible, growth is tax deferred and if used for qualified medical expenses, withdrawals are completely tax free! That's a triple whammy!
Financial planning is like trying to hit a moving target. Things are constantly changing and trying to predict the future, can be a real educated guessing game. But if you would like to explore any of these strategies above, give us a call!