Implications of the Big Beautiful Bill

In this episode Jeremy and Jen take on a few of the questions on today’s topic recently, the One Big Beautiful Bill. New legislation typically does create questions. They'll be talking about the tax implications of the One Big Beautiful
Bill. This is not meant to be an all-inclusive explanation, but it will cover the biggest points.

Instagram: https://www.instagram.com/keystonefin/
Twitter: https://twitter.com/Keystone_Fin?advisorid=33004651
Contact Josh Nelson: https://www.keystonefinancial.com
Contact Jeremy Busch: https//www.keystonefinancial.com
Podcast Editing: Tim Leaman/info.primegen@gmail.com

Transcript

Wiser Financial Advisor – Implications of Big Beautiful Bill

Hi Everyone, and welcome to the Wiser Financial Advisor show with Josh Nelson where we get
real, we get honest and we get clear about the financial world and your money. Let the financial
fun begin!
Jeremy: Welcome to the Wiser Financial Advisor. This is a podcast takeover—and we are your
hosts. I’m Jeremy Bush, Certified Financial Planner with Keystone Financial Services, and with
me today is Jen, also from Keystone. Thanks for joining me, Jen, on this crazy "podcast takeover".
Jen: Thank you for having me. This should be fun.
Jeremy: So we've been getting a few questions on today’s topic recently, because new
legislation typically does that. We’ll be talking about the tax implications of the One Big Beautiful
Bill. This is not meant to be an all-inclusive explanation, but it will cover the biggest points.
Jen: Some good highlights.
Jeremy: Let's jump right into it.
Jen: Yeah, let's talk about tax brackets. What does that look like, Jeremy?
Jeremy: If you recall, the tax cuts in the JOBS Act of 2017 were supposed to sunset at the end
of this year of 2025. What this bill did is to extend and make permanent the current tax brackets
from that JOBS Act, with some tweaks here and there. So you'll find that the 10 and 12%
brackets are both a little bit wider. The 22% bracket is a little bit narrower, but no big changes
beyond that. So I know that was a big thing, a lot of people thinking the brackets were going to
jump back up to what they were before, and that would have had a pretty big impact on things.
But no, those were made permanent moving forward.
Another thing that's usually on people's minds when they think about taxes is standard
deductions. This bill increases those. Married filing jointly is going to be increased slightly to
$31,500. Of course, these are indexed for inflation as well so this is more of a carry forward
from the 2017 tax cuts and JOBS Act, so yep, that standard deduction is basically going to be
bigger, but really the key thing is with these becoming more permanent, to develop a few more
strategies around grouping itemized deductions in certain years or just planning accordingly for
whatever deductions we have when they come up.
Jen: Another question that always comes up around taxes is the area of charitable giving and
charities.
Jeremy: That has changed a little bit. The thing that hasn't changed is the 60% adjusted gross
income cap stays. That was going to drop down to 50%. That's on cash contributions to
charities. So if you're in the habit of giving to Goodwill or something like that, the deduction
available for those increased $1000 for single filers, $2000 for married filers. So, save your
charity receipts. That's an easy one to do. Some of these are 2025 eligible. Most start in 2026
and go forward. So when we think about charities and charitable distributions, a lot of the time
we like to play that game of lumping them into certain years, because that standard deduction
continues to be high and most people use that, and will probably continue to use that.
Jen: But even if you're thinking of taking the standard deduction, keep track of those receipts
and save them.
Jeremy: Absolutely, and of course for qualified charitable distributions as well. Those always
come in handy. If you're over 70 1/2 and you don't know what a qualified charitable distribution
is, talk to us. We can walk you through it and see if it makes sense for you.
Jen: Alright, how about the itemized deduction limitation? What does all of that mean for us?
Jeremy: This won’t impact most people too much. This starts in 2026, and it's gonna impact
those in that highest tax bracket of 37%. They basically capped it at 35 cents per dollar of
income. OK, it used to be 37 cents, if I recall correctly. So, if you are in that highest earning
bracket, we can talk to you about itemized deductions. We'll go over some things here in a
minute that might make it more possible for people to itemize as opposed to taking the standard
deduction.
Jen: That segues into what we call SALT. That's State and Local Tax Deduction. Would you go
into some of those details?
Jeremy: This is a big one. It went from a $10,000 limit to now $40,000 max if you're married
filing jointly, $20,000 for single filers. So obviously that is a pretty big jump that's probably going
to help quite a few people. However, a couple key considerations on this one. There are phase
out rules. If you are filing single and you have income greater than $250,000, you are going to
be subject to phase-outs of that $40,000 deduction. If it's $500,000 or more, you're going to be
subject to phase-outs too. So definitely something to consider if you are in that upper tier of
earning and you want to take advantage of this. This also has a timeline phase-out, so it will
only be good for a few years, through 2029. Then according to the bill it goes away. So this is
not a permanent one. If you're able to take full advantage or at least partial advantage of that
$40,000 max, that could be a game changer and all of a sudden maybe itemizing becomes
something that you can take advantage of. But there's a time limit on that and there are phase-
outs for it.
Jen: Here's another big question. I think, Jeremy, that a lot of people thought that when it came
to the one Big Beautiful Bill there was no tax on Social Security. Is this true and accurate for
what we can interpret at this point?
Jeremy: The short answer is no. There was a lot of speculation on this bill saying they're not
going to tax Social Security. Not quite the case. What they did do with this was to give an
enhanced senior deduction. So really what that means is, if we look at 2025 tax, the senior
deduction for aged 65 and over gets you a $1600 deduction. If you're over 65 unmarried, not a
surviving spouse, it was a $2000 deduction. OK, what they did is to up that to $6000 per
person. Nothing to sneeze at, right? This happens in the year you turn 65, but if you're married
filing single and still living together, you're not eligible for this one. Most people over 65 will be
eligible for that $6000 per person if you turn 65 in the current year or you are already over 65.
There are also adjusted gross income phase-outs for this, so if you';re married filing jointly over
$150,000, you're subject to phase-outs. If you make over $250,000, you're not going to get it.
Singles $75,000 to $175,000 are subject to phase-outs. There are still a lot of people this is
going to help, but the idea that we're not taxing Social Security is not real. It's more of giving a
wash for a few years. This one disappears in 2028.
Jen: That's good to clarify. Thank you. Now here's another topic that may or may not affect a lot
of people, but what about tips deduction?
Jeremy: Yeah, so on the campaign trail, promises were made and whatnot saying, “We're not
going to tax tips.” For anybody who works in a position where you earn tips or have a family
member that earns tips, the tips deduction that got added in is up to $25,000 regardless of your
filing status. The one caveat to that is once again married filing single and living together
automatically takes this one away. However, this is for anybody who reports tips on your W2 or
schedule C. This one also has phase-outs. Married filing jointly, if you make $300,000 or more
and you make tips, you are going to be phased out of this. If you're single, it’s $150,000 that will
start the phase-out range. Also married filing jointly, anything above $550,000 or single, above
$400,000. That's a pretty wide range. Of course, I don't know many people making $500,000 a
year working a job where you're getting tips. This tips deduction also phases out completely in
2028 and goes away. So there are only a few years that you'll be able to take advantage of it. A
lot of these things have limits on them as far as time frames, so it'll be interesting to see down
the road if they make any of these permanent or create an extension. One of the biggest
reasons we're talking about this is because they literally extended the Tax Cuts and JOBS Act.
So you never know.
Jen: Right. Now here's another item that a lot of people were curious about: What happens
when it comes to an overtime deduction. What can you tell us about this?
Jeremy: This is an interesting one as well, and probably affects more people than the tips one.
Married filing jointly, there is a $25,000 max deduction for overtime hours. Many of us at some
point in our lives have worked a job with overtime hours, some more than others, right? So that'll
be nice. The single limit on this one is $12,000. And if you’re married filing single, you're not
eligible for this, so it almost feels like married filing single is getting punished. Well, for whatever
reason, they wrote that in. It might give you more reason to start filing jointly, but the adjusted
gross income phase-outs for this are the same as the tips and this one also goes away in 2028,
which is the shelf life for a bunch of these. It gives us a few years where we can say, “Let's take
advantage of this while we can, right?” This makes tax planning from a financial planning
standpoint even more appropriate for more people to see if this suits their situation.
Jen: Awesome. Well, how about the next topic? Auto loan interest deduction?
Jeremy: Yes, this is interesting. This one is basically a $10,000 deduction. There are a few key
stipulations. This is deduction on interest only. So if you think about it, how much of a car do you
have to buy to have $10,000 worth of interest payments on it during the year? And the biggest
thing is that it must be bought after 2024 and it has to be a new car, motorcycle, new vehicle,
assembled in the United States. There's a little bit of interpretation on what assembled in the
USA means on this one. But really it's a buy America push. Like all the rest of these, there are
phase-outs. So for married filing jointly, if you make $200,000 or more you're going to be into
that phase-out. Everybody else, if you make more than $100,000 a year there will be a phase-
out. So, if you're buying a new car, great. You can probably capture some of this. But like so
many of the others, this one sunsets in 2028. So if you're in the market for a new vehicle,
consider it in the next couple years.
Jen: So what about alternative minimum tax adjustments? That is quite a topic.
Jeremy: Yes. So, if you don't already know what an alternative minimum tax (AMT) is, you're
probably not subject to it. If you know about the AMT, you have dealt with this before. There
aren’t a ton of people in this category, but there are some implications in this bill. That State and
Local Tax (SALT) deduction that we discussed gets added back in here. That will increase what
they calculate as your taxable income for alternative minimum tax. This one starts in 2026 and
then becomes permanent. Depending on how this plays out, there could be a few more people
being subject to AMT. We see this in pretty high earning individuals, people with incentive stock
options. Most people don't have to worry about AMT.
Jen: Alright, now here's another topic many people are curious about, which is the credits that
are expiring. It looks like this affects a couple of big things with different expiration dates. So
what are the credits that are expiring?
Jeremy: All of these are around either electric vehicles or clean energy credits. The first one is
the clean vehicle credit. So right now if you buy an EV, there are a lot of incentives, but that one
disappears September 30th, 2025, which is coming up fast, so if you've been thinking about
buying an EV, you want to get it before September 30 th of this year. Go for it. Otherwise, hold on
to your money and buy an American vehicle, because according to this bill, that's where you're
going to get the credits. Also, for the things around the house, energy efficient home
improvements, resident clean energy credits go through the end of the year. So, if you're putting
in solar panels or wind, or high efficiency appliances, that stuff still qualifies for residential clean
energy on your 2025 taxes if you buy it by the end of the year. However, starting 2026, January
1st, that one's gone. If you've been thinking about this and saying, “Hey, I know we need those
new energy efficient windows or that new appliance,” now's a good time to get it done before the
end of the year.
There is an energy efficient home credit now, typically for new builds. So if you're building a new
house and trying to get this credit, this one goes all the way through June 30th, 2026, so you do
have a little bit more time on this one. But that one is on the chopping block as well, just
extended into 2026. Otherwise, anything having to do with energy efficiency, EV, clean energy,
goes away by the end of 2025.
Jen: That's really important to note. So next up, let's talk about the credit for qualified
elementary and secondary education scholarships.
Jeremy: This one has a lot of ifs. It’s designed to start in 2027 as of now. In order for people to
get credit for this, the State in which you reside has to opt in to be on the approved list. What
this is designed for is a dollar for dollar credit of $1700 per taxpayer for a qualified elementary or
secondary education. So this one's an off-the-wall weird one to tell you the truth. I think most tax
professionals are still trying to digest this one, but they're also not in a huge hurry because it
was written into the bill that this is a 2027 thing. Anyway, it might be a new way to give to your
kids’ school and get a little bit of a tax credit on it. A lot of us have kids in elementary or high
school, so that might be a good one. We're gonna have to see how it plays out.
Jen: We've gone through several topics and it’s important to note that we're all still digesting this
bill. There are some unknowns. So what do you think is important to note when it comes to
phase-outs?
Jeremy: Just remember, pretty much all of these deductions we talked about have an income
level phase-out attached to them. And in addition to the income phase-out, most are only going
to be around for a few years. So, pay more attention to your tax planning to take advantage of
these while we can. Here at Keystone, we have tax planning software available to people who
need it. Many of our clients utilize that, and we can have those conversations about taxes when
we know what your income level is and know what your expenses are and what your financial
plan is. Then we have the ability to say, “Hey, you might be able to take advantage of this one
this year while these things are here to put you in a better situation down the road.” It makes
these next few years of tax planning a bit more important so as to take advantage while you
can.
Jen: So definitely approaching planning is pretty crucial starting from here to year end and even
the next following years to see what is applicable to your financial situation and what is not.
Jeremy: And that's really what we're here for, right? That's a lot of what we do with clients is try
to stay on top of all of this stuff, see what affects you and what doesn't. And this is an ever-
evolving landscape. The longer we do financial planning, the more we realize we have jobs
because this world is ever-changing. The rules are ever-changing. Keeping up with this is what
we're here for. We're here to help you plan and understand how this affects you.
Jen: And how it affects your future in a couple of years or five years or 10 years down the road.
Jeremy: Yeah. I hope that was a good introduction to the Big Beautiful Bill. I want to thank
everybody for tuning in. Jen, it was fun to take over Josh's podcast. Let.s do it again!
As always, anybody listening to this who has questions, feel free to reach out to us. You can
always find us at www.keystonefinancial.com. All of our contact information is on there, and
more about the team and our growing presence.
Josh: We love feedback and we'd love it if you would pass it on directly to
josh@keystonefinancial.com. Also, please stay plugged in with us, get updates on episodes
and help us promote the podcast by rating us five stars and subscribing to us at Apple
Podcasts, Spotify or your favorite podcast service.
The opinions voiced in the Wiser Financial Advisor show are for general information purposes
only and are not intended to provide specific advice or recommendations for any individual. To
determine what may be appropriate for you, consult with your attorney, accountant, financial or
tax advisor prior to investing. Investment advisory services offered through Keystone Financial
Services, an SEC registered investment advisor.