How Big, How Beautiful? The Trump Budget Bill and Your Finances

Co-Written by Thomas A. Foglia, CPA/PFS, MST and Michelle L. Wright, CPA, MST

As you may be aware, a new tax bill, often referred to as the “One Big Beautiful Bill” or “Trump Account” bill, has been recently signed into law. This legislation brings significant changes impacting individuals, businesses, and clean energy initiatives. Provided below are some 2025 changes that warrant a review of individual tax planning strategies. Note that some changes do not take effect until 2026.

1. Re-evaluate Your Standard vs. Itemized Deductions.

• • Increased Standard Deduction: The standard deduction has increased to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of households, with temporary additional increases for a few years. For many, this higher standard deduction may make itemizing less beneficial.
  • Additional Senior Deduction for both itemizers and non-itemizers: For tax years 2025 through 2028, individuals aged 65 and older can claim an additional tax deduction of up to $6,000. For married couples filing jointly, where both spouses are 65 or older, this deduction can be up to $12,000 ($6,000 per spouse).  This deduction begins to phase out for income over $75,000 and $150,000 for single and married filing joint taxpayers, respectively.
  • SALT Deduction Increase (and Phase-out): The cap on the State and Local Tax (SALT) deduction has been raised to $40,000 (or $20,000 for married filing separately) and indexed for inflation through 2029. However, it phases out for higher earners (AGI over $500,000), eventually reverting to the lower cap.
    • Planning for Itemized Deductions –  Bunching: If you typically itemize but your deductions are close to the new higher standard deduction, consider “bunching” deductible expenses (like charitable contributions, property taxes if not fully limited by SALT, or medical expenses if you meet the AGI floor) into 2025 to exceed the standard deduction in that year, then take the standard deduction in subsequent year. Toward that end, you may want to consider a donor-advised fund (DAF).
  • New Middle-Class Deductions (Temporary): Take advantage of the new deductions:
    • Temporarily make up to $25,000 of tip income deducible for individuals in traditionally and customarily tipped industries for tax years 2025 through 2028; deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).
    • Temporarily make up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation deductible for itemizers and non-itemizers for tax years 2025 through 2028; the deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).
    • Temporarily make auto loan interest deductible for itemizers and non-itemizers for new autos with final assembly in the United States for tax years 2025 through 2028; deduction limited to $10,000 and phases out at a 20 percent rate when income exceeds $100,000 for single filers and $200,000 for joint filers.
  • Charitable Contributions for Non-Itemizers:
    • The final bill reinstates and makes permanent a charitable deduction for non-itemizers for cash contributions to certain qualifying charities and raises the cap on such deductions to $1,000 ($2,000 for joint returns).

2. Optimize for Child-Related Credits.

• • Child Tax Credit (CTC) Review: The $2,000 CTC is permanent, with an increase to $2,200 (indexed for inflation) . Ensure you meet the Social Security Number (SSN) requirement for the parent, spouse (if married filing jointly), and child(ren) to claim the credit.
  • Child and Dependent Care Tax Credit (CDCTC): Understand the income thresholds and expense percentage limitations for this nonrefundable credit.
  • Adoption Tax Credit: If you’re considering adoption, note the increased maximum credit of $17,280 for 2025, which can help offset adoption expenses. Note that the new law makes $5,000 of the adoption credit refundable effective for taxable years after 2025.

3. Maximize Retirement Savings and Investment Strategies.

• • “Trump Accounts” for Newborns: If you have a child born in 2025 (or through 2028), understand the implications of these new accounts. They will be seeded with $1,000 and allow additional private contributions up to $5,000 annually, growing tax-deferred. Plan for how these accounts can complement your existing savings for your child’s future.
  • Traditional and Roth IRA Contributions: Continue to maximize your contributions to these accounts, with the 2025 limit remaining at $7,000 ($8,000 for those 50 and over).
  • 401(k)/403(b)/457 Plans: Increase your contributions to these employer-sponsored plans, with the annual limit rising to $23,500 for 2025. For those aged 50 and over, the limit is $31,000, including a $7,500 catch-up contribution.
  • Health Savings Accounts (HSAs): These accounts offer a triple tax benefit (deductible contributions, tax-free growth, tax-free withdrawals for medical expenses). Maximize contributions within the 2025 limits ($4,300 for individuals, $8,550 for families). At age 55, individuals can contribute an additional $1,000.
  • Tax-Loss Harvesting: Continue to utilize this strategy to offset capital gains with investment losses, potentially deducting up to $3,000 against ordinary income.
  • Roth Conversions: Given the permanent extension of lower individual tax rates, consider whether a Roth conversion makes sense for you, especially if you anticipate being in a higher tax bracket in retirement.

4. Adjust Withholding and Estimated Taxes.

• • W-4 Review: With significant changes to tax rates, deductions, and credits, it’s crucial to review your W-4 form with your employer to ensure appropriate payroll withholding. This can prevent overpaying taxes throughout the year or facing a large tax bill at year-end.
  • Estimated Taxes: If you have income from self-employment, investments, or other sources not subject to withholding, review your estimated tax payments to avoid underpayment penalties.

5. Consider Estate and Gift Tax Planning.

• • Increased Gift Tax Exclusion: The annual gift tax exclusion has increased to $19,000 for 2025. This allows you to gift more money without impacting your lifetime exemption.
  • Increased Estate Tax Exclusion: The basic exclusion amount for estates has increased to $13.99 million for 2025. If you have a large estate, review your estate plan with an advisor to account for this change.

6. Long-Term Financial Planning.

• • Inflation Adjustments: Be aware that many tax provisions, including brackets and deduction amounts, are subject to inflation adjustments annually.

Given the complexity and scope of these tax changes, we highly recommend a specific review with your JFS advisor. We are always here to answer any questions and discuss your investment and retirement strategies. Please let us know how we can help.

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