The 5 Most Important Tax Planning Changes from the Big Beautiful Bill

William Braddy III, CFP®

The Big Beautiful Bill Act has introduced significant tax changes that could reshape your retirement planning and wealth transfer strategies. While the political debates continue, the financial implications are clear – and there are meaningful opportunities to consider before these provisions potentially sunset.

This sweeping legislation affects everything from your standard deduction to estate planning limits. However, many of the rules remain unclear, both in how they’re written and how they interact with existing tax law. The key is understanding which changes matter most for your situation and taking appropriate action.

Let’s break down the five most impactful changes and what they mean for families approaching or already in retirement.

Individual Tax Changes: New Deductions and Opportunities

Higher Standard Deductions Made Permanent

The Act significantly increases standard deductions for all taxpayers, making these changes permanent rather than temporary:

Single filers: $15,750 (up from current levels)
Married filing jointly: $31,500

This permanent increase means more of your income will be sheltered from federal taxes, potentially reducing your overall tax burden and creating new planning opportunities.

The “Senior Bonus” Deduction

Perhaps the most talked-about change is the new senior bonus deduction—an additional $6,000 deduction for taxpayers aged 65 and older. However, this benefit phases out based on your modified adjusted gross income (MAGI):

Single filers: Phases out between $75,000 and $135,000
Married filing jointly: Phases out between $150,000 and $210,000

The senior bonus applies from 2025 through 2028, creating a four-year window for strategic tax planning. This temporary nature is crucial – it gives you a specific timeframe to consider Roth conversions or tax-loss harvesting before tax brackets potentially revert in 2029.

Important uncertainty: The IRS hasn’t yet clarified whether this bonus reduces your “modified AGI” for Medicare IRMAA purposes. This guidance, expected in fall 2024, could significantly impact your Medicare premium calculations.

SALT Cap Relief: Temporary but Meaningful

The state and local tax (SALT) deduction cap increases to $40,000 for tax years 2025 through 2029, with annual 1% increases through 2029. Like the senior bonus, this benefit phases out:

Single filers: Phases out between $400,000 and $500,000
Married filing jointly: Phases out between $500,000 and $600,000

After 2029, the cap reverts to $10,000 unless Congress acts.

This change particularly benefits residents of high-tax states like New York, though there’s uncertainty about whether states will “decouple” from federal tax changes. New York hasn’t decided its approach, and experts suggest responses are unlikely before 2026.

For residents of states like Tennessee (no wage tax) and Missouri (which starts with federal AGI), the impact will be immediate and automatic.

Estate Planning and Gift Tax Changes

Higher Estate and Gift Exemptions

The lifetime unified estate, gift, and generation-skipping transfer (GST) tax exemption jumps to $15 million per person – with no scheduled sunset. This represents a permanent increase that opens significant planning opportunities for families with substantial assets.

Unlike previous temporary increases, this change doesn’t have an expiration date, providing long-term certainty for estate planning strategies. Consider these planning opportunities:

Lock in current values: If you expect your assets to appreciate significantly, transferring them now at today’s values could save substantial future taxes.

Future law changes: While this exemption is permanent, future legislation could still modify these rules. Having strategies in place provides flexibility.

State-specific considerations: Some states offer unique opportunities, such as community property trusts in Tennessee or specialized inheritance tax planning in New York.

Annual Gift Exclusion Increases

The annual gift tax exclusion rises to $20,000 per recipient, up from current levels. This increase creates new opportunities for:

529 plan front-loading: You can now contribute larger amounts upfront while using multiple years of exclusions
Intra-family loans and gifts: Higher annual limits make family wealth transfer strategies more effective

Headlines about the Big Beautiful Bill often suggest that Social Security benefits are now untaxed, but this is misleading. The Act didn’t change the existing 50% and 85% inclusion rules for Social Security taxation. The only relief comes through the senior bonus deduction discussed earlier.

While, in practice, this bonus deduction will mean that many retirees Social Security benefits are effectively untaxed, the provisional income thresholds that determine Social Security taxation remain unchanged.

This means your planning around Social Security taxes should still focus on managing total income, including coordinating the senior bonus with Roth conversions to avoid Medicare IRMAA cliffs.

What This Means for Your Planning

These changes create a unique four-year window (2025-2028) for strategic tax planning. The temporary nature of some provisions – particularly the senior bonus and SALT cap relief – means you have a limited time to take advantage of these opportunities.

Consider these strategies:

Roth conversion opportunities: The combination of higher standard deductions and the senior bonus may create room for tax-efficient Roth conversions, especially if you expect tax rates to increase after 2029.

Gain harvesting: With more income sheltered by higher deductions, you might have opportunities to realize capital gains at lower tax rates.

Estate planning acceleration: The permanent increase in estate exemptions, combined with higher annual gift exclusions, may warrant revisiting your wealth transfer strategies.

Income timing: If you’re in the phase-out ranges for either the senior bonus or SALT cap relief, managing your income timing could help maximize these benefits.

The Importance of Professional Guidance

This legislation is complex, and many details remain unclear. The interaction between new provisions and existing tax law creates both opportunities and potential pitfalls. Some considerations require careful analysis of your specific situation, including:

How the senior bonus affects Medicare premiums
State-specific implications of SALT cap changes
Coordination of new provisions with existing retirement planning strategies
Estate planning strategies that take advantage of higher exemptions

The four-year window for many of these changes means decisions made now could have lasting impact on your financial security. This isn’t about chasing the latest tax strategy – it’s about understanding how these changes affect your long-term plan and making thoughtful adjustments where appropriate.