How the 2025 “Big Beautiful Bill” May Affect Your Taxes and Financial Plan

What is the “Big Beautiful Bill”?

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law – a sweeping package of tax reforms, spending cuts, and financial incentives. The legislation makes permanent many provisions from the 2017 Tax Cuts and Jobs Act (TCJA), while introducing new deductions and targeted benefits for families, workers, and retirees. It also includes significant cuts to Medicaid and other federal programs.

At Stratos Private Wealth (SPW), we’re monitoring the new law carefully to assess how it may impact clients’ financial plans, both in terms of potential opportunities and areas that may require adjustments.

Key Changes to Individual Taxes

1. Lower Tax Rates Made Permanent

The bill makes the lower individual income tax brackets first introduced in 2017 under the Tax Cuts and Jobs Act permanent (TCJA). Without this extension, those rates were set to expire at the end of 2025. Most notably, the top individual tax rate will remain at 37% rather than increasing to 39.6%. Other bracket thresholds will continue to adjust annually for inflation. Locking in these rates ensures a more predictable tax environment, allowing for more tax efficient financial planning in the long term.

2. New Deductions (2025-2028)

• Higher Standard Deduction with Charitable Add-On
  

  The OBBBA increases the standard deduction to $15,750 for individuals and $31,500 for joint filers starting in 2025, with inflation indexing going forward. Additionally, a new above-the-line charitable contribution add-on of $1,000 per taxpayer is now available, even for those who do not itemize. This offers a planning opportunity for donors seeking streamlined tax relief on their charitable giving while maintaining simplicity in their filings.

• Tip and Overtime Deduction

  Beginning in 2025, workers who receive income from tips or overtime will be eligible to deduct up to $12,500 if filing as a single taxpayer or up to $25,000 if married filing jointly. This deduction applies directly to federal taxable income and is intended to provide relief for those with variable or supplemental income streams. For example, a restaurant worker who earns $15,000 in tips during the year could potentially deduct $12,500 of that amount.

• Social Security Offset for Retirees

  Another new deduction targets retirees whose Social Security benefits are partially taxable. Taxpayers who are age 67 or older can deduct up to $6,000 (individual) or $12,000 (married filing jointly) that previously would have been taxed. This provision is temporary and will apply through 2028. It could meaningfully reduce federal tax liability for retirees living on modest retirement income.

• U.S. Auto Loan Interest

  Interest payments on loans for U.S.-manufactured vehicles will now be deductible, up to a maximum of $5,000 per year. This deduction is also set to sunset after 2028 and may create planning opportunities for clients considering a car purchase within that timeframe.

3. Expanded Child and Family Benefits

• Child Tax Credit Increase

  The Child Tax Credit has been expanded from $2,000 to $3,000 per child under the age of 18. While the credit remains partially refundable, the income thresholds for phaseout begin at $200,000 for single filing and $400,000 for those married filing jointly. This adjustment offers meaningful support for working families, particularly those with multiple dependents or limited access to other forms of tax relief.

• New Savings Vehicles for Children

  Families with children born between 2025 and 2028 may now open government-backed “Trump Accounts.” These accounts come with an initial $1,000 federal deposit and annual tax-deductible contributions up to $2,500. Funds can be used for education, training, or first-time home purchases. Donors may also benefit from expanded tax credits for contributions to scholarship organizations. This opens new conversations around coordinated education funding and intergenerational planning.

• 529 Plans and Vocational Training

  The bill expands 529 plan flexibility: funds may now be used (penalty-free) for qualified vocational training and registered apprenticeship programs. This shift accommodates families whose children are pursuing non-traditional education paths. It’s also an opportunity to reassess how 529s are used in coordination with UTMAs or trust distributions.

• Enhanced Lifetime Exemption
  

  Starting in 2026, the estate and gift tax exemption increases to $15 million per individual (or $30 million for married couples), adjusted annually for inflation. This permanently extends high exemption thresholds that were previously set to expire. Wealth transfer strategies, particularly those involving trusts or family businesses, should be reviewed in light of these favorable provisions to ensure optimal use of the expanded exemption. 
  
  

4. Changes for High Earners and Business Owners

• Increased SALT Deduction Cap

  The bill also significantly raises the cap on the State and Local Tax (SALT) deduction. Previously limited to $10,000, the cap now ranges from $30,000 to $40,000, depending on income level. This change is particularly beneficial for high earners in states like California, New York, and New Jersey, who have been disproportionately affected by the original TCJA limitation. With the higher deduction limit, many taxpayers may now be able to itemize more of their state and local taxes, reducing their overall federal tax burden.

• Section 179 Expansion

  For small business owners, the expansion of Section 179 provides an opportunity to accelerate depreciation and improve cash flow. The maximum immediate deduction for qualifying equipment and software purchases increased from $1 million to $2.5 million. This change helps reduce taxable income in the year of purchase, supporting stronger cash and encouraging reinvestment into the business.

• Pass-Through Deduction Made Permanent

  The 20% Qualified Business Income (QBI) deduction under Section 199A is now a permanent feature of the tax code. This supports continued tax savings for sole proprietors, partnerships, and S corporations.
  
  

What’s Not So Beautiful? Cuts to Safety Net Programs

While the One Big Beautiful Bill offers some tax relief for high-income earners, it also includes significant cuts to federal safety net programs. Funding for Medicaid, affordable housing, and various low-income and disability benefits will be reduced under the new law.

For families who depend on these programs, or support aging parents or loved ones with special needs, these changes could lead to added financial strain over time. Even those not directly affected may see downstream impacts in healthcare access or community resources, highlighting the importance of planning beyond just taxes.

Planning Considerations: What Should You Do Now?

• Reassess Income Timing:

  With lower rates locked in, it may make sense to accelerate income (e.g., bonuses, stock sales) or complete Roth conversions before rates possibly rise in future administrations.

• Track Tip and Overtime Income:

  If applicable, ensure this income is documented and properly reported to qualify for the deduction starting in 2025.

• Adjust Retirement Income Strategies:

  The new Social Security deduction may shift the ideal order of withdrawals or timing of IRA conversions, especially for those nearing age 67.

• Consider Vehicle and Child Tax Credit Eligibility:

  Buying a U.S.-made vehicle or reevaluating your family’s eligibility for the expanded child tax credit could yield meaningful tax savings.

• Review Education Accounts and Trusts:

  With broader 529 use and simplified trust reporting, a review of your gifting, education, and estate strategies is timely.
  
  

Final Thoughts: Opportunities to Enhance

The Big Beautiful Bill creates some households opportunities to help lower tax burden and enhance after-tax wealth, but the impact will look different depending on your income, age, and overall financial picture.

At Stratos Private Wealth, we’re already factoring these changes into client plans and tax strategies. If you’d like to understand how the new law affects you or explore ways to apply some of the new rules, we’re here to help.

Disclaimer: The information contained in this market commentary reflects the opinions of Stratos Investment Management. These opinions do not reflect the views of others and are subject to change without notice. Content in this material is intended for general information purposes only and should not be construed as specific investment advice or recommendations for any individual. Please contact your advisor with any questions or for specific recommendations regarding your own circumstances. Investing involves risks including possible loss of principal. Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets wealth management services. Investment advisory services offered through Stratos Wealth Partners, Ltd., a registered investment adviser.  Stratos Wealth Partners and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only; and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.  To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.  Investing involves risk including possible loss of principal. Some of the information contained herein has been obtained from third party sources which are reasonably believed to be reliable, but we cannot guarantee its accuracy or completeness. The information should not be regarded as a complete analysis of the subjects discussed