It feels unoriginal, but what kind of financial planner would I be to not even acknowledge the latest tax bill?
There is a LOT going on with the bill (remember, it’s Big), so I’m going to focus very narrowly on the items that affect my clients’ financial plans: Social Security, tax rates, and estate provisions.
Social Security
The bill does not fully eliminate federal income taxes on Social Security for everyone, but it does so for the vast majority of retirees by introducing an enhanced deduction for seniors. Here is how it works:
- The enhanced deduction is $6,000 per taxpayer over 65, which brings the standard deduction to approximately $45,000 for a married couple, allowing most seniors to receive Social Security tax-free unless they have substantial additional income from other sources.
- For a single filer receiving the average benefit (around $24,000/year), or a married couple both on Social Security with a combined $48,000, the new deduction means their taxable Social Security income will generally be fully offset by deductions, resulting in no federal tax due on those benefits.
- Wealthier retirees with higher combined incomes (above roughly $150,000 single/$300,000 married filing jointly) may still owe some tax on Social Security due to the phaseout of the enhanced deduction.
- This tax relief provision is currently set to expire after 2028 unless extended by future legislation.
Income taxes
- Permanently Larger Standard Deduction: The standard deduction is now $31,500 for married couples filing jointly and $15,750 for most other filers in 2025, indexed for inflation thereafter.
- The child tax credit is permanently raised to $2,200 per child with expanded refundability.
- No Tax on Tips and Overtime (2025-2028): A new up-to-$25,000 above-the-line deduction for qualified tips and an up-to-$12,500 ($25,000 for joint filers) deduction for overtime pay is available for those under 300,000 income for joint/$150,000 for single filers.
- Lower income tax rates from the TCJA are made permanent.
- Starting in 2026, even non-itemizers can deduct charitable contributions (up to $1,000 for singles, $2,000 for couples), while itemizers face a modest “floor” for eligible deductions.
- The State And Local Tax deduction cap rises from $10,000 to $40,000 for 2025-2029, with a 1% annual increase, benefiting many in high-tax states before the cap reverts.
- New “Trump Accounts” let families save $1,000 a year tax-free per newborn, and the bill introduces a tax deduction for interest on Made-in-America auto loans for qualifying purchases.
Estate Planning
The latest tax bill significantly increases the federal estate, gift, and generation-skipping transfer (GST) tax exemptions:
- Exemption Increase: For deaths and gifts made on or after January 1, 2026, the estate and gift tax exemption rises to $15 million per individual (up from $13.99 million in 2025). For married couples, this allows up to $30 million to pass to heirs without federal estate tax.
- Permanence: This higher exemption level, set by the bill, is made permanent and indexed for inflation going forward—eliminating the uncertainty of recent years when exemptions were periodically set to drop sharply unless new laws were passed.
- Of course, entirely NEW tax law could be passed by a future administration that will change what is being called “permanent” now.
- Tax Rate: The estate, gift, and GST tax rate on amounts exceeding the exemption remains unchanged at 40%.
For comparison, before the Tax Cuts and Jobs Act of 2017, the federal estate tax exemption was $5.49 million per individual in 2017 (and $10.98 million for a married couple). The top federal estate tax rate was 40%.
Going from $11million to $30million for a couple to pass down to heirs means MANY families with small businesses or non-Bezos assets will be able to pass those assets to the next generation much easier.
I hope this little primer has made it easier to understand how the latest tax legislation affects your everyday life!
