On July 4th, the president signed a significant new tax and spending bill into law. The text of the bill runs to almost 900 pages and affects nearly every corner of the tax code, including personal, business and estate tax rules.

Below I’ve summarized the provisions that I see as most relevant to financial planning. Especially because many of the provisions are retroactive to the beginning of 2025, we’ll be sure to address these as part of our discussions during the second half of the year, but please feel free to reach out in the meantime with specific questions.

The formal name of the law is the “One Big Beautiful Bill Act,” and it is, for the most part, positive for taxpayers. It does come at a cost, though, which I’ll address further below.

Personal income tax rates: The most significant element of the new bill is that it makes the current tax brackets permanent. Because these had been scheduled to revert in 2026 to a much higher set of rates, this should provide greater certainty as we consider strategy for the coming years.

Standard deduction: The standard deduction is essentially unchanged but will receive a bit of an increase for 2025—an additional $750 for single filers and $1,500 for those married and filing jointly—providing a small additional tax benefit for this year.

Itemized deductions: A provision that had been the subject of significant debate was the so-called SALT cap. By way of background, prior to the 2017 Tax Cuts and Jobs Act (TCJA), state and local taxes had been fully deductible against federal income taxes. But since 2018, this deduction had been capped at $10,000 for both single and married taxpayers. The new law increases the cap but in a limited way and only for a limited time.

Between 2025 and 2029, the cap will be increased from $10,000 to $40,000, but this higher cap won’t apply to everyone. A phaseout will apply to incomes between $500,000 and $600,000. Beyond $600,000, the lower cap of $10,000 will apply. This will make tax planning especially important for those with incomes in the neighborhood of that phaseout range. For better or worse, though, this will only be an issue for the next five years, after which this provision will expire.

For business owners who had been taking advantage of a pass-through entity tax (PTET) strategy as a workaround to the SALT cap, there is good news. Despite a push by some in Congress to prohibit these strategies, they will be unaffected.

Bonus standard deduction: There has been a misconception that the new law will make Social Security exempt from income tax. That is not true, but a new provision in the law offers a benefit for many Social Security recipients: A deduction of $6,000 per person will now be available to taxpayers age 65 and older. This new deduction will be on top of existing deductions, including the existing extra deduction that already applies to those 65 and up. But unfortunately, this special deduction isn’t quite as generous as it appears. It only applies for tax years 2025 through 2028, and it comes with an income cap. It will phase out as income increases above $75,000 for single filers and $150,000 for those married and filing jointly.

Qualified business income (QBI) deduction: For business owners, the new law makes the QBI deduction permanent and enhances it a bit.

Charitable giving: When it comes to charitable giving, the new law is a mix bag, providing a benefit to some but imposing a cost on others.

Taxpayers who make charitable gifts but not enough to itemize deductions will benefit under the new law. Starting next year, single filers will be able to deduct up to $1,000 of donations, and joint filers will be able to deduct up to $2,000.

A separate new provision, however, will make charitable giving a bit less tax efficient for those who itemize. Starting next year, charitable gifts will only be deductible to the extent that they exceed 0.5% of adjusted gross income. For example, if a taxpayer has income of $100,000 and contributes $2,000 to charity, the first $500 (0.5% x $100,000) will no longer be deductible. Only the remaining $1,500 can be deducted. This provision will go into effect next year, making charitable gifts relatively more valuable in 2025 than in 2026, all things being equal.

Estate tax: Starting in 2026, the estate tax lifetime exclusion was scheduled to be cut in half, from approximately $14 million per person to $7 million. While these are both big numbers, the lower threshold would have made the estate tax a consideration for many more people. Under the new rules, the lifetime exclusion will not revert and will actually increase somewhat. Beginning in 2026, the exclusion will be $15 million per person.

This should provide much greater certainty for planning purposes. That said, no law can ever be considered truly permanent. A future administration, with a politically aligned Congress, could make the rules more punitive again, and it is a real possibility. Though the estate tax provides minimal revenue to the government, it’s a political football. For that reason, I would characterize the new rules as only semi-permanent.

529 accounts: Prior to the 2017 TCJA, withdrawals from 529 accounts were permitted only for higher education. The TCJA loosened that restriction, allowing withdrawals of up to $10,000 per student per year for K-12 education. Beginning next year, this limit will be increased to $20,000. Parents will also be able to use 529 funds for a broader set of educational institutions, including vocational and certification programs.

Trump accounts: The law creates a new type of savings account for children known as “Trump accounts.” They’ll be similar to IRAs but with a few key differences. Unlike IRAs, children won’t be required to have income in order to contribute, meaning that parents could begin funding one of these accounts from the time a child is born. Employers will also be able to contribute to accounts for employees’ children without the contributions counting as income. For business owners, this opens up an interesting new employee benefit opportunity. Also, a pilot program will provide a $1,000 tax credit to parents who open a Trump account, but this credit will apply initially only to children born in 2025, 2026, 2027 and 2028.

These new accounts will come online in July 2026, and the initial contribution limit will be $5,000 per year.

Cost: These new rules are almost universally positive for taxpayers. As the saying goes, however, there is no such thing as a free lunch. The Congressional Budget Office estimates that the new rules will add $3.4 trillion to the national debt over the next 10 years. That’s on top of the existing debt load of $36 trillion, which is growing at a rate of about $2 trillion per year. Because both political parties continue to show no serious interest in addressing this issue, the result is that interest expenses will continue to consume a growing portion of the federal budget. But if a future Congress chose to get serious about this issue, there is a possibility that future tax rates could move higher. For that reason, in our planning discussions, we will continue to emphasize a multi-year outlook.

The new law contains hundreds of other provisions, but upon initial review, this is what we see as most important for financial planning purposes.