One Big Beautiful Bill Act Tax Implications

Hello, everybody. My name is Ty Bernicke, and I’m going to be going over One Big Beautiful Bill Act tax implications. There are a million things in this bill, but I’m just going to be going over some of the higher-level things that I think will affect many people.

Expansion of the State and Local Tax (SALT) Deduction

One of the major items out there is the state and local tax deduction, also known as SALT. The deduction has been raised from $10,000 to $40,000 annually until the year 2030, starting next year. This is applicable for people who have under $500,000 of modified adjusted gross income. So if you have under $500,000 of modified adjusted gross income, you can expect to receive some beneficial tax deductions, especially if your state and local taxes exceed the $10,000 that was previously allowed for deductions.

Additional Deductions for Seniors and Married Filers

A few other major items to consider: if you are a single individual, 65 years of age or older, and you have less than $150,000 of modified adjusted gross income, you will get an additional tax deduction. If you’re married and filing a joint tax return, you’ll get $12,000 in additional tax deductions.

Tax Relief for Social Security

The reason for these new deductions is generally to offset or negate some of the taxes that many people pay on their Social Security. This was designed as an indirect way to reduce tax liability for Social Security recipients.

Permanent Increase to Estate Tax Threshold

In addition, if you’re fortunate to have a larger estate, the estate tax threshold has been permanently increased to $15 million if you’re single, up to $30 million if you’re married. This is adjusted for inflation on an annual basis.
There has been a lot of concern among higher-net-worth clients that this law might not be made permanent and that the estate tax exemption could be reduced.
However, if you’re married and have less than $30 million, you don’t need to worry about estate taxes for the foreseeable future. If you are above that limit, there are a number of estate tax planning strategies that can help reduce estate taxes, but this law is now permanent.

Federal Debt Ceiling Raised

Another thing worth noting is that the debt ceiling with the One Big Beautiful Bill Act has been increased to $5 trillion. For those following the situation, the United States’ debt-to-GDP ratio is currently about as high as it’s ever been, and it’s projected to continue rising.

Roth IRA Conversions: A Strategic Move

If you’re worried that this higher debt-to-GDP ratio could mean higher taxes down the road, one thing you can do to address this is to convert IRAs to Roth IRAs. IRAs are subject to future taxation, but if you convert an IRA to a Roth IRA, you don’t have to worry about future taxes on the Roth IRA.

This really only makes sense if you expect to face higher tax rates in the future than you do at the time of conversion. If you can convert an IRA now at a lower tax rate than you’d pay later, it can make sense.

Roth conversions have already been recommended by many financial advisors across the country, and I believe today it’s even more promising for many people than in the past, due to the potential for increasing tax rates.

Closing Thoughts

Hopefully, I gave you a few things to think about with the One Big Beautiful Bill Act, how it might affect you, and what you can do. These are just some of the higher-level items that affect most people who are either going to retire within five years or are already retired.

If you have any questions about what I covered today and you’d like to schedule a quick call, you can click the link in the description below or go to our website at bernicke.com. Thank you.