Your Guide To The Big, Beautiful Bill

Here is a summary of the big, beautiful bill and how it is intended to help the economy and your finances.
Five Items That Did Not Change

1. Individual Income Tax Rates and Brackets (Core Structure): While the bill makes permanent the lower individual income tax rates and brackets from the 2017 TCJA (which were set to expire), it does not introduce new, higher, or lower core tax rates beyond making the existing ones permanent. The individual rates (e.g., 10%, 12%, 22%, 24%, 32%, 35%, 37%) remain as they have been.
2. Corporate Tax Rate: The corporate tax rate remains at 21%.
3. Personal Capital Gains Tax Rates: The bill does not alter the current capital gains tax rates. It stays the same at 0%, 15%, and 20% for long term capital gains based on your income level.
4. Estate and Gift Tax Exemption Levels: The bill makes permanent the increased estate and lifetime gift tax exemption levels that were set under the 2017 Tax Cuts and Jobs Act (TCJA). For 2026, this is projected to be around $15 million for single filers and $30 million for joint filers, indexed for inflation.
5. Section 1031 Like-Kind Exchanges for Real Estate: The bill makes no changes to the rules for Section 1031 like-kind exchanges for real estate. This allows real estate investors to continue to defer capital gains taxes when they exchange one investment property for another, preserving a long-standing tax deferral strategy.

Retirees

1. New Senior Deduction

• A significant new provision is a temporary additional deduction of up to $6,000 for taxpayers aged 65 and older.
• This deduction is available for single filers with a modified adjusted gross income (MAGI) of up to $75,000 and for married couples filing jointly with a MAGI of up to $150,000.
• If both spouses are 65 or older, they can each claim the deduction, for a total of up to $12,000.
• This deduction can be claimed even if seniors itemize their deductions, and it adds to the existing higher standard deduction for those over 65.
• Goal: The stated goal is to put more money back into the pockets of low- and middle-income seniors, helping them afford the cost of living.

2. Effective Reduction/Elimination of Federal Income Tax on Social Security Benefits for Many

• While the bill does not directly eliminate the federal income tax on Social Security benefits (which is subject to complex rules and the Byrd Rule in Congress), the new senior deduction, combined with other deductions and the existing standard deduction, means that a large percentage of Social Security beneficiaries will effectively pay no federal income tax on their benefits.
• The Social Security Administration (SSA) and the White House’s Council of Economic Advisers estimate that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits under the new law, because their deductions will exceed their taxable benefits.
• Clarification: It’s important to understand this is achieved through deductions that reduce overall taxable income, rather than a direct repeal of the tax on Social Security benefits themselves. The underlying tax rules for Social Security benefits remain, but the new deductions will lower the taxable income for many seniors to below the threshold where those benefits would be taxed.

3. Increased Standard Deduction (Made Permanent)

• The bill makes the significantly increased standard deduction (from the 2017 tax cuts) permanent and further enhances it with an extra year of inflation adjustment and additional bonus amounts for all filers.
• Impact on seniors: Many seniors take the standard deduction, and a higher standard deduction directly reduces their taxable income. The combination of the general increased standard deduction and the new “bonus” senior deduction provides substantial tax relief for many.

4. Permanent Tax Cuts

• The permanency of the individual income tax cuts from 2017 means that tax rates will not revert to higher levels, providing long-term certainty and potentially lower tax liabilities for seniors who have other sources of income (e.g., pensions, investments, part-time work).

5. Continued Ability to Contribute to Health Savings Accounts (HSAs)

• The bill ensures that individuals participating in Medicare Part A who are still working and enrolled in a high-deductible healthcare plan (HDHP) will continue to be eligible to contribute to an HSA.
• Benefit: This provides an additional tax-advantaged savings vehicle specifically for healthcare expenses in retirement, which can be a major cost for seniors.

Investors

1. Permanent Tax Cuts for Businesses and Individuals

• Corporate Tax Rate: The bill maintains a globally competitive corporate tax rate (currently 21%) which proponents argue is crucial for encouraging companies to invest, create jobs, and grow their businesses in the U.S.
• Individual Income Tax Rates: Making the lower individual tax rates from the 2017 tax cuts permanent means investors will keep more of their capital gains, dividends, and other investment income that falls into these brackets.
• Qualified Business Income (QBI) Deduction (Section 199A): The bill makes the 20% QBI deduction for pass-through businesses (like S-corps, partnerships, and sole proprietorships) permanent and expands it to 23%. This is a significant benefit for many business owners who are often also investors in their own companies or other ventures. It directly lowers the effective tax rate on their business income.

2. Accelerated Investment Incentives

• 100% Bonus Depreciation (Permanent): This is perhaps one of the biggest wins for investors, especially those in capital-intensive industries or real estate. The bill permanently reinstates the ability for businesses to immediately deduct the full cost of eligible new and used business property (like machinery, equipment, and certain property improvements) in the year it’s placed in service. This significantly improves cash flow and reduces the upfront tax burden for new investments.
• Immediate Expensing of Domestic Research & Development (R&D) Costs (Permanent): The bill restores the ability to immediately deduct R&D expenses for U.S.-based research. This is a crucial incentive for companies that invest heavily in innovation and new product development, encouraging more R&D to stay within the U.S.
• Increased Section 179 Expensing: The cap for Section 179 expensing is increased to $2.5 million with higher phase-out thresholds, allowing small and medium-sized businesses (including many investor-owned ventures) to deduct more qualified property immediately.
• Bonus Depreciation for Manufacturing QPP: New bonus depreciation specifically for “Qualified Production Property” aims to further incentivize domestic manufacturing and supply chain investments.

3. Real Estate and Property Investors:

• Preservation of Section 1031 Like-Kind Exchanges: The bill explicitly makes no changes to the 1031 exchange rules for real estate. This allows real estate investors to continue to defer capital gains taxes when they sell one investment property and reinvest the proceeds into a similar property, which is a powerful tool for scaling portfolios.
• Business Interest Deduction: The bill preserves the deductibility of interest expense on real property trades or businesses, which is important for investors who use leverage (mortgages, loans) for their properties.
• Opportunity Zones (Permanent Extension): The program, which offers tax benefits for investing in economically distressed communities, is permanently extended with some changes. This continues to incentivize investment into these areas, which can include real estate development.
• Low-Income Housing Tax Credit (LIHTC) Expansion: While focused on affordable housing, the permanent increase and relaxation of rules for LIHTC creates more investment opportunities in this space, often attracting large institutional and private equity investors due to the tax credits offered.
• Increased SALT Deduction Cap (Temporary): For individual investors who also own homes, the increased SALT deduction cap to $40,000 (for five years) can reduce their personal tax liability, freeing up capital for other investments.

4. Sector-Specific Incentives

• Defense Industrial Base: A substantial $100 billion investment in the defense industrial base will likely create significant opportunities for investors in defense contractors, technology, and related industries.
• Semiconductor Manufacturing: The bill proposes increasing tax credits for eligible semiconductor firms building plants in the U.S. from 25% to 35%. This is a direct incentive for investors in the chip manufacturing sector.
• Coal and Mining: The bill includes provisions like reducing coal royalty rates and authorizing mining on federal lands, which could encourage investment in the traditional energy sector.

Savers

1. Tax Cuts to Free Up More Money for Savings

• Permanent Individual Tax Rate Cuts: By making the lower individual income tax rates permanent, the bill ensures that people keep more of their earned income. This means a larger take-home paycheck for many, which theoretically provides more discretionary income that can be directed towards retirement savings accounts like 401(k)s, IRAs, or other investment vehicles.
• Higher Standard Deduction (Made Permanent and Enhanced): The bill permanently increases the standard deduction and adds further enhancements. For those who don’t itemize, a higher standard deduction reduces their taxable income, leaving more money available to save for retirement.
• Tax Relief for Specific Groups:
  • • New Tax Breaks for Tipped Workers and Overtime Pay: Deductions for qualified tip income and overtime pay can increase the take-home pay for many hourly workers. This increased disposable income can be channeled into retirement savings.
    • New Senior Deduction (Temporary): For those aged 65 and older, a temporary additional deduction of up to $6,000 ($12,000 for couples) can significantly reduce their taxable income, allowing them to retain more of their retirement income or other earnings. This helps ensure that more of their existing funds are available for their retirement years.

2. Preservation of Tax-Advantaged Retirement Accounts

• Protects 401(k)s and IRAs: A key aspect of the bill, as highlighted by financial industry groups, is that it preserves the current tax treatment of voluntary retirement accounts like 401(k)s and IRAs. This means that contributions to traditional 401(k)s and IRAs remain tax-deductible (or pre-tax), and growth within these accounts continues to be tax-deferred until withdrawal in retirement. Roth accounts also retain their tax-free withdrawal status in retirement. This provides certainty for long-term retirement planning.

3. New Savings Vehicles and Expanded Options

• “Trump Accounts” for Newborns (as IRAs): The bill creates a new type of investment account, referred to as “Trump Accounts,” which are structured as individual retirement accounts (IRAs) under IRC 408(a).
  • • Initial Seed Money: Newborn American citizens born between January 1, 2025, and December 31, 2028, will receive a $1,000 federal contribution to start these accounts.
    • Annual Contribution Limit: These accounts have an annual contribution limit of $5,000.
    • Employer Contributions Allowed: Importantly, the bill explicitly states that employer contributions are permitted to these “Trump Accounts” (up to $2,500 annually for employees or their dependents on a tax-free basis), allowing them to function somewhat like a retirement savings vehicle from birth.
    • Investment Restrictions: Investments are generally restricted to mutual funds or exchange-traded funds (ETFs) that track qualified indexes, without leverage, and with low fees (under 0.1%).
    • Tax Treatment: Investments grow tax-deferred, like traditional IRAs, but distributions before age 18 are prohibited. At age 18 or older, distributions are subject to capital gains tax (if not used for specific qualified expenses).
    • Goal: This initiative aims to provide a long-term, tax-advantaged savings vehicle for children’s future, which can directly contribute to their financial security and potentially their retirement, given the long investment horizon.

4. Expanded Health Savings Accounts (HSAs)

• The bill expands access and utilization of HSAs, allowing more individuals to be eligible for and contribute to these accounts.
• HSAs are powerful retirement savings vehicles because they offer a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. For those who save diligently, HSAs can effectively act as a supplemental retirement account, especially given that healthcare costs are a significant expense in retirement.
• Specifically, the bill revives and makes permanent first-dollar telehealth coverage for HDHPs, includes all Bronze and Catastrophic plans available on the Exchange as HDHPs (making more people eligible for HSAs), and allows Direct Primary Care arrangements to be HSA-compatible.

Families and Kids

Potential Benefits/Additions (largely tax-related)

• Increased Child Tax Credit: The bill permanently increases the maximum Child Tax Credit (CTC) to $2,200 per child (from a projected $1,000 if no action was taken). This is designed to provide more tax relief for qualifying families.
• “Trump Accounts” for Newborns: A notable new provision in the bill states that every newborn American baby will receive a $1,000 contribution to a private investment account. This is intended to help support the child’s future, with the accounts open to additional contributions from family, friends, and others, and becoming available to the child for education, skills training, starting a business, or building a family when they turn 18.
• Enhanced Adoption Tax Credit: The bill enhances the existing adoption tax credit and indexes it for inflation, aiming to help more families afford the costs of adoption.
• Enhanced Child and Dependent Care Tax Credit (CDCTC): The bill expands access to this credit, which helps families with childcare expenses.
• Enhanced Employer-Provided Child Care Credit: This credit, which incentivizes employers to offer childcare benefits, is enhanced.
• Expansion of 529 Education Savings Accounts: The bill expands the allowable uses of 529 accounts to include K-12 education expenses, giving families more flexibility in saving for their children’s schooling.

American Cars

Deductible Car Loan Interest for American-Made Vehicles

• New Deduction: The bill introduces a new, temporary tax deduction for interest paid on auto loans. This is a notable change, as personal auto loan interest has generally not been tax-deductible for most consumers in the past.
• “Buy American” Component: A key condition for this deduction is that the vehicle must have undergone final assembly in the United States. This directly ties the tax benefit to supporting American manufacturing and aligns with the administration’s “America First” agenda.
• Cap and Phase-Out: The deduction is capped at up to $10,000 in interest payments annually. It also phases out for higher-income individuals, specifically for single taxpayers with a modified adjusted gross income (MAGI) over $100,000 and joint filers over $200,000. The deduction tapers off by $200 for every $1,000 of additional income.
• Temporary Nature: This deduction is temporary, generally applying for tax years 2025 through 2028.
• Scope: It applies to new on-road vehicles with at least two wheels and a gross vehicle weight rating (GVWR) of less than 14,000 pounds. It does not apply to leases, fleet sales, or commercial vehicles not used for personal purposes.
• Retroactive: The deduction is retroactive to January 1, 2025

New Home Buyers and Owners

1. Increased State and Local Tax (SALT) Deduction Cap

• This is one of the most significant changes for homeowners, especially in high-tax states. The bill quadruples the cap on the SALT deduction from $10,000 to $40,000 per household for five years (2025-2029). There’s a phase-out for higher incomes starting over $500,000.
• Impact on new home purchases: For buyers in areas with high property taxes and state income taxes, this larger deduction can significantly reduce their overall federal tax burden, making homeownership in those areas more financially attractive. This could potentially increase demand in high-tax, high-cost markets.

2. Permanent Mortgage Insurance Deduction

• The bill makes the deduction for mortgage insurance premiums (PMI, FHA MIP, VA funding fees, and USDA guarantee fees) permanent. This deduction had previously expired.
• Impact on new home purchases: This is a benefit for borrowers who make smaller down payments (typically less than 20%), as they often pay mortgage insurance. Making this deduction permanent reduces the effective cost of these loans, potentially making homeownership more accessible for those who can’t afford a large down payment.

3. Permanent $750,000 Cap on Mortgage Interest Deduction

• The bill makes permanent the current cap on the mortgage interest deduction at $750,000 of acquisition debt ($375,000 for single filers). It does not expand or shrink this limit.
• Impact on new home purchases: While not a new benefit, making this permanent provides certainty for borrowers in planning their finances for new home purchases or refinances, particularly in higher-priced markets.

4. Expansion of the Low-Income Housing Tax Credit (LIHTC)

• The bill permanently increases 9% LIHTC allocations by 12.5% and reduces the bond financing requirement for 4% LIHTCs from 50% to 25%.
• Impact on new home purchases (indirect): While LIHTC directly supports the creation of affordable rental housing, an increase in affordable rental supply can indirectly affect the broader housing market. By providing more affordable rental options, it could potentially ease some competition in the entry-level homebuyer market, as fewer people may be “forced” into buying due to a lack of affordable rentals.

5. Boosting Opportunity Zones

• The bill establishes a permanent policy for Opportunity Zones (OZs) that creates a recurring 10-year designation period and makes changes to eligibility rules.
• Impact on new home purchases (indirect/investor-driven): Opportunity Zones offer tax incentives for investments in designated low-income areas. While primarily aimed at community redevelopment and business, this could stimulate investment in new residential developments within OZs, potentially increasing housing supply in those specific areas over time, including some new home construction.

6. Restoration of 100% Bonus Depreciation and Section 179 Expensing (for builders/investors)

• While not directly for homebuyers, the permanent restoration of 100% bonus depreciation and increased Section 179 expensing caps can benefit homebuilders and real estate investors. This allows them to immediately deduct the full cost of certain capital investments (like equipment and some property improvements for new construction).
• Impact on new home purchases (indirect): This could incentivize more construction and development of new homes by making it more financially attractive for builders and developers, potentially contributing to an increased supply of new housing over time.

Sources

Search / Google Gemini – key provisions of the big, beautiful bill: https://gemini.google.com/app/928e24c4c0c63e45