What The Wealth Retirement Podcast

The One Big Beautiful Bill: Are There New Opportunities for Seniors and Retirees? (112)

• Jonathan Bednar II, CFP • Episode 112

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Tax laws have changed dramatically with the passage of the "One Big Beautiful Bill," and your retirement planning strategy likely needs to adapt. This sweeping legislation extends several tax cuts and Jobs Act provisions while adding several powerful new deductions specifically targeting seniors and retirees.

Take a listen and to hear how these changes may affect your retirement. 

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Thanks for Listening!

Jonathan

Speaker 1:

How the One Big, beautiful Bill Changes Retirement Planning and what you Need to Know. Welcome back to the what the Wealth Retirement Podcast. I'm Jonathan Bednar, certified Financial Planner. If you're new here, this is where we cut through the noise. We bring you clear, actionable financial advice so you can retire with confidence. Today, we're going to talk about this one big, beautiful bill that was just signed into law on July 4th 2025. And this piece of legislation is surprisingly packed with several positive changes for retirees and those nearing retirement, and I'm going to break down what's in it, how it impacts you and what steps you should be considering before the end of the year. So let's get in it.

Speaker 1:

What is the one big beautiful bill? This is a tax bill that extends many of the popular provisions from the 2017 Tax Cuts and Jobs Act, while adding several new deductions and credits. Some of these changes are temporary, some are permanent, and these details really matter because they could impact your retirement income plan and your tax bill, and actually they could even impact your estate strategy. So there's a lot to impact here. I'm going to walk through probably the five or six most important things and keep this fairly simple for you. So a quick rundown. This extends the current 2017 tax credits that were pushed back or not pushed back, but were announced and pushed through Congress in 2017, under Trump's first term. Those are now permanent. So this is very big for the sunset tax sunset we were going to see towards the end of the year. That is now permanent, and so those lower tax brackets are permanent for individuals and families filing taxes today. It also keeps the higher estate and gift tax exemption in place for now. So there was talks around the gift tax, the lifetime gift tax that you can give to family. There was a lot of talk about that being cut, and this bill keeps that in place much longer. I think it's actually permanent now I need to double check that, but that is a big win for people, as they're continuing to build and accumulate wealth faster and faster. It also adds brand new deductions for seniors, tips overtime and even a new tax credit on auto loan interest, or actually a deduction not a tax credit, because there is a big difference between a tax credit and a tax deduction but a deduction on auto loan interest for some people. So that is a very big piece that was added here. And then, finally, it boosts the SALT deduction cap SALT stands for state and local taxes significantly from about $10,000 to $40,000 for a limited time. So several sweeping changes we're going to dive into a little bit more right now. So what I think are the biggest win for retirees might be and there's several of these but the senior bonus deduction.

Speaker 1:

This is probably one of the most talked about changes and if you're 65 or older, you'll get an extra above the line deduction of up to 6,000 for single filers and 12,000 for joint filers, and that applies for tax years 2025 through 2028. You don't have to itemize to get it. It's just applied to everybody's tax return who is 65 and older and it stacks on top of your standard deduction. So your current standard deduction is in place. If you are, you get an additional $6,000. If you are married, you get an additional $12,000. So for 2025 through 2028, that additional tax savings is a big deal because it essentially helps give some free tax savings just for being over 65 years old. So that's a nice win for the retirement community, really of all income levels. So that's a really big gift. As an example, we'll look at what this looks like. So, as an example, if you're a married couple, 68 and 70 years old, you already have the standard deduction, which is about $34,000. Plus, you add on this senior add-on of $12,000. In this situation, because we're talking about a married filing jointly, that makes it roughly $46,000 of income that's shielded from federal taxes, before we even talk about other credits or strategies or deductions. If you itemize, so a very big benefit.

Speaker 1:

The next thing that I want to talk about is the SALT cap, so state and local taxes. Under the original Tax Cuts and Jobs Act in 2017, the SALT cap was taxed at $10,000. So any state and local taxes that you paid was capped at that $10,000. And so a lot of places in high property tax states New Jersey, california, new York, some of those places it's real easy to get over that $10,000 pretty quickly when you add on taxes for buying a vehicle or buying a boat or some of these other things. A lot of times, those state and local taxes were maxed out pretty quickly, were maxed out pretty quickly. So the one big beautiful bill bumps that cap up to about $40,000, not about it bumps it up to $40,000. Also over the next few years. The caveat here is there is a phase out for higher income earners. So if you live in a higher tax state and even if you're in Tennessee but pay significant property taxes, this could open the door for more deductions. But again, you also may have some phase outs depending on what your income limit is. So you know it's a nice benefit but not everyone may qualify. So just you know. Kind of think about that.

Speaker 1:

One of the things people have done over the last several years is do a strategy called bunching. So what someone might do is take the standard deduction year one, year, two, they itemize and then what they would do in that itemized year is they would bunch certain deductions to get them all into one year to be more beneficial. So this may change some of the strategy and do you bunch and do you alternate years between itemizing and not itemizing. So you might want to play around with your tax advisor. You might want to play around with your tax advisor, your CPA, on that strategy to see if it still makes sense. And if it does what that looks like, it actually might make more sense this year because that number is higher. So you actually might get more bang for your buck if you do some of the bunching.

Speaker 1:

A couple of other smaller I say smaller these are very impactful for some people, but qualified tips deduction up to $25,000, qualified overtime deduction up to $12,500 for single, $25,000 for joint and then auto loan interest deduct up to $10,000. So not every retiree will benefit from these, but if you do have some part-time work or you own a business, these sort of deductions might help and play a small factor in your overall plan. I do think that auto loan interest deduction of up to $10,000 could be a benefit to the economy to to get people to go ahead and buy the car. Rates are higher now and so that may be that, coupled with just kind of the uncertainty on the market and the economy in general, may may prevent people from going out and buying some of these cars because interest rates are higher. But if you're able to deduct some of that auto loan interest, that may help give people some confidence to go out and purchase new cars, which then helps boost the economy. You've got manufacturers, you've got the dealerships that are selling these cars, you've got the companies that make all the parts and then, after they're sold, you have the companies that do the maintenance on them. So this is a big segment of the economy that has a lot of impact.

Speaker 1:

The next thing is, I guess, probably maybe some things to think about before year end. So get a tax projection done for 2025. See how some of these benefits impact you before the end of the year, and that way you can still have some time to make some decisions. Around which levers do you want to pull and knobs you want to twist in order to get the best bang for your buck when you're doing your taxes in 2026, for 2025. The other thing to think about is evaluate doing Roth conversions with lower tax brackets being extended. I personally don't think they will stay this low forever. Now it will take an act of Congress to change these. There does have to get law. We have to get both chambers to review, to agree and to sign the bill and send it up to the president for signature. But I would not take it as something that these are truly permanent forever. At some point these will probably change and so, while tax brackets are lower, it might make a lot of sense to evaluate Roth conversions and see if they make sense for you.

Speaker 1:

The other thing is review gifting and estate plan. So, because of these, high exemptions are still in place. That may change after 2028, may change beyond that. It's important to consider how you're planning from an estate planning perspective if you're over that threshold. That threshold's pretty high. I'm not looking at it exactly right now, but it's around $30 million. So if you're under that, you don't really have to worry about that now. But you do want to be mindful of when they make changes. How does it impact you? So you know, review the gifting and estate plans. You know if you need to sit back down with your estate plan attorney to review how these affect you, reach out. You know, schedule a time to do a review with them to see if there's anything you need to update and then coordinate with your CPA and your advisor. Make sure that you've got a great team that is working together in your best interests and not so focused on siloed decisions. We have great relationships with attorneys and CPAs and we would encourage you to make sure you coordinate with those people so that they have the full picture, to give you guidance and advice on your plan and not just winging it or, you know, can't make decisions because December 31st has passed. So it's really important that you do some tax planning and you make sure you coordinate with your trusted advisors.

Speaker 1:

What does this all mean for your retirement. I think the one big beautiful bill is a bill that gives us new planning opportunities without adding a lot of complexity. There are some nuances there, but it's a great way for you to take advantage and see which of these benefits are pertinent to you and how they can be most efficiently implemented to benefit your financial plan. So, whether it's reducing your taxable income in retirement or using Roth conversions more strategically, or accelerating some of these expenses and doing some bunching for tax planning purposes, these next three or four years through 2028 are really, really important and prime for proactive tax planning. I cannot harp on that enough. This is really a four-year window of significant tax planning that you should be doing. So If you are 50 and older, you're not sure how the one big beautiful bill affects your retirement plan, your financial plan. Now is the time to find out. We're helping clients right now create these tax strategies, shore up their financial plan, give them a real plan on purpose and one that is designed to take advantage of these new rules. If you want to see how this could work for you, you can email me at info at paradigmwealthpartnerscom or info at paradigmwpcom. You could also go to paradigmwealthpartalth Partners dot com and schedule a consultation.

Speaker 1:

If you found today's episode helpful, share it with a friend who's getting close to retirement or has questions. That's what this podcast is designed to do Help you understand and get a solid financial plan in place for your retirement. I hope you have a wonderful rest of your week. Be confident in your retirement. Have a wonderful day. Thanks for joining me on another episode of what the Wealth. If you enjoyed the episode today, smash that subscribe button. It helps me more than you think. Also, if you found this episode insightful and a light bulb went off, share it your friend, aunt Judy, the random guy in the office who's always talking about investments.

Speaker 1:

Wealth isn't about just the chain. It's about our choices, chances and changing our financial futures. The information in this podcast is informational in general in nature and does not take into consideration the listener's personal circumstances. This podcast is not intended to be a substitute for specific financial, legal or tax advice. You should consult the approved qualified professional prior to making a final decision. Security is offered through LPL Financial member, finra, sipc. Paradigm Wealth Partners is the other business name for Independent Advisor Alliance Investment advice offered through Independent Advisor Alliance a registered investment advisor. Independent Advisor Alliance and Paradigm Wealth Partners are separate entities from LPL Financial.