Here we go again! Another year means another tax system to navigate. This time, it’s all about HR1, officially dubbed the One Big Beautiful Bill Act. I don’t want to dive too deep into political territory, but as an advisor, my focus is really on practical implications for our clients. Sure, cutting programs like Medicaid and food assistance hits those in need hard, but it’s not usually top of mind for most advisory clients.
For the average client, there’s some good news—the bill mostly extends the 2017 tax cuts. But don’t confuse “no radical changes” with “no changes at all.” There are key adjustments that could greatly influence your tax situation, presenting both new opportunities and challenges. Let’s explore the five main points to keep in mind.
Standard deduction
The standard deduction is set to rise from $15,000 to $15,750 for singles in 2025, and from $30,000 to $31,500 for married couples filing together.
What advisors should do: Consider “bunching” itemized deductions to maximize tax benefits.
Salt deduction
The 2017 legislation capped the state and local tax deduction at $10,000. This really hurt residents in states with high income and property taxes. Starting in 2025, that limit will jump to $40,000, climbing 1% each year until 2029, before reverting to $10,000 in 2030. This change means more clients will be able to itemize their deductions. Plus, those who are itemizing could see their total depreciation rise by as much as $30,000 this year.
What advisors should do: If your client has a notably lower taxable income, think about suggesting a reduction in withholding or estimated tax payments. Or, better yet, consider this a chance to enhance their Roth IRA conversions.
Senior “bonus” deduction
Taxpayers aged 65 and above could qualify for an extra $6,000 tax credit, applicable whether they itemize or not. Individuals with an adjusted gross income (AGI) up to $75,000, or $150,000 for married couples filing jointly, can benefit. Once their income crosses those thresholds, the deduction is fully eliminated. This benefit will be in effect from 2025 to 2028.
What advisors should do: For senior clients within the income limits, strategize to lower taxable income. Couples under $150,000 AGI can see reductions of up to $13,500 or $42,000 depending on their situation. Also, consider advising on reducing withholding or estimated tax payments. And if required minimum distributions might lessen their bonus deduction benefits, think about employing eligible charity distributions to lower their AGI.
EV and Clean Energy Credits
The tax law will phase out a $7,500 tax credit for new electric vehicle (EV) purchases or leases, and a $4,000 credit for used EV buyers, which will end after September 30, 2025. It’s also removing credits for energy-efficient home improvements—like solar panels and energy-efficient windows—which will cease on or after December 31, 2025.
What advisors should do: Encourage clients to make improvements to their EVs or invest in energy-efficient homes before these credits expire.
Charitable Deduction
Non-itemizers can deduct up to $1,000 if single, or $2,000 if married. Itemizers can only deduct contributions that exceed 0.5% of their modified AGI. For instance, if the modified AGI is $100,000, they can only deduct amounts over $500. The maximum remains in place.
What advisors should do: Starting in 2025, analyzing the benefits of taking standard versus itemized deductions will become even trickier. If your client is affected by multiple aspects of the new law, like increased standard deductions or charitable contributions, now’s a good time to collaborate closely with a certified public accountant.
The Trump Tax Act introduces more modifications to tax law than what we’ve covered here. This article, while informative, is certainly not exhaustive. My purpose here is to alert you to critical tax areas that could directly impact clients. It’s crucial to grasp these nuances for effective planning, ensuring your clients are prepared for future tax years. Keep an eye out for more comprehensive guidance as these provisions come into full effect. And let’s keep striving together to provide the best for our clients.
