The 5 Things You NEED to Know About In The One Big Beautiful Bill

0:00Brian Preston:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

0:45Brian Preston:Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. the one big beautiful bill was signed into law on july 4th of 2025 it keeps some old stuff add some new stuff and we're going to be walking you through all of it today brian i am so excited about this because we love helping folks decipher what policy changes mean for their money so that really they can focus on what matters most to them we'll break this bill down in five key areas highlighting what's changing and in true money guy fashion, practical steps you can take to prepare.

1:26With that, let's jump right in.

1:34Brian Preston:So there were a lot of changes in this bill. And really, some of the changes weren't so much that something changed, but that it was this realization that things weren't actually going to change the way that they were supposed to. It's probably easier if we just let people see exactly. And let's start off with tax rates, deductions, and credits. So one of the very first changes, and this is probably the one that's the most impactful across the board, is that tax rates were set to go back to the pre-2017 levels. And instead of them reverting back to the pre-levels, the current levels were locked in.

2:08Brian Preston:So tax brackets were slated to be 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. And now, under this law change, which now just locks in where they were temporarily, new tax rates are going to be 10, 12, 22, 24, 32, 35, and then a top bracket of 37%. Well, that's what, look, the thing about this is with legislation, a lot of times with tax policy, they do what's called sunsetting, whereas it means that these tax changes are temporary. what this tax bill did is it basically locked in the temporary and turned it into as permanent as things can be in Washington meaning that until somebody votes and comes up with a new bill this is the tax rates and for most of you what this means is is that starting next year it was going to revert back to where it was so your taxes were probably going to go up three to four percent this now locks it in so you just don't have the change and it makes it permanent for the future and there were some other of those temporary changes they made permanent And again, one of the ones that's probably going to be the most impactful to most Americans was the standard deduction.

3:19Brian Preston:It made permanent at these new elevated levels with even adding a little temporary boost from 2025 to 2028. There's going to be an extra$1 ,000 for single filers or head of household, an extra$2 ,000 for joint filers. So the standard deduction is going to be$15 ,750 for single filers and$31 ,500 for married filing jointly. And this is one for simplicity is better here. And the fact that if you think about, I've been doing taxes since the 90s. And the whole decision, do you take the standard deduction or do you automize? We've now gotten to a place because of where the standard deduction is. It's so high now.

3:5790 % of people are taking the standard deduction. So this would have been a big change. I know it's got a temporary boost in there, but now at least does lock in that standard deduction where it's basically twice of what it was pre-tax laws in 2016 and before.

4:13Brian Preston:And then another thing that is going to change as it relates to standard deduction is there is going to be an additional deduction for seniors. There's going to be a temporary$6 ,000 additional deduction for those that are 65 and older, but this one does have some phase-out limits. If your adjusted gross income is over$75 ,000 as an individual or$150 ,000 married filing jointly, you're going to begin phasing out of this additional$6 ,000 deduction. And by the way, it's$6 ,000 for an individual,$12 ,000 for a couple. But no, it's important to know. So if you're a married couple, 65 plus, this is going to, in the temporary, it's not permanent, but it is going to provide some relief there.

4:52Brian Preston:Another change that we saw in the tax legislation was to the child tax credit. Right now, the child tax credit was$2 ,000 per qualifying child. That got locked in, and it's actually going to increase to$2 ,200 starting in 2026. This credit itself is composed of a$1 ,500 refundable portion, which means even if you do not pay tax into the system, up to$1 ,400 of that credit can be refunded to you. And there's going to be a$500 credit for other dependents, which are still going to be subject, both of these, to eligibility requirements as well as income phase outlets. This is, once again, another one of those things where it's much to do about nothing because this made it permanent.

5:32But a lot of people, especially for people in the messy middle, if the child tax credit reverted back to where it was, you were going to see a pretty big change in your taxes. But because this is now just codifying or making it permanent, we get to keep, a lot of you in the messy middle, we get to keep that child tax credit.

5:48Brian Preston:And then one of the things that you and I talked about, Brian, we saw, there is going to be an adjustment to charitable contributions. Normally, charitable contributions are an itemized deduction on your tax return, but there is a little sweetener for those who are charitably minded that there's now going to be an above-the-line front-page deduction for charitable contributions. Yeah, and this is, look, I get it. Charity is not something, if you look at the average American, if you look at the stats, people aren't as generous as you would like to think. But I know if you look at our ground rules and you look at what I've written in Millionaire Mission, we find that generosity is very rewarding.

6:24It's one of our ground rules. And I like the fact that now, at least whether you itemize or you just take the standard deduction, this is making it above the line. So$1 ,000 for individuals,$2 ,000 for couples will be deductible when you give to charity. That's from a generosity standpoint, I think that's a good thing.

6:45Brian Preston:So those are some of the tax rate changes, the deduction changes. The question that people really have is, okay, well, who does this impact or how does this actually impact us? And well, as it relates to those changes, it pretty much hits everyone. Every tax filer in this country will be affected just simply in the fact that rates were locked in instead of reverting back to the old rates. So we're no longer going to see tax rates return to those pre-TCJA Tax Cuts and Jobs Act levels. From a financial planner's perspective, we were already having to think about things we were going to have to do for clients to adjust for the income tax changes, estate tax changes, standard deductions.

7:26It was going to be a lot of planning. This just meant that now the status quo stayed, which from a planning perspective make things a little bit easier.

7:34Brian Preston:And then for messy middle households, and that's those that have income somewhere between like$50 ,000 to$150 ,000, the permanent lower rates on the tax rates coupled with the higher standard deduction could result in tax savings on average somewhere around$500 to$2 ,000 per year. Again, depending on your unique situation, then obviously there are some additional tax savings as well for those who get the child tax care credit boost. Yeah. And I will say the one that probably the biggest wins is the seniors and retirees because no surprise there, they vote. And so the political class typically does write a lot of policies that benefit the retirees.

8:19And you see seniors with these big tax savings, they didn't make social security tax free We'll talk about that more in a minute, but they definitely did throw a nod towards senior citizens by giving them that$6 ,000 for individuals,$12 ,000 sweetener for retirees.

8:38Brian Preston:So then the question was, okay, well, what do you need to do about it? Well, make sure when you go to file your taxes that you're taking full advantage of all applicable deductions and credits that you qualify for. There are some things that are changing in the tax code. And so just as with most things in the financial world, the more prepared you can be, the better records you can keep, the better likelihood you have of making sure you're taking advantage of whatever tax opportunities may present themselves, but also avoiding any tax pitfalls that may have come because of this legislation. Pay attention and review phase outs too, because you've heard every one of these, or I shouldn't say everyone, but the majority of these things do have phase outs based upon your income.

9:19So as you make more money, you do need to pay attention to these things, whether it's the credits, whether it's the deductions, pay attention to where your income is and how that interacts with these updates.

9:28Brian Preston:And then this last one, this may be a little controversial for financial mutants, but anytime there are significant and major tax changes, it may not be crazy to think about hiring a tax professional, at least, and even if it's not for like every year moving forward, at least for the first year to understand, okay, what are the things that changed? How are those things going to impact my personal tax return? And how do I make everything as completed the way that it's supposed to be? Again, first year of policy changes are always a little unique and a little hairy getting used to the new policy.

9:59Brian Preston:So a tax preparer, tax professional may be a solid addition to your financial life moving forward. All right, Bo, let's transition into actual policy changes. What's the saying, lions, bears, oh my. Lions, tigers, and bears, oh my. Instead, we have tips, overtime, and salt, oh my. That was good. Stick to the notes, Brian. He's going to take this on the road. So what changed? Well, one of the things that changed is there's now a new deduction for$25 ,000 in qualified tip income from federal income taxes for those who are paid or compensated through tips. Now, these tips are still going to be reported for payroll taxes, and you'll get a refund when you file.

10:46Brian Preston:And this is subject to certain income phase outs. But for those who are compensated this way, this will be a little bit of a tax reprieve if you fall into that category. Phase outs are pretty high. $150 ,000 for single individuals,$300 ,000 if you're filing a joint tax return. So, you know, you remember when politics was being talked in campaign trail, well, it was taxes are no longer, tips are going to no longer be taxed. This is the nod towards that. It's not completely they're not taxed. They just basically came up with a deduction that up to$25 ,000 would be, you know, come down to not being taxable.

11:20Brian Preston:And it is important to note that this is a temporary thing. This is going to last from year 2025 to 2028. And in that same temporary vein, there's also going to be a new deduction, same time period 2025 to 2028 for federal income tax on overtime pay up to$12 ,500 for singles or$25 ,000 for joint filers. And again, the same phase outs apply for the overtime pay as it does for the tip deduction. Yeah, it's back to these are temporary things. They're really kind of going back to things that were said during the campaign and they made a nod towards making$25 ,000 of each of these things deductible if you met certain criteria.

12:01Brian Preston:Now, one of the things I feel like, at least in my world, I felt I got the most press that was the most talked about that had the most attention on it was what was going to happen for itemized deductors with their state and local income taxes. How was that going to be effective? And there was indeed a change for those who are itemizers and pay state and local income taxes. Well, look, we've been around for a while. So you can remember when the original tax bill was passed in 2017. If you lived in a high tax state, this was rough because you went from being able to deduct all of your state income taxes to where now it was capped at$10 ,000.

12:36And you quickly, if you paid property taxes, that was included. If you paid state taxes, that was included. $10 ,000 just didn't go that far. So this has tried to try to correct that to a degree by raising that cap on taxes to$40 ,000 if your adjusted gross income is under$500 ,000 for married couples.

12:58Brian Preston:Yeah, I mean, we're going to talk about in a moment who this affects and how you ought to be thinking about it. Before we do that, there were some pieces of confusion both in the tax bill and then in the days following the tax bill that we want to make sure that we clear up because there were sort of two things that got a whole lot of press right after it was signed into law. And one of them was, okay, what's going to be happening with Social Security? And then another one was some information went out that, oh, maybe Roth IRAs and backdoor Roth IRAs were going to be impacted. Well, this is why we always have to be careful when you cover stuff prematurely.

13:32Remember, this bill was signed into law on July 4th, where on July 3rd, the Social Security Administration sent out an email suggesting that federal income taxes on Social Security benefits would be eliminated.

13:43Brian Preston:And if you get this email from the Social Security Administration, you're thinking, oh, this must be legit and accurate and right. Well, now, once the legislation was signed into law on July 4th, it became apparent that, look, there is a nod towards seniors with the$6 ,000 for individuals,$12 ,000 for couples. So that will wipe out a lot of taxability in Social Security. But Social Security is still taxable. So we would put this to clear up confusion. This was a false statement or a premature statement that needed to be clarified. And then the second one, I remember we were, I went out there and as soon as the legislation passed, I was like, let's go see what other content creators are doing.

14:18And look, I know we're all out there trying to get the data in front of the public as fast as possible because there's a curiosity and you're trying to get the information. But unfortunately, some of the preliminary stuff was just straight up wrong. And this is a big one because when I saw it, I was like, what? Because I was like, is that in there? I immediately started doing my own research. So Roth and backdoor Roth changes. These things have been on the bubble with some of the proposed legislation in the last few years where if you're not aware, Roth IRA contributions have an income threshold, but there is a pretty easy threshold because of Roth conversions, not having income caps on them, that if you have the right account structure, you can make a non-deductible contribution to a traditional IRA and then convert it into a Roth IRA.

15:09So that essentially gets around the income thresholds with Roth IRAs. And then there's even, I won't even go into it, but there's what's called a mega backdoor Roth conversion strategy if your retirement plan is structured the right way with after-tax contributions. Well, a lot of content that was being created said that this legislation was doing away with backdoor Roths, with mega backdoor Roths. And we just want to go ahead and clarify for you guys. We looked into it. This is not a true statement. There have been legislation proposals that have targeted these things, but this legislation, it did not happen.

15:45So you can still do your Roth backdoor conversions and you will be okay.

15:51Brian Preston:And so when we think about these policy changes, the question goes, okay, well, who does this impact and how does it impact? And well, obviously it's going to impact anyone who's part, who part of their compensation is paid through tips. If they fall into the income thresholds, there will be an additional deduction there. It's going to impact overtime workers. Those who qualify for the overtime, they're going to get a deduction. And then if you're a taxpayer that lives in a high-tax state, whether that be high property taxes or high income taxes, this is likely going to affect you because more of those taxes will now be deductible on your return than they were previously assuming you fall within the appropriate income threshold.

16:29And now let's talk about what you need to do. Look, if you have any tip income, this is probably the biggest, if we're trying to clarify, because remember, tip income is just not going to be taxable. No. That's not right. They've just put a deduction on it. So this is why it's on you now to track this because as Bo has already covered, this is still going to be subject to payroll tax or self-employment taxes, whatever, however you file your taxes. But it's also going to be on you now to make sure that you can meticulously report this accurately on your tax return.

17:00Brian Preston:And then if you are an overtime worker, you want to make sure you check your FLSA exemption status and tax applicability. Is this something that I qualify for? Or do I fall into this group of workers? Is this a deduction that I can take advantage of? And I think, you know, earlier I said that only 10 % of people now itemize. 90 % take the standard deduction. I do think raising that salt limit from$10 ,000 to$40 ,000, you will have more people who live in high-tax states probably now itemizing because you're going to need to analyze, hey, I need to compare what the standard deduction is versus itemizing.

17:35You're going to see more people fall into that category, so see if you're one of them.

17:39Brian Preston:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

18:25Brian Preston:Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. All right, Brian, there were, in addition to the policy changes and the rate changes, There were some other changes inside the legislation that kind of affect the way that we look at future financial planning. As we're planning on making decisions in the future, there are some things in here that affect that. And one of those things where they slightly, to a small degree, changed the rules for 529 plans. Yeah, I mean, 529s.

18:57Can we say these things, they just get so much love. Because when they first came on the scene, they were just for college savings. But over the years, we've added trade schools. We've added where you can, if you have extra money, you can turn it into Roth contributions. Well, now, you know, in a few years ago, they made it to where you could do K through 12 contributions or payments for private school up to$10 ,000. Well, this, the legislation changed it to where now you can expand that to$20 ,000.

19:26Brian Preston:So that's going to be for folks that are using 529s for primary education. It's going to be a pretty big benefit or at least a pretty big deal that's worth assessing. That's one thing that's going to affect children that you are saving for, for college or for primary education. But there was another change in the legislation that's going to affect kids and it's going to affect them at an even younger age. And these are the Trump accounts, which are a new custodial savings accounts for any U.S. citizen or resident children that are born between January 1st, 2026 and December 31st, 2028. Essentially, if your child is born inside of that window, there's a special account that's going to be open and they're going to be eligible and able to take advantage of.

20:09So the way this is going to work is the government, just during this limited window, January 1st of 2026 through December 31st of 2028, they're going to put$1 ,000 into these accounts. Now, it's a little gray on how it's going to be invested, but all preliminary indication is these are going to be low-cost index funds. I'm waiting to get clarification as more details come out. But it is very interesting that the government's going to put$1 ,000 at birth, and then you're going to be able to allow to make annual after-tax contributions up to$5 ,000.

20:41Brian Preston:These accounts are there, but there are some restrictions in terms of when and how they can ultimately be used. But it's still for us. It was fun to say, because we've been talking about this for years, and we've even had school teachers who have used this as a teachable exercise. If you go to moneyguy.com slash resources, we have the wealth multiplier. And we've been telling people, they're always shocked, that for a baby, you don't have to put much money to turn them into a future millionaire. And I thought it was for illustrative purposes, education-wise. It's crazy. And this is the power of compounding growth, that$1 ,000 has the opportunity to potentially become$650 ,000 at retirement.