How the “Big Beautiful Bill” Affects Your Taxes
Overview
In this episode, Ben Hockema walks through the newly passed “Big Beautiful Bill” and what it means for individual taxpayers in 2025. This sweeping legislation—nearly 900 pages long—builds on the 2017 Tax Cuts and Jobs Act (TCJA) and includes key updates to deductions, credits, and planning opportunities.
Ben focuses on the sections most relevant to middle- and upper-middle-income families, especially clients who are working professionals or retirees navigating tax planning, charitable giving, and state tax rules.
Transcript (Edited for Readability)
Ben Hockema:
Hello, I’m Ben Hockema, founder and advisor at Illuminate Wealth Management. Today we’re talking about the new Big Beautiful Bill—what’s in it, what’s changing, and how it affects your taxes.
This bill was passed just last week, and at nearly 900 pages, there’s a lot inside it. We’ll focus on the parts that matter most to individuals and families—specifically, updates that affect personal income taxes for middle- and upper-middle-class households.
Big Picture
The Big Beautiful Bill extends most of the provisions from the 2017 Tax Cuts and Jobs Act (TCJA). These changes are retroactive to 2025, meaning they apply to income and deductions already earned this year.
Most of the current tax brackets remain in place, but there are a few key updates:
Higher standard deductions, with additional benefits for seniors.
Increased SALT cap—the state and local tax deduction limit rises from $10,000 to $40,000 (through 2029).
Estate tax clarity—step-up in basis remains intact, meaning no capital gains taxes are triggered at death.
Standard Deduction and SALT
For 2025, the standard deduction is now $15,750 for individuals and $31,500 for married couples filing jointly.
Seniors (age 65+) receive an additional $6,000 per person, though that benefit phases out once income exceeds $75,000 single / $150,000 joint.
This phase-out matters for retirees who are close to those income thresholds—especially if required minimum distributions (RMDs) or capital gains push them over the line.
The SALT deduction cap has been raised to $40,000. That’s a meaningful change for many families in higher-tax states like Illinois. However, the benefit begins to phase out above $500,000 of income.
For high-income business owners using Pass-Through Entity (PTE) payments, the PTE tax election remains a valuable tool for maintaining deductibility despite these new thresholds.
Mortgage interest remains capped at debt up to $750,000.
Charitable Giving Changes
Charitable deductions got a few notable adjustments:
Taxpayers taking the standard deduction can now still deduct up to $1,000 per person ($2,000 married) for charitable gifts.
For those who itemize, the first 0.5% of AGI in charitable giving is not deductible.
This means tax planning around giving is more valuable than ever.
Qualified Charitable Distributions (QCDs)
For retirees taking RMDs, Qualified Charitable Distributions remain one of the most efficient ways to give. QCDs lower your adjusted gross income, helping preserve the senior deduction and keeping more income out of higher brackets.
Charitable Bunching Example
Let’s say a couple earns $225,000 per year and gives $15,000 annually to charity, with another $19,000 in other itemized deductions.
Without bunching, they’d deduct about $32,875 each year.
If they “bunch” two years of giving into one—perhaps via a donor-advised fund—they could deduct about $47,875 in year one, then take the standard deduction the next year.
That’s roughly $13,000 more deductions over two years—saving about $3,000–$4,000 in taxes.
The same total charitable giving, just smarter timing.
Other Key Updates
Child Tax Credit:
Expanded benefit amounts for qualifying dependents.
“Trump Account” for Newborns:
Starting this year, families of newborns receive a $1,000 Treasury-funded investment account. Details on how to claim the funds are still being finalized, but eligibility begins in 2025.
Dependent Care FSA:
Contribution limits rise to $7,500, enhancing tax savings for daycare and related expenses.
529 Plan Expansion:
529 funds can now be used for college test prep courses (SAT, ACT, etc.)—a small but useful addition for families planning education costs.
Student Loan Changes:
Major adjustments to repayment programs, borrowing limits for graduate school, and Parent PLUS loans. If you currently have student loans—or expect to take out new ones after 2026—expect changes to repayment options and forgiveness eligibility.
Time-Sensitive Tax Opportunities
EV tax credits expire September 30, 2025—you must take possession of your electric vehicle by that date to qualify.
Clean energy home credits (for HVAC systems, insulation, and similar improvements) expire December 31, 2025.
Auto loan interest deduction now applies only to vehicles assembled in the United States, regardless of manufacturer.
Final Thoughts
The Big Beautiful Bill keeps much of the TCJA framework in place but adds several meaningful opportunities for planning—especially around charitable giving, state tax strategies, and retirement income management.
If you’re unsure how these changes affect your situation, reach out to our team. We can review your income projections, charitable plans, or deductions to help you make the most of these updates before year-end.
