Lately, there has been a lot of talk about the “Big Beautiful Tax Bill” that has so far passed the House. The bill now heads to the Senate, where it will almost assuredly be changed. This week, I wanted to cover the basics that may apply to many readers since it is a very large tax proposal. I’ll start with the effects on individuals and then cover businesses.
For starters, let’s cover the overall expected effects according to the Tax Foundation. The Tax Foundation predicts that the bill is expected to increase the gross domestic product or GDP by 0.8%. GDP is the measure of all goods and services produced in the USA. While 0.8% doesn’t sound like a lot, for the world’s largest economy, 0.8% is a very big number. The effect on the national debt would equal an increase of roughly $2.6 trillion dollars or $1.7 trillion when factoring in economic growth and other factors. It is assumed that approximately 62% of US taxpayers would be prevented from incurring a tax increase.
For individuals, it would:
- Extend the current tax brackets for everyone except the top bracket, leaving room for a possible tax increase on the top taxpayers
- Boost the standard deduction by $2000 for joint filers and $1500 for single filers until 2028
- Make the State and Local Tax or SALT deduction permanent and increase it from $10,000 to $40,000 but phase it back down for single taxpayers with a modified adjusted gross income over $250,000 and joint tax filers over $500,000
- Make the child tax credit permanent and raise it from $2000, up to $2500 until 2028
- Temporarily make auto loan interest deductible for autos with final assembly in the U.S. until 2028 limited to $10,000 but phased out for taxpayers making over $100,000 single or $200,000 joint. The phaseout will be $2000 for every $1000 you make over those limits.
- Make tip income tax-deductible through 2028
- Make overtime income tax-deductible through 2028 on the overtime portion only
- Seniors would be allowed an additional $4,000 standard deduction through 2028, which is subject to a 4% phaseout for above a modified adjusted gross income of $75,000 for single filers and $150,000 for joint filers
For businesses, it would:
- Make the Sect. 199A pass-through deduction permanent while increasing the deduction from 20% to 23%
- Temporarily restore the 100% bonus depreciation through 2029
- Temporarily restore the immediate expensing of domestic research and development expenses
- Temporarily reinstate the EBITDA-based limitation on business net interest deductions from 2025 through 2029
- Temporarily provide 100% expensing of qualifying structures in manufacturing, extraction, and agriculture sectors for which construction begins before the end of 2028 and placed in service date occurs before the end of 2032
- Lastly, for estates, it will increase the estate and gift tax exemption to an inflation indexed $15,000,000 in 2026.
While this bill will almost certainly raise the deficit, it will produce some offset based on economic expansion. Perhaps some of these costs can be offset by proposed tariffs. However, I don’t like to count on that as tariffs can be adjusted in an instant, as we have recently seen, and are therefore too difficult to accurately quantify.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
