The “One Big Beautiful Bill” and Your Financial Plan
I recently took my family to Washington, D.C. and we had a fantastic time. While we were there this bill was being passed and signed into law. Here’s my take on it.
President Trump has enacted comprehensive tax and spending legislation following Congressional approval, representing a substantial 900-page bill that significantly modifies the tax code.
Tax policy plays a crucial role in financial planning, making these legislative changes immediately relevant to household finances. From market and economic standpoints, investors often express concerns about government expenditures, rising national debt, and related factors that have influenced markets over recent decades.
Given the multiple perspectives on this budget legislation and its potentially controversial nature, focusing on practical implications remains essential.
Key Provisions of the New Tax Legislation
The administration’s “One Big Beautiful Bill” extends and enhances numerous provisions from the 2017 Tax Cuts and Jobs Act that faced expiration. Notable modifications impacting Spokane, Deer Park, and Chewelah include:
Tax Structure Changes:
- TCJA tax rates and brackets become permanent, eliminating previous year-end expiration concerns
- Standard deduction rises to $15,750 for individual filers and $31,500 for joint filers
- State and local tax deduction cap increases from $10,000 to $40,000, with annual 1% growth through 2029 before reverting to $10,000 in 2030
- Senior taxpayers receive additional $6,000 deduction (income-limited) through 2028
- Child tax credit grows from $2,000 to $2,200 per child with inflation adjustments
Additional Provisions:
- Workers earning under $150,000 can deduct up to $25,000 in tip income through 2028
- Alternative minimum tax exemption becomes permanent with elevated thresholds
- Certain green energy tax credits face elimination
- Federal estate tax exemptions remain elevated, reaching $15 million for individuals and $30 million for couples in 2026. We still have Washington State’s estate tax as a concern for many of us as well as our friends and family.
Financial Planning Implications
This legislation eliminates the “tax cliff” scenario where rates could have increased substantially upon previous provision expiration. This certainty enables more confident long-term financial planning for you and your family.
The bill preserves the relatively favorable tax environment experienced in recent decades. Historical context shows current rates remain significantly below 20th century peaks, when top rates occasionally exceeded 90% during wartime.
For estate planning purposes, higher exemption limits reduce federal estate tax exposure for most families. Nevertheless, comprehensive planning for asset transfer remains important, particularly given state-level estate taxes with lower thresholds (ie. Washington, Oregon, etc.).
Economic Context and Investment Strategy
While tax changes benefit many families, broader economic considerations exist. The Congressional Budget Office projects this bill will add over $3 trillion to national debt over ten years. Federal debt currently totals $36.2 trillion, approximately $106,000 per American.
This trend continues decades of consistent government borrowing, with the last balanced federal budgets occurring 25 years ago. Most spending supports programs like Social Security, Medicare, defense, and debt service payments, which face political resistance to reduction.
From investment perspectives, elevated debt levels may influence interest rates and inflation over time. However, many feared worst-case scenarios haven’t materialized. Maintaining diversified portfolios capable of performing across various economic environments remains key.
Tax policy changes typically have limited impact on long-term investment opportunities. Markets have historically grown regardless of tax policy shifts, and the economy has demonstrated resilience across different fiscal environments. This legislation extends the current low-tax environment while providing enhanced planning certainty.
We’ll continue monitoring these developments and their impact on your financial plan. Please reach out with any questions to Deep Creek Financial Planning at 509.241.8306 or www.DeepCreekFinancialPlanning.com. We help active retirees and successful business owners in Eastern Washington, from Spokane to Chewelah, live abundantly by connecting the dots between their family goals and strategic financial planning.
The bottom line? This tax legislation provides planning certainty by extending current favorable rates and eliminating potential tax increases. While government debt concerns exist, maintaining a well-diversified investment strategy remains the best approach for long-term wealth building.