What You Need to Know About the Big Beautiful Bill
As you may be aware, over the weekend, Congress passed the comprehensive tax and fiscal package unofficially being dubbed the One Big Beautiful Bill. This legislation includes a wide range of tax code changes that may impact your financial picture. In an effort to preempt some questions we know you likely have and dispel rumors circulating in the media, we've reviewed the key updates and summarized some major changes you need to know about. From adjustments to retirement account rules to expanded tax credits and new deductions, here's a breakdown of the most relevant changes and how they might affect you. The chart below briefly summarizes some key individual tax changes included in the bill. |
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Other Changes to be Aware of: |
Sec. 70204. Trump Accounts: One of the headline provisions in the new legislation is the creation of so-called "Trump Accounts for Kids" - a new tax-advantaged savings vehicle designed to help families build long-term financial security for children. While similar in some ways to existing custodial 529 accounts, these accounts come with unique contribution rules, investment options, and potential tax benefits. Because of the relative novelty of these accounts, we deemed it worthy of its own explanation. In the simplest terms, these accounts are tax-deferred savings accounts funded by a one-time deposit of $1,000 from the federal government for any child born between January 1, 2025 and December 31, 2028, who is a U.S. citizen and whose parents have Social Security numbers. (If the parents are unmarried, only the parent who is filing for the account must have a Social Security number.) These "Trump Accounts" are taxably treated the same as a traditional individual retirement account, or IRA. Parents can open an account for a qualifying child at any bank or qualifying institution (including LPL Financial). If a parent does not voluntarily create an account, the government will create one when the parent files their first tax return following the birth of a child within the qualifying window. When the account is opened, the government would deposit $1,000 in seed money. In any given year, a maximum of $5,000 (subject to increase via cost of living adjustments) can be contributed to the accounts and invested in an approved, low-cost, well-diversified fund that tracks a U.S. stock index. In addition to parental contributions, employers can also contribute up to $2,500 to an employee's accounts without adding to the parents' taxable income. When the child turns 18, they can spend the money in one of four ways:
When the child turns 31, they have full access to the funds in the account and any distributions are taxed at the appropriate capital gains rate. As of now, these accounts can begin to be opened in July 2026. We plan to be fully equipped and prepared to open these accounts as soon as we are able. Social Security: There were two prevailing, though contradictory, headlines that gained traction in the days leading up to this bill's passage - one claiming that the bill would severely cut or completely eliminate Social Security benefits, and one claiming that the bill would completely eliminate all taxes on Social Security. In the end, neither provision actually made its way into the final bill. There is a provision, however, that will indirectly benefit Social Security beneficiaries. An AARP-backed provision will temporarily provide a $6,000 bonus deduction for taxpayers age 65 and up. The full deduction is available to taxpayers with a modified adjusted gross income (MAGI) of up to $75,000 for an individual filer and $150,000 for a couple filing jointly. Each spouse can take the deduction, for a total of $12,000 if both are 65+. There is a phaseout for higher earners up to $175,000 for single filers and $250,000 for couples. Taxpayers with a MAGI above that threshold will not qualify for the bonus deduction. You can claim the additional deduction whether you itemize or take the standard deduction. Medicare and Medicaid: Contrary to a lot of statements in the press, Medicare remains mostly untouched by the legislation signed into law by this bill. The bill does not reduce general Medicare benefit spending, nor does it impose cuts to hospital payments, services, or coverage levels. There is also no rollback of Medicare drug price negotiations or reductions to Medicare Part D prescription coverage caps. The only substantive change to Medicare are changes to non-citizens' eligibility to qualify for Medicare. A change to Medicaid will take effect in January 2027. Medicaid recipients ages 19 to 64 who are applying for coverage or who received coverage through the Affordable Care Act will now be required to prove that they are working, going to school, or volunteering 80 hours or more per month, or qualify for an exemption, to receive or continue to receive Medicaid benefits. Student Loans: There are some changes to the way students will borrow and repay loans as a result of the bill's passage. Beginning mid-2026, there will be two loan repayment plan choices available to new federal student loan borrowers. The standard plan will give a borrower a loan with a life-span of fixed payments, structured the same as a mortgage loan, typically between 10 and 25 years in length. The other option will be an income-based repayment plan dubbed the Repayment Assistance Plan, or RAP. In the RAP repayment plan, monthly student loan payments will vary based on annual income level, tax filing status, number of dependents, and a few other factors. The RAP will require 30 years of payments before student loan forgiveness is allowed. The bill also introduces some new limits on how much students can borrow from the federal government. Among other measures, the bill:
Final Thoughts We recognize that legislation of this scope brings both great opportunity and new complexities to navigate. While many of the changes may not take effect immediately, now is a great time to begin evaluating how they might impact your financial strategy in the years ahead. As always, we are here to help you navigate the implications whether that means revisiting your savings plan, exploring new tax-advantaged accounts, or simply staying informed as guidance is released. If you have questions about how any of these provisions apply to your situation, don't hesitate to reach out! |
