Lots to unpack in Big Tax Bill: Here’s how the new laws may affect you

After plenty of negotiations and narrowly passed votes, H.R. 1 (previously known as “One Big Beautiful Bill Act”), the massive tax-cut and spending legislation, became law on July 4.

You’ve likely read various reports about this sweeping set of changes that affect everything from tax deductions on some car loans to the elimination of many environmental tax credits and much more.

With limited space and no need to provide an exhaustive list of all of its features, I’ll focus on some that I think might be the most important for you:

• Expanded cap on State and Local Tax (SALT) deductions: You’ll be able to deduct up to $40,000 a year in state and local taxes if you earn less than $500,000 in 2025. That’s a 400% increase from the previous $10,000 limit. As written, the SALT limit would revert to $10,000 in 2030. But we’ve seen how hard it can be for Congress to rescind a popular tax break. What is certain is that a lot of middle-class and wealthier taxpayers will benefit from this provision … at least initially.
• Seniors (age 65+) will receive a nice gift during tax filing season: a $6,000 special deduction for the 2025-2028 tax years. This applies to anyone who uses the standard deduction as well as those who itemize their tax deductions. But it’s limited to individuals with modified adjusted gross income (MAGI) of less than $75,000 and couples with a MAGI of less than $150,000.
• Tip earners take home a big bonus: Taxpayers who earn tips will pay no tax on the first $25,000 in tips that they earn each year. This applies to income earned in 2025 through 2028.
• Car buyers will be able to deduct taxes based on interest paid on auto loans: There’s a catch though – the vehicle must have been built in the United States. This tax break phases out for individuals whose income is above $100,000 ($200,000 for couples).
• Babies get showered with a gift: Parents of children born between Jan. 1, 2025, and Dec. 31, 2028, will receive a $1,000 tax credit for opening a “Trump account,” a new type of custodial savings account. (A tax credit is much more valuable than a tax deduction because it reduces your taxes dollar for dollar.) Parents will be able to add up to $5,000 per year to the account until the child reaches age 18.
• Deductions on charitable contributions apply to everyone, whether or not they itemize their tax deductions. In a permanent provision, individuals can claim up to a $1,000 annual deduction ($2,000 for couples). 
• The tax cuts from 2017, which were set to expire at the end of 2025, have become permanent. One feature, which is significant for wealthier individuals and families, is that the estate and lifetime gift tax exemption, currently $13.99 million, will rise to $15 million for individuals and $30 million for couples in 2026. Without this change, this tax exemption would have been cut in half on Jan. 1, 2026. This exemption will be indexed to inflation for the 2026 tax year and beyond.

Some benefits have also been removed as a result of the new tax law. Here are a couple of the most notable changes:

• Millions of recipients of Medicaid and food stamps (through the Supplemental Nutrition Assistance Program, or SNAP) are expected to lose their benefits because of new work requirements. For example, parents of children age 14 and older would have to work, volunteer, take classes, or take part in job training to keep their benefits.
• Tax incentives that have encouraged consumers to move to forms of clean energy, including wind and solar energy, will disappear. As part of this modification, electric vehicle tax credits of up to $7,500 will end after September 2025. These tax credits had previously been set to last through 2032.

The Congressional Budget Office estimates that the U.S. federal deficit will grow by $3.4 trillion from 2025 to 2034 relative to the CBO’s 2025 baselines as a result of the bill’s features.

One often-overlooked aspect of legislation like H.R. 1 is the potential for mid-year tax planning opportunities. For instance, if you’re a business owner or a high-income earner, accelerating deductions or deferring income into future years could significantly impact your tax liability. Similarly, individuals nearing retirement might benefit from reviewing Roth conversion strategies now that the estate tax exemption has increased. Even small changes — like contributing to the new “Trump account” or restructuring charitable giving to maximize the universal deduction — can add up. The key is to act early and strategically.

There’s a lot to digest and plan for, even for the big, beautiful bill. With so many changes and far-reaching impacts, it would be prudent to speak with your financial advisor and tax professional before making any decisions based on this information. This article is for informational purposes only and should not be considered tax, legal, or financial advice.  

Brian R. Littlejohn, MBA, CFP, CFA is the founder of Sherwood Wealth Management, an independent, registered investment advisor (RIA) firm. He lives in Aspen and works with clients in the Roaring Fork Valley and beyond.