The 2025 Tax Bill Explained: How the ‘One Big Beautiful Bill’ Changes Everything for Retirees and Investors

What It Means for Your Taxes, Your Wallet, and Your Future

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Taxes affect nearly every part of our financial lives – from how we earn and save to how we retire and pass our assets to the next generation. That’s why sweeping tax legislation like the new One Big Beautiful Bill deserves more than just a headline. It reshapes the rules that govern income, retirement, small business deductions, and family credits for millions of Americans.

In this post, we’ll break down the most important changes and what they mean for your wallet, your retirement plan, and your long-term financial strategy. The real story lies in understanding which changes actually move the needle for retirees, investors, and everyday families. Learn how smart planning can turn new tax rules into long-term financial advantages.

What is the One Big Beautiful Bill

Signed into law on July 4, 2025, the One Big Beautiful Bill (OBBB) spans nearly 900 pages and permanently extends many provisions from the 2017 Tax Cuts and Jobs Act. And it impacts your finances in countless ways.

At its core, the OBBB ensures stability: it locks in the lower income-tax brackets from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire in 2026

At its core, this sweeping legislation preserves and makes permanent many of the tax provisions first introduced in the 2017 Tax Cuts and Jobs Act (TCJA). But it also introduces new deductions and credits that could save taxpayers thousands – if they know how to take advantage of them.

“The real impact of this bill is that it keeps the economy stable by preventing a major increase in taxes while adding a few thoughtful incentives.” – Joel Garris

12 Ways the OBBB 2025 Tax Bill Might Impact You

1. Income tax rates: permanently locked in
2. Standard deduction: bigger and here to stay
3. Child tax credit: increased and indexed for inflation
4. Estate tax exemption: clarity and stability
5. Senior deduction: a new $6,000 break for retirees
6. No tax on tips: a win for workers
7. SALT deduction: relief for high-tax states
8. Car loan interest deduction: drive and save
9. Charitable giving: incentives for everyone
10. Business owners: more deductions, more flexibility
11. Green energy credits: use them before they’re gone
12. Above-the-line deductions: why they matter

#1. Income Tax Rates: Permanently Locked In

The single most consequential element of the law is permanence – a permanent extension of the lower income tax rates. The lower brackets introduced in 2017 – 10%, 12%, 22%, 24%, 32%, 35%, and 37% – are now written permanently into the code. Without this bill, those rates would have expired at the end of 2025, triggering one of the largest across-the-board tax hikes in decades.

Now that rates are stable, investors and retirees can make multi-year plans with confidence.

According to Tax Foundation, the 22% and 24% brackets cover income roughly between $100,000 and $400,000 for married couples – a crucial planning window. That means there’s time to perform Roth conversions, realize capital gains strategically, or accelerate retirement income while rates are still low.

What’s Staying

• Tax brackets of 10%, 12%, 22%, 24%, 32%, 35%, and 37% are now permanent
• These rates apply to inflation-adjusted income thresholds. For example, in 2025:
  • 12% kicks in at $11,925 for single filers and $23,850 for joint filers
  • 22% starts at $48,475 for singles and $96,950 for joint filers

Tax Rate	Single Filers Income	Married Couples Filing Jointly Income	Head of Household
10%	$11,925 or less	$23,850 or less	$17,000 or less
12%	Over $11,925	Over $23,850	Over $17,000
22%	Over $48,475	Over $96,950	Over $64,850
24%	Over $103,350	Over $206,700	Over $103,350
32%	Over $197,300	Over $394,600	Over $197,300
35%	Over $250,525	Over $501,050	Over $250,500
37%	Over $626,350	Over $751,600	Over $626,350

Planning Tip: with the 22% and 24% brackets covering income from $100,000 to $400,000 for married couples, this is a prime window for Roth conversions, inherited IRA distributions, or other income acceleration strategies.

A couple earning $180,000 annually can convert $40,000 from a traditional IRA to a Roth IRA without leaving the 22% bracket. That’s a long-term tax-free growth opportunity – one made possible by knowing the brackets won’t change abruptly.

“These are the same rates we’ve had since 2018. Making them permanent avoids a huge economic drag, even if it doesn’t immediately change your paycheck.” – Joel Garris

Why It Matters:

• Easier to plan Roth conversions, capital gains harvesting, and charitable gifting strategies
• Reduces anxiety about “use it” or “lose it” windows for favorabe rates
• Helps small business owners time income and expenses for consistent outcomes

#2. Standard Deduction: Bigger and Here to Stay

One of the most impactful changes was the permanent extension of the nearly doubled standard deduction first introduced in 2017, which now includes annual inflation adjustments. The standard deduction, nearly doubled under the TCJA, is now permanently enshrined in the tax code.

2025 Standard Deduction Amounts

• $15,750 for single filers
• $31,500 for married couples filing jointly
• $23,625 for heads of household

With these generations deductions, less than 10% of taxpayers are expected to itemize.

“Those are very important numbers. Over 90% of filers now use the standard deduction – itemizing has become rare.” – Zach Keister

This change simplifies tax filing for millions and reduces the need for itemizing, which has become increasingly rare.

Why It Matters:

• Simplifies filing: fewer people need to track medical receipts, mortgage interest, or property taxes
• Especially beneficial for retirees who no longer have mortgage debt or large itemized deductions
• Reduces the IRS audit risk because simpler returns leave fewer gray areas

Example:
A retired couple earning $70,000 from pensions and Social Security will likely owe minimal income tax, even with zero itemizations, thanks to the expanded deduction.

#3. Child Tax Credit: Increased and Indexed for Inflation

The Child Tax Credit rises to $2,200 per child and will now automatically adjust with inflation – a key safeguard against eroding value. With this credit made permanent and indexed for inflation, it provides more relief for families.

In 2026, the Child Tax Credit (CTC) was set to drop to $1,000 per child. Instead, the OBBB:

• Increases the credit to $2,200 for 2025
• Indexes the credit for inflation going forward

“This is a big win for families. It’s one of the most utilized credits, and now it’s even better.” – Kristin Castello

This extension avoids a cliff that would have halved it to $1,000 in 2026. This credit begins to phase out for incomes above $400,000 (joint) or $200,000 (single).

Planning Tip:
To claim the full credit, your Modified Adjusted Gross Income (MAGI), or your Adjusted Growth Income as modified by adding back in certain income items, must be:

• $400,000 or less for joint filers
• $200,000 or less for all other filers

Why It Matters:

• Families can plan multi-year budgets knowing the credit won’t suddenly shrink
• Inflation adjustments ensure real buying power – critical amid higher childcare costs
• Encourages consistent savings habits, such as channeling the credit into 529 plans

#4. Estate Tax Exemption: Clarity and Stability

The estate-tax exemption, which was set to fall from nearly $14 million to $7 million in 2026, will instead be permanently set at $15 million per person and indexed for inflation.

The OBBB instead:

• Sets a permanent base of $15 million per person starting in 2026
• Applies annual inflation adjustments thereafter

Why It Matters:

• Provides lasting certainty for family wealth transfers
• Doubles to $30 million for married couples using potability
• Simplifies planning: fewer families need complex trust or gifting strategies

“The goal isn’t only to avoid estate tax. It’s to ensure your wealth transitions on your terms.” – Joel Garris

With less than 0.1% of estates now taxable, most families can refocus their planning energy on managing income taxes, retirement withdrawals, and charitable goals.

#5. Senior Deduction: A New $6,000 Break for Retirees

While the bill stopped short of eliminating taxes on Social Security, it did introduce a Senior Deduction. The new Senior Deduction gives taxpayers aged 65 and older an additional $6,000 per person – $12,000 for a couple – for tax years 2025 through 2028.

“You don’t need to be collecting Social Security – it’s exclusively keyed on your age.” – Kristin Castello

It phases out beginning at $75,000 for singles and $150,000 for joint filers. Because it’s separate from the standard deduction, seniors can claim both. In a twist, you don’t actually need to be collecting Social Security to qualify for this, so long as you meet the age threshold.

Practical Impact:
A couple earning $60,000 primarily from Social Security and small IRA withdrawals can now take out roughly $12,000 more per year tax-free, freeing cash for medical expenses or travel.

Planning Tip:
This deduction may also eliminate filing requirements for lower-income seniors. For moderate-income retirees, it opens a short-term opportunity to convert IRA dollars to Roth IRAs at little or no tax cost before 2029.

“I had high hopes for this one. It’s an area of the tax code that truly needed reform but fell short. However, it does provide some relief.” – Christina Lamb

#6. No Tax on Tips and Overtime: Relief for Workers

In a state like Florida and particularly cities like Orlando, where tipping culture is strong, the no tax on tips provision is a major benefit. The new above-the-line deductions for tips and overtime pay aim to support hourly workers. Workers can now deduct up to $25,000 in qualified tips annually, with phase-outs starting at $150,000 MAGI for single filers and $300,00 for joint filers.

“This is huge in tourist areas such as where we are located. The Orlando area thrives on tipping culture.” – Zach Keister

For the tips, the deduction covers up to $12,500 per person ($25,000 for couples). For overtime, it applies only to the overtime premium – the “half-time” portion of time-and-a-half pay – and phases out for incomes above $150,000 single / $300,000 joint.

Impact Example:
A restaurant worker earning $60,000, including tips, could save roughly $2,500 in taxes. It’s not a windfall, but it directly rewards reported income – something long overdue for tipped employees.

“This could provide a significant saving on a tax return. For example, if you fall into the 22% tax bracket and qualify for the full $25,000 deduction, that would equate to $5,500 in tax savings.” – Christina Lamb

#7. SALT Deduction: Relief for High-Tax States

The State and Local Tax (SALT) deduction cap has been raised from $10,000 to $40,000 per return, with phase-outs starting at $500,000 MAGI. This finally provides relief to homeowners in high-tax areas.

“Taxpayers who own multiple properties or larger value homes were previously aggravated over the low $10k SALT threshold. The new $40k cap seems much more reasonable.” – Christina Lamb

Why It Matters:

• Homeowners can reclaim deductions for real estate and sales taxes that had been capped since 2018
• High-income taxpayers regain flexibility to itemize
• Strategic “bunching” – prepaying two years of property taxes in one year – can help maximize deductions in high-tax years

#8. Car-Loan Interest Deduction: Proceed with Caution

The new deduction allows up to $10,000 in car-loan interest for U.S.-assembled, new personal-use vehicles. Income limits apply – $100,000 single and $200,000 joint. But Joel cautions, “there ain’t no deduction worth borrowing $125,000 at 8% just to maximize it.”

“You must be willing to provide the VIN number on the tax return. The vehicle must have final assembly in the U.S. – but doesn’t have to have all U.S. parts.” – Zach Keister

Planning Note:

• Borrowing $50,000 at 7% interest generates about $3,500 in deductible interest, saving roughly $770 in the 22% bracket
• But this deduction is temporary – available only through 2028

Use it if it fits your financial plan – not to justify unnecessary debt.

#9. Charitable Giving: A Universal Deduction for Non-Itemizers

Starting in 2026, even taxpayers who take the standard deduction can claim a small charitable donation – $1,000 for individuals or $2,000 for joint filers.

“I really like the idea of this deduction because as itemizing has become harder, we saw a drop in charitable contributions. Hopefully this will encourage people to give more.” – Christina Lamb

Why It Matters:

• Reintroduces an incentive to give for middle-income households
• Complements Qualified Charitable Distributions (QCDs) from IRAs for retirees
• Strengthens nonprofits that rely on individual giving

According to Giving USA 2024, charitable donations fell 3.4% last year as prior deductions expired. That OBBB aims to reverse that trend.

#10. Business Owners: More Deductions, More Flexibility

For small business owners, the OBBB restores and strengthens two major benefits:

• The Qualified Business Income Deduction (QBID) rises from 20% to 23%
• 100% bonus depreciation is reinstated for assets placed in service between 2025 and 2029

“This is a big deal for small business owners. It levels the playing field and encourages investment.” – Joel Garris

Example:
A self-employed contractor earning $100,000 can deduct $23,000 of that income – saving about $5,000 in taxes. A small HVAC company that purchases $80,000 of new equipment can deduct the full amount in the same year.

Why It Matters:

• Encourages reinvestment and growth
• Simplifies depreciation schedules
• Keeps more small businesses competitive amid rising costs

#11. Green Energy Credits: Use Them Before They’re Gone

The OBBB accelerates the phase-out of clean-energy and electric-vehicle tax credits. If you’re considering solar panels or an EV purchase, 2025 may be your last chance for the full 30% credit.

“This has drastically shortened the life on these electric car and energy credits. If you’re considering taking advantage of one of them, you’ll wan to make sure to do this in 2025.” – Christina Lamb

Example:
A $20,000 solar installation completed in 2025 yields a $6,000 credit. Waiting until 2026 could cut that in half.

Planning Tip:

• Homeowners and EV buyers should act before December 31, 2025
• Check IRS Form 5695 for eligible systems and vehicles

#12. Above-the-Line Deductions: Why They Matter

Many new provisions – tips, overtime, car interest, charitable giving – are classified as above-the-line deductions, meaning they reduce your Adjusted Gross Income (AGI) and can be claimed without itemizing.

“Above-the-line-deductions help reduce taxable income whether or not you itemize. It’s a powerful tool for tax planning.” – Christina Lamb

Why It Matters:

• Lower AGI can help avoid higher Medicare Part B premiums (IRMAA surcharges)
• Reduces taxable Social Security benefits
• Keeps retirees under income thresholds for credits and deductions

Example:
A couple lowering AGI from $198,000 to $194,000 could avoid the next IRMAA tier – saving nearly $2,000 annually in Medicare premiums.

“When you understand what drives your AGI, you control your tax destiny. It’s not about one deduction – it’s about layering smart moves.” – Joel Garris

Final Thoughts.

The One Big Beautiful Bill doesn’t reinvent the tax code – it cements the framework of the past decade while refining incentives for stability, savings, and smarter investing. For retirees and investors, it offers both predictability and opportunity – a chance to align long-term strategies with known rules instead of temporary relief.

But “permanent” is a political word. Tax law evolves, and future administrations can always rewrite the rules.

That’s why now – while rates are low and deductions are clear – is the time to plan.

Ready to Take Action?

If you’re wondering how the One Big Beautiful Bill impacts your financial plan, we can help.

At Nelson Financial Planning, we offer free consultations and don’t believe in account minimums. We’re fiduciaries – meaning we’re obligated to put your best interests first, not just during tax season, every day.

“We are truly here to help in any way that we can. That’s what being a fiduciary is all about.” – Joel Garris

Schedule your consultation today to see how these new tax changes can work for you!

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