As 2025 unfolds, U.S. taxpayers face a pivotal moment in tax policy. The House’s One Big Beautiful Bill Act (H.R. 1) and the Senate Finance Committee’s June 28 bill are reshaping the future of personal and business taxation. These reconciliation bills aim to extend, modify, or replace key provisions of the Tax Cuts and Jobs Act (TCJA), which is set to expire after this year.

For individuals, families, and business owners, understanding these changes is essential for effective financial planning. This article breaks down the most impactful provisions and offers practical insights to help you prepare.

This article is provided for informational purposes only and does not constitute legal, tax, or accounting advice. Readers should consult their own qualified tax professionals before making any tax-related decisions. While every effort has been made to ensure the accuracy of this information at the time of publication, tax laws and regulations are subject to change.

Income Tax Planning: Stability and Strategy

One of the most significant developments is the proposed permanent extension of TCJA’s individual income tax rates. Both bills maintain the current seven-bracket structure (10% to 37%) and continue inflation adjustments, offering long-term clarity for tax planning.

Additionally, the standard deduction is permanently increased, with the House bill offering temporary enhancements through 2028. The Pease limitation, which previously reduced itemized deductions for high earners, is repealed and replaced with a cap on the value of deductions—$0.35 per dollar for top-bracket taxpayers.

Planning Implications:

  • Roth conversions and income acceleration strategies may be more attractive.
  • Bracket management remains crucial for minimizing tax liability.
  • High-income earners should time deductions strategically to maximize their value.

Estate and Retirement Planning

The estate and gift tax exemption is increased to $15 million in 2026 and made permanent, providing more flexibility for wealth transfer strategies. Seniors benefit from a bonus standard deduction—up to $6,000—phased out at higher incomes. The House bill also proposes expanded Health Savings Account (HSA) eligibility and contribution limits.

Planning Implications:

  • Reassess estate plans to optimize federal and state tax benefits.
  • Consider lifetime gifting strategies to utilize the increased exemption.
  • Seniors should evaluate income timing to qualify for enhanced deductions.

Education and Family Planning

The Child Tax Credit is increased and partially refundable, with stricter Social Security number requirements. 529 plans are expanded to include homeschool and credentialing expenses, and a new tax-preferred savings vehicle—“Trump Accounts”—is introduced for children born between 2024 and 2029.

Planning Implications:

  • Use 529 plans for broader educational and professional goals.
  • Integrate Trump Accounts into long-term savings strategies.
  • Review eligibility for employer student loan assistance programs.

Business Owner Considerations

For pass-through entities, the Qualified Business Income (QBI) deduction is made permanent, with expanded phase-out thresholds. The SALT deduction cap is increased to $40,000, and excess business loss limitations are extended indefinitely.

Planning Implications:

  • Evaluate entity structure and compensation strategies to maximize QBI benefits.
  • Monitor interactions between SALT and QBI rules to manage marginal tax rates.
  • Reconsider charitable contributions through corporate vs. personal channels.

Charitable and Investment Planning

Charitable deductions face new limitations for both itemizers and non-itemizers. The House bill reinstates a partial deduction for non-itemizers, while the Senate bill introduces a higher cap for certain contributions. Opportunity Zones (OZs) are restructured, with new designations and stricter eligibility criteria beginning in 2027.

Planning Implications:

  • Front-load charitable gifts before new limitations take effect.
  • Use Donor Advised Funds to “bunch” deductions and maximize impact.
  • Explore OZ investments under the revised designation rules.

Cash Flow and Lifestyle Planning

Several provisions aim to ease the financial burden on everyday expenses. Notably, a new deduction allows up to $10,000 in interest on U.S.-assembled car loans. Mortgage interest and home equity debt rules are made permanent, and deductions for tips and overtime pay are introduced for certain occupations, subject to income limits.

Planning Implications:

  • Consider timing vehicle purchases to take advantage of the new deduction.
  • Evaluate financing strategies for non-home improvement expenses.
  • Monitor adjusted gross income (AGI) thresholds to preserve eligibility for deductions.

While the reconciliation bills are still under debate, they offer a clear direction for future tax policy. Individuals and families should begin reviewing their financial plans and preparing for strategic adjustments.

At American Pacific Tax, we’re committed to helping you navigate these changes with confidence. Contact us today to schedule a personalized tax planning session and ensure you’re ready for what’s ahead.