Women's Money Wisdom

Episode 280: One Big, Beautiful Bill: What the OB3 Tax Law Means for Your Money

• Melissa Joy, CFP® • Season 1 • Episode 280

Share episode

In this special solo episode, Melissa Joy, CFP®, CDFA, breaks down the newly passed One Big, Beautiful Bill Act—yes, that’s really the name! 

Signed into law on July 4th, this sweeping piece of legislation (affectionately nicknamed “OB3”) will impact everything from your tax brackets to your charitable deductions, and much more in between. 

Whether you’re a retiree, parent, small business owner, or high earner, Melissa walks through what’s changing, what’s staying, and what you need to know to navigate the financial road ahead.

⚖️ Key Topics Covered:

  • 🧾 Tax Brackets & Deductions: 2017 rates are now made “permanent,” with small tweaks and no sunset provisions—yet.
  • 👵🏽 Seniors Win Big: A new $6,000 deduction and reduced taxation on Social Security (but only for four years…for now).
  • 👶🏽 Families with Kids: Increased child tax credit and the introduction of a new “Trump Account” for minors.
  • 🏠 Homeowners & Itemizers: Mortgage interest deduction remains capped at $750K—but now includes mortgage insurance premiums.
  • 💸 SALTs Revived: The state and local tax deduction cap is increased to $40,000 for many, offering potential relief for homeowners in high-tax states.
  • 🍽️ Tipped & Hourly Workers: Temporary deductions for tips and overtime income, subject to income thresholds.
  • 🚗 New Car Loan Deduction: But only for U.S.-assembled vehicles purchased after 2024 and under strict income limits.
  • 🌱 Clean Energy Credits: Act fast—many are phasing out earlier than expected.
  • 🏛️ Estate & AMT Revisions: Estate tax exemptions rise to $15M per person in 2026, and AMT thresholds shift downward.
  • 👩🏽‍💼 Small Business Owners: Expanded access to deductions like Section 179, QBI (199A), family leave credits, and retirement plan incentives.
  • 🎓 Student Loans & 529s: Parent PLUS loans capped; 529 plans expanded for apprenticeships, therapy, and some non-degree programs.



📬 Resources Mentioned:

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show.

Speaker 1:

Welcome back to the Women's Money Wisdom Podcast. We are going to get needy and we're going to talk, have a conversation that I think affects any of you who are US citizens paying US taxes. We're going to talk about the One Big, beautiful Bill Act yes, that is the name and I'm going to tell you a lot of things that you should be looking out for, just so you understand how you could benefit or be affected by the new legislation. I'm mainly looking at money matters and I'm really focusing mostly on tax changes, but I'll have a few miscellaneous items along the way. But I hope you listen in because this is, you know, late and breaking news. The bill was just signed into law, july 4th, and I really couldn't do as much pre-work of just like pre-recording a podcast of what's coming, because the negotiations were down to the wire as to what would be included in the bill, and so you know, we really just didn't even know until the bill was signed into law. We've got an actual piece of legislation and this is going to provide clarity likely for the next four years, but at least through midterm elections in terms of what we've got and I think it will last longer. A lot of the bill is actually an extenuation of changes that had occurred in 2017 through the Tax Cuts and Jobs Act, and, as I'm mentioning that name, let me just start by talking a little bit about what's in a name. So there have been some key financial pieces of legislation over the last, let's say, 10 years, and it's really helpful for me to refer to them by name. So, first of all, I mentioned the new act's official name is One Big, beautiful Bill Act, and I referred to it in the blog post I recently wrote, which will be in show notes. It was nine and a half pages in Word, so a long blog post that has a lot of the details I'll be discussing today as OBBB, because I just need a shorter name as I have to retype this for years.

Speaker 1:

Looking back, the Tax Cuts and Jobs Act, which was passed in 2017 and really went into action in 2018 for the most part. Sometimes I refer to that as the TCJA. And then we had the SECURE Act SECURE Act 2.0. We also had the CARES Act during COVID, and the Inflation Reduction Act was kind of an escalation of the war, of like saying how good our bill is, like we're going to fight inflation. That was a Biden piece of the legislation and now I think there's an escalation in the name war once again, with you know kind of editorializing and saying one big, beautiful bill, I would recommend that we all start calling it OB3. I just think that has a nice ring to it and then I have less to type.

Speaker 1:

But anyway, let's get into the actual piece of legislation. The first thing to consider is that this new piece of legislation, for the most part, really firms up the tax brackets that were codified in 2017, but then had what's called a sunset, so they were not permanent legislation. So there were tax brackets that were lower than taxes had been. Are a 10% rate, a 12% rate? I should say a 12% rate, a 22% rate, a 24% rate, a 32% rate, 35, and 37. So those are the rates and they become permanent. There's a little bit of a wiggle in the lower brackets with this new piece of legislation, but I mean, it's like you know, the 20s, hundreds of dollars for those people in those brackets. So anyway, these are codified and now they're called permanent. Now we know these aren't permanent. I would be willing to bet that in 10 or 15 years there's some new tax regime or maybe a few, but there is no like triggering mechanism so that these rates are going to expire.

Speaker 1:

Life was set up in the Tax Cuts and Jobs Act, where everything was pretty much set to kind of roll away, for the most part at the end of this year. That's what created a sense of urgency and action, partially in terms of this bill. And so now we're moving into permanent, which really means until things change, based on legislation for now. So we know, you know kind of for planning purposes, what we can plan for until things change. And then again the standard deduction to there's a slightly higher standard deduction coming in for the new legislation starting in 2026, slightly higher, and then those will be continued to be modified based on inflation. Okay, so moving along. I'm going to keep moving quickly and you can reference my blog, which also has references to other, more detailed articles.

Speaker 1:

There's a new deduction for seniors, and this. There was a campaign promise by President Trump that said that there wouldn't be Social Security for senior citizens, and there's not an actual like removal of federal taxes from Social Security in this legislation. That's not what's happened, but in current day previous law about two-thirds of Americans did not pay taxes on Social Security and one-third of Americans paid taxes on 85% of their Social Security income. That's going to be reduced further with this new law. Estimates say that about 91% of Americans will not pay taxes, but there is phase out, and let me just explain how this is going to work. So, for Social Security, there is a new deduction for senior citizens, and so those are people ages 65 and later, and for people who have attained those ages, you will get a deduction on your taxes oh, I need to put this into my article of about $6,000. So I need to put that extra detail into the article Now.

Speaker 1:

Keep in mind, though and this is something that hasn't been necessarily highlighted is that when you hit certain income levels based on your modified adjusted gross income, often referred to as MAGI and I don't need you to know the equation, just know that there's an income level you need to pay attention to. If you're single, if you earn more than $75,000 in this year's when you report your taxes, or if you're in more than $150,000, which, believe it or not, many seniors do, because of both pension income as well as their required minimum distributions, distributions from their retirement accounts then they can phase out of their ability to contribute, and the full phase out happens when you hit $125,000 of income for single or $250,000 for joint. So this isn't a full, one-for-one reduction in Social Security taxes, but for many people who are claiming Social Security, it will be a significant reduction and will make a big difference. And then, furthermore, for these people, you don't have to be claiming Social Security to receive the deduction. So for those of you who may consider waiting until age 70, that is not something where you don't get a benefit because you haven't claimed Social Security.

Speaker 1:

Now, also of note, this is part of this bill that is not permanent. It actually has a sunset. So this will be enacted for the time of President Trump's presidency 2025, 2026, 2027, 2028. And then, unless there's new legislation although there is often new legislation that keeps things going that have been put into place unless there's new legislation, then seniors taxes will be going up after four years, so that's kind of a triggering mechanism. I'm sure it will be a campaign promise or conversation. And also the reason that these things often sunset is because you're dealing with how do you pay for this legislation, and I think everyone can agree the things that are included in this bill are not fully paid for with cuts made elsewhere. So it's a really expensive bill when it comes to debt and deficits and that's why often certain things are sunsetted. Certainly that was why there were sunsets in the past.

Speaker 1:

Okay, so there's also we've covered seniors but there's also some considerations for those who have minor children. The child tax credit is being slightly increased to $2,200 per child and the phase-out is continuing to be at a very high amount between $400 for married filing jointly or $200,000 if not married filing jointly where it starts to phase out. So people who have more children are going to have an impact of paying less in taxes and that is made permanent. Also, there's a new type of account. These were initially being kind of floated as being called the MAGA account, but that changed during all the process of negotiation and legislation and instead we have a new account called the Trump account. So the Trump account is going to be for minor children. It kind of works like an IRA Money can be put in before kids are 18 and then it can be used for a variety of factors, including school or starting a business, buying a house. It gets taken out like an IRA, so it actually is income to kids when it's taken out. I'm not a huge fan of one more account because, as a person who has to have knowledge about all of these accounts, we've got a lot of accounts and accounts that have small amounts that you can kind of put in, in this case, $5,000 per year, when we already have 529 accounts and also uniform trust to minor accounts for kids. You know that's just one more type of account to keep track of. But if you are having children this year and beyond this account for a few years, that just like we're talking about the senior accounts between 2025 and 2028, will fund $1,000 per child as what's being called a pilot program for these new Trump accounts. So there's a couple things in the bill. Definitely for people who have children who are minors Moving right along, there's a lot of changes to itemized and miscellaneous deductions.

Speaker 1:

You know, I know we're getting in the weeds here, and in the past I've told you in other conversations about taxes, a lot of people do not itemize because when we kind of switched over to this regime in 2018, you know, your standard deduction is kind of what you get as a discount on your taxes just right off the bat, just for being a taxpayer and filing your taxes, and in order to get your itemized deductions you have to have more deductions than that standard deduction. And so we've kind of made permanent the standard deductions. But some rules are changing for the itemized deductions. So first of all, um, the Pease Amendment, which reduced eligibility for itemizing for higher earners, is permanently repealed. That's a niche conversation, probably more for financial planners than CPAs. Also, some miscellaneous itemized deductions, including fees for financial planners or paying for tax preparation fees on reimbursed expenses when you're an employee. Those also are permanently gone. They were set to come back in perhaps after the tax cuts and jobs act sunsetted.

Speaker 1:

Now the biggie here on itemized deductions. The reason that more people are going to be falling in is twofold. First of all, we've made permanent now the mortgage interest deduction at $750,000. So the mortgage interest deduction is capped. It used to be kind of unlimited and now there are more restrictions. So you can't just go and take out a big home equity line to go on a trip to Europe or pay for your kid's college and deduct. You have to either buy a house or do home improvements. But we did add mortgage insurance premiums and, as you know, as more and more people buy houses after interest rates have gone higher, then those who qualify for these deductions because you're paying more and more interest on your mortgage are going to be piling up and going to be getting you closer to kind of the areas where you may be able to deduct.

Speaker 1:

And to keep it fresh, the standard deduction is $31,500 or $1,550 if you're single, $31,500 if you're married and then $23,625 if you're a head of household. So if you're a single person and you own a home that you bought more recently, you only have to have mortgage interest. That's more than $15,750, which I know sounds like a ton of money, but it's an amount of money that many of you are likely paying in interest for a home, and then you know it's fair game to itemize likely paying an interest for a home. And then you know it's fair game to itemize. And that one thing I would note when I ran these numbers. So a lot of things in our tax legislation nowadays are indexed for inflation. You know you get a bigger standard deduction every year based on inflation. You get changes in other areas, like you can put more money into your retirement accounts based on inflation, but that number is staying put for the $750,000. And I ran back the numbers that $750,000 cap was put in in 2018. And if you inflated money from $750,000 in 2018, you would actually have $959,700 in 2025. While that inflation has been so high when we used to be, you know, comfortable with much lower inflation. But that you know kind of benefit and deduction is getting smaller in terms of as the dollar, you know kind of depreciates in value. So that's definitely something to keep in mind. Is it's kind of fleeting because it's not going to be increasing, but they did add the ability for you to add in if you have MIP or mortgage insurance premiums. Those also can count, which couldn't count in the past.

Speaker 1:

Finally, for those of you who are charitable givers, which is something that I love it's noteworthy that there's going to be, first of all, in order to itemize. You need, you know, often some other things in play unless you're a really big charitable giver. But there's a new reduction in the amount that you can deduct based on a half percent of adjusted gross income. So if you had income of $100,000, the first $500 would not be deductible on itemizing. So just something to keep in mind. But there's a biggie when it comes to the ability to itemize. It's a state and local tax deduction. So when you combine that mortgage interest that you're paying plus state and local tax deduction for some taxpayers, you're going to be floating back into that place where you're able to itemize.

Speaker 1:

The big deal here and this was a lot of it's an expensive part of the legislation. It was a lot of like, you know, kind of at juggernauts within the GOP as they were trying to figure out how to pass this bill is that you can deduct up to $40,000 in terms of your income or your property taxes, your state and local taxes. If you're somebody who doesn't have a state income tax, your state sales taxes may also count for your return. But again, if you made a million dollars last year, you're not getting that $40,000 deduction. Noteworthy, it used to be $10,000. It used to be a $10,000 limit. But now we're going to a regime where, if you made less than $500,000 for a married family, or $250,000 if you're filing single, then you're looking at the opportunity to deduct up to $40,000 of taxes. And again you may be saying, well, I don't know how does somebody pay that much in taxes? But this does include property taxes, which are getting higher and higher, and it also includes income taxes. So, depending on the state you live in, it may or may not benefit you. That's why it was so popular for coastal states that have higher tax rates.

Speaker 1:

But this is legislation that stays in place only until 2029. And also big. But once you hit half a million of income married or $250,000 of income. But once you hit half a million of income married, or $250,000 of income if you're single then you start to phase out and you go back down to a lower range until you hit $600,000 where you're phased out. So new regime, new rules. They're temporary, they'll last for five years, ok, so now there's a whole new set of deductions that kind of fit in. They're being treated like the senior deduction that I mentioned earlier, which is also being floated as a no tax on Social Security, even though exactly no taxes, because you do still pay your FICA taxes and perhaps state taxes when it comes to tips.

Speaker 1:

But if you're a normal tipping population so this is not clearly identified in the legislation but, like I can't start reporting my income as tips as a financial planner. But if you're in a qualified, you know kind of job category which is supposed to be clarified by the government in short order, then you can deduct up to $25,000, subject to income limitations. So if you are reporting income that's higher, you're not going to have that opportunity $300,000 for married filing jointly and $150,000 if it's single. And this will sunset if not, you know, if not kind of re-triggered through legislation in 2028. There's a lot to determine. I'm sure some people will be motivated to kind of shuffle their income into tips. But you've got to be able to disseminate on, for example, your pay stub, what part is regular income and what part is tips. If I were a server I'd be checking with my restaurant to see if they have the ability to kind of break these things out. Also, you know you still do owe FICA taxes. So if things are going under the table, you know that's, you know something to think about where you're not getting that deduction but you're also not reporting the income. So moving along. Also, no taxes on overtime, and again, this isn't for everybody, so it needs to be kind of standard overtime. So if you're not in a class of labor that receives overtime, it's not counting for you. You can't recharacterize your income to you know be overtime. Also, though, there are income limits, so things start to phase out for $300,000 if you're married, $150,000 if you're a single filer, and fully phases out at $550,000 and $275,000. And the max deduction is $25,000.

Speaker 1:

And so this legislation too, it's temporary. It's during Trump's term, so it'll be there until 2028. I should say I'm primarily focusing on married filing jointly, single filers and also heads of household. If you're married filing separately, then there's a lot of limitations to what you can do with some of this legislation. So just keep that in mind. You're kind of your own separate class, but there's fewer people that file that way, so I'm not primarily focusing on it.

Speaker 1:

So if you do not itemize but you are charitably inclined, great news you will be able to take a deduction if you're paying money to charities in 2025 and beyond the amount of actually. This doesn't start. It is not in effect until next year, so I should say 2026. The amount of deduction will be $2,000 if you're married, filing jointly, and $1,000 for everybody else, so there's a little extra incentive to be charitable. I should note, if you're doing qualified charitable distributions, those don't count. You get your tax break elsewhere.

Speaker 1:

Now there's also new deduction for car loan interest and again, just as I've been talking about before, this is only for people who are making under certain income limits. It starts to phase out at $200,000 married and $100,000 for single, and then fully phases out at $250,000 and $150,000. And there's a lot of rules on here in terms of what types of auto loans. First of all, you can't have bought a car in the past previous, prior to 2025, and you get a deduction on your car loan interest and, by the way, this is interest, not the full payment. Second, it needs to be a new car. It can't be a lease. It also needs to have final assembly in the United States. So I'm sure dealerships will be noting when these are car loans are eligible. And keep in mind, if you're making half a million dollars, you're not going to be eligible for this new tax break, but it is beneficial as the price of loans goes higher and higher. And keep in mind, for this set of four loans plus the senior loan, you don't need to itemize. These are their own separate set that have a set of rules that aren't about itemizing. They're their own kind of separate sets of deductions, and it'll be interesting to see how they're going to kind of change the tax forms, I'm assuming, in order to do this.

Speaker 1:

Okay, so what else is in the legislation? Well, many of you may have participated in getting clean energy credits If you, you know, had an electric vehicle and put plugins in your house, you got solar panels or you bought an electric or energy efficient vehicle, and all of these are moving up in terms of their phase out. 2032 was a year that was kind of earmarked for a lot of phase out of clean energy credits, but those are all accelerating and they're accelerating anywhere between 2025, 2026, 2027. Just know, if you were planning to get one of these types of credits, you need to act soon in some cases, as soon as next month, and in my blog I have more details about when things are changing, but not a lot of incentives in terms of the taxes, in order to make you know kind of investments in clean energy, types of changes when it comes to your vehicle or your home.

Speaker 1:

Now here's some considerations that are primarily for the highest net worth individuals and very high earners. We're talking north of half a million dollars. First, the alternative, minimum tax, which is a pesky tax that you have to pay if you make more. It's basically kind of a test when you're in a high income bracket, but before the Tax Cuts and Jobs Act was affecting more and more people because it wasn't really linked to inflation. Well, that is staying at higher levels, but it's kind of going back down to where we started in 2018 legislation. So the more intrusive AMT is going to hit you when you have income over a million dollars for married filing jointly, or half a million for singles. It had been creeping up because of inflation adjustment, but it was scheduled to sunset inflation adjustment, but it was scheduled to sunset so it's going to come down, if you were planning this year, from $1.2 million $1.25 for married down to $1 million and from $626 single down to half a million. So this is something to keep in mind if you're in that top, top bracket.

Speaker 1:

The people that get impacted by this very frequently are if you maybe worked for a startup and had incentivized stock options and the company hit it big. We've worked with clients like this. You can get trapped in the AMT based on that. You know extraordinary opportunity or windfall pretty easily. So that's the time we see alternative minimum tax most frequently.

Speaker 1:

Another area that is really now only touching the highest net worth people is estate taxes. So when I started my career in 1998, more than 25 years ago at this point the estate tax would hit anyone over $625,000 in terms of their estate. So the estate tax was real and frequent. But nowadays we're looking at an estate tax exemption that's at $13.99 million and that's per person. So if you're a married couple you can double that because there's portability between the two.

Speaker 1:

A lot of people who are in the estate planning realm or CPAs or financial planners really were focused, depending on who won the election, hey, the estate tax rate could sunset and go back down in the like five to six million dollar range. I was a little more skeptical than that. It just isn't something that people understand or really are highly focused on. So it seemed to be an upward and an upward trend. But now we're going even further up. So we're there's not going to be a sunset. It's not reverting back to, like I said, the five to seven million dollar range per person. Now in 2026, we're going to get about a seven percent bump and it's going to be 1515 million per individual if it's a married couple. So you're really not hitting the estate tax realm until the second death in a married couple with an estate of more than $30 million and so during years.

Speaker 1:

With this much higher estate tax exemption, there are considerations for gifting generationally or out of your taxable estate that only apply to the highest net worth individuals. But some of you may be listening. We definitely know families who are in this range where higher level estate planning to avoid estate taxes would be appropriate. There's also a bunch of considerations for business owners, but some of these may affect you if you're also working in a small business. So there's a section. 179 involves accelerated depreciation for small businesses. This is now permanent deduction, which can be significant for businesses that are basically depreciating their equipment right away instead of doing it over time, for an immediate tax break. And same for something that works in conjunction with 179, which is called a bonus depreciation if you kind of spill over your limits on the 179. I'm not going to spend more time on that, but know that this is just making it a little bit easier for small business owners to get deductions.

Speaker 1:

More significantly, in the world of venture capital and startups, there's something called QSBS, which is Qualified Small Business Stock, which can make it extremely lucrative in terms of taxes and what you get to keep when you sell a startup or kind of a growth-oriented business. This is in law in order to encourage people to start businesses that will be growthy for America, and we're getting even bigger in terms of the amount of assets that could be in this type of stock, from $50 million to $75 million with a phase-in that happens quicker for the time you have that stock. Again, this is super niche and small, but if you're someone that this would be appropriate for, it's a big, big deal in terms of the tax savings. So I don't want to fail to mention it. More broadly, though, almost any business owner, depending on their income and their type of business, may be eligible or many are eligible for the Section 199A, which is also known as the Qualified Business Income Deduction.

Speaker 1:

This often we see for small business owners, even if you just have a small LLC, and that is becoming permanently extended and includes inflation indexing, so it will continue to grow higher and depending on what type of business you're in, and then some miscellaneous additional things that may impact business owners but also employees of small businesses, include a permanent incentive to provide family and medical leave for paid family leave tax credit. This was something that I'm embarrassed to say I wasn't even aware of as a small business owner. At our firm we have paid family leave. We had two maternity leaves last year, we're going to have one this year and there's actually a credit for your taxes for that up to 25% of that leave if it's part of your policy before the employee leaves, and it's been expanded to also include paying for short-term disability insurance premiums to also make that a way to be eligible. So this is great news and if you're a small business that has this, let your owner know if they're offering it. Let your owner know if they're offering it and you might. If you're trying to negotiate for maternity leave for everyone or fraternity, you might mention that this is an opportunity for your small business owner employer. Also, employers can permanently pay $5,250 per year toward employee student loans without including it in their income as a benefit. There's excess business loss Limitations have been made permanent. There's a workaround for that state and local tax deduction for people who are business owners, called the pass-through entity tax, where you can actually pay some of your state and local taxes through your business. So this is something to keep in mind. And there's also incentives for charitable giving and child care incentives, as well as startup credits for establishing a retirement plan, if you're in a business that doesn't have one, are increased and made permanent, which is great news. So here's some additional changes that may impact your money, which I'm sure we'll be talking about over time.

Speaker 1:

I know I have put in a lot, but here's my last few bullet points. This, during this legislation, is definitely going to increase, as I mentioned, debt and deficits. One of the things that is puts debt front and center is the debt ceiling, which needs to be renegotiated and increased legislatively periodically. Renegotiated and increased legislatively periodically. This is anticipated that it would, because the debt ceiling was also increased to now $5 trillion. This is anticipated to not be an issue until 2028. Medicaid and food stamps are, snap benefits are being reduced, there's increased work requirements and there's also increased verification process that may be more difficult to navigate and manage when you think about. Well, who's that going to impact? It's not directly cutting out seniors who use Medicaid for long-term care and nursing needs when they run out of assets. But certainly it's diminishing kind of the system and the services that's going to be providing that and certainly we're most concerned about health care networks in more rural areas. And you know, as there are those charitable incentives sprinkled throughout the plans, I know I've made extra donations to food banks because federal grants and funding for local food insecurity are significant and used across the country in all 50 states.

Speaker 1:

529s great news have more uses and more flexibility. Now you can use 529s for apprenticeships, tutoring therapy for certain disabilities, for some homeschooling, and you can use 529s for apprenticeships, tutoring therapy for certain disabilities, for some homeschooling, and you can pay back up to $15,000 of student loan principal repayment per beneficiary. Now I will say like if you've got money in 529s, instead of paying towards student loans, the best bet is to not take the student loans to begin with and write the tuition checks through the 529s. But this is good news. The 529 accounts continue to be extremely flexible. To use an example, becoming a CFP is typically a certificate program, although there are also degree programs for it. So with these new rules you could use your 529 account to get your professional credentials for something like the Cert financial planner designation.

Speaker 1:

There's also, though, changes to student loans that are going to make it increasingly difficult to pay for college. Parent PLUS loans are going to be capped, with a $20,000 annual limit and up to $65,000 per student. Parent PLUS loans we don't like anyway, but there's also just like not a lot of good ways, especially as interest rates have gone higher, to pay for college loans. We don't like anyway, but there's also just like not a lot of good ways, especially as interest rates have gone higher, to pay for college if you don't have the funds or the cash flow. So this is becoming increasingly difficult. Those changes are going to take effect next summer, and also Pell Grants are going to be this is good news are going to be expanded for non-degree programs, but grad PLUS are going to be expanded for non-degree programs, but grad plus loans are going away altogether as of next summer. Health savings account contribution limits are increasing and more of Affordable Care Act plans are now eligible, including catastrophic plans as well as bronze plans, and then there are new reporting and compliance requirements for those that own digital assets and cryptocurrencies.

Speaker 1:

As I look at the aggregate of this law, I first know I use software so for my clients I can upload your 2024 tax return, talk to you about what your taxes are going to be this year in terms of your income and then show you before and after before the legislation and after. And the differences in taxes are anywhere from the hundreds of dollars to, in some cases, many thousands of dollars, especially getting into those itemized deductions for mid-range income people. But there's a lot of opportunities, including like having more clarity on planning, using those senior provisions. Also, you know, using deductions if you fall into the subsets that may be appropriate. There's clarity in terms of the estate tax limit for high net worth individuals.

Speaker 1:

Major shifts going on within this legislation on the education and funding landscape. I didn't touch on it, but endowments of large universities, universities with more than 3,000 students are going to have a tax on investments, investment returns. So it's not a tax on the entire endowment, it's on the returns of the endowment. The new Trump accounts are coming. That's something that is a TBD. They're not really going to be out until next year and I suggest that it's going to be interesting to see how it's administered and what financial institutions are going to be offering them.

Speaker 1:

But there's also a lot of phase outs when you get to higher incomes, and so planning your income, especially with those phase outs in the state and local tax reduction, is going to be really important, especially if you're someone who's, you know, kind of close to, let's say, a half a million dollar range. If you go from half a million to 600,000 in income, you could have to report $130,000 more in income, so that's a big deal. We love the new charitable options and opportunities and also know that for some of you who are planning for some clean energy credits, those are going away. But, bottom line, if you are thinking about financial advice, if you work with a financial planner, it is critical, mission critical and one of the most important things that I see to keep taxes in mind. If you're not working with someone who takes taxes into consideration, it may be time to have a conversation with someone else.

Speaker 1:

And if you ever have questions or want to contact me about this, do let me know. And if you're looking for more resources, we have a blog coming up. I'm going to be doing a webinar which goes over similar information, but with pictures as well, as you know, kind of a powerpoint to show you and guide you a little more visually, and we'll also be doing an economic update soon. After we have all of these details out for obbb or ob3, then we will pivot to talking about the investment and economic landscape for the year. So if you're interested in receiving those, you can go to my website at pearlplancom and subscribe to our newsletter.

Speaker 1:

With that, thanks for listening to this meaty episode. I hope you can hear that I got my geek on to tell you about some of the things that are changing. I do love the details, but I also just love helping people individually take advantage of whatever opportunities legislation brings and plan for the risks that it also brings. So this is, you know, pivot points and change are where a financial planner shines, and I hope you appreciated my geeky conversation. Until next week, thank you for joining us. You, you, you.

People on this episode

Head Shot

Melissa Joy, CFP

Co-host