One of the greatest benefits of working with HCM Wealth Advisors & CPAs is having access to tax planning that is integrated into all financial decisions from single stock trades to legacy planning. The importance of tax planning is again in the spotlight with the recent tax legislation known as the One Big Beautiful Bill.
There is a lot to unpack within the One Big Beautiful Tax Bill (OBBB) including many claims about it that are not completely accurate, such as:
- No tax on Social Security
- No tax on tips
- No tax on overtime
- No tax on car loan interest
With that said, the new bill provides numerous tax-saving opportunities that, with proper planning, will help many HCM clients pay less.
Important Tax Policies Changes
Extending Lower Tax Rates
Tax rates for almost all individuals were scheduled to rise in 2026. The OBBB makes the current lower tax rates permanent. As a result, taxpayers who were accelerating income to avoid higher future rates may now delay the payment of these taxes. This may open the door to taking advantage of other benefits in the OBBB.
Increased Standard Deduction
Before the OBBB, the standard deduction was scheduled to be cut in half in 2026. The OBBB increases the current standard deduction and makes the higher deduction permanent.
On the negative side, maximum bracket taxpayers will see the benefit of their itemized deductions reduced in 026, creating a planning opportunity to accelerate itemized deductions, such as charitable gifts, into 2025 to capture the full benefit.
SALT Deduction
The limit for deducting state and local taxes (SALT) has been increased from $10,000 to $40,000 beginning in 2025 through 2029. This means that taxpayers with state and local income and real-estate taxes that exceed $10,000 will need to review their filing strategy to see if itemizing deductions will provide an advantage. Phaseouts begin at $500K Modified Adjusted Gross Income (MAGI) for joint filers and $250K for singles.
Charitable Giving
The OBBB makes several changes to the tax treatment of charitable contributions. These changes will impact both itemizers and non-itemizers alike and will require planning to achieve optimal benefits.
Beginning in 2026:
- High-bracket taxpayers who itemize deductions will see the tax benefit of their gifts reduced. Affected donors should explore the benefits of accelerating their gifts into 2025 where the full tax advantage may be achieved. High income taxpayers should discuss their charitable goals for the next few years with their tax advisor.
- An "above-the-line" $1,000 single/$2,000 married charitable deduction is available for gifts made by taxpayers who claim the standard deduction. The deduction only applies to cash contributions made to qualified public charities, not to donor-advised funds or private foundations often used by HCM clients. Qualified individuals can make a one-time gift from their IRAs of up to $50,000 to fund certain life-income plans.
Big Claims that Aren’t Quite True
No Tax on Social Security
While there is still a tax on social security, seniors age 65 and older may claim an additional $6,000 deduction ($12,000 for couples) from 2025 to 2028. This new deduction is in addition to the current additional standard deduction for seniors available under existing law. Phaseouts apply for those with income above $75,000 and $150,000 for joint filers.
No Tax on Tips
Effective for 2025 through 2028, employees and self-employed individuals may deduct an annual maximum of $25,000 in “qualified” tips received in occupations that are listed by the IRS. The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
No Tax on Overtime
Like tips, the Bill allows a deduction, effective for 2025 through 2028, for "qualified" overtime pay (the “premium” portion above regular pay, like the half time in “time-and-a-half”) of $12,500 for a single taxpayer and $25,000 for couples. The same phaseouts applied to tips apply here.
No Tax on Car Loan Interest
The bill introduces a maximum $10,000 deduction for qualified vehicle loan interest, available for loans originated after 2024. The deduction will be available through 2028 for new, personal use vehicles with final assembly in the United States. Phaseouts apply to those with modified adjusted gross income over $100,000 ($200,000 for joint filers).
Show Me the [Child-Related] Money
Increased Child Tax Credit
Starting in 2025, the OBBB increases the Child Tax Credit by $200 for each child under 17. The new maximum per-child credit is $2,200, up from $2,000 in 2024. Additionally, the credit will be adjusted for inflation each year starting in 2026. The Child Tax Credit is still partially refundable, up to $1,700.
Trump Accounts
An American child born after December 31, 2024, and before January 1, 2029, will have a Trump Account established and will receive an initial $1,000 deposit from the government. Parents (and others) may contribute up to an additional $5,000 per year until the child reaches 18. Minors born before January 1, 2025, may still receive the annual $5,000 contributions but will not receive the $1,000 government bonus. The account generally follows traditional IRA rules allowing for a lifetime of tax deferred compounding. The soonest Trump accounts can be established is July 2026. HCM recommends every child should open an account and leave it untouched for the next 40-60 years so the miracle of tax-deferred compounding applies.
Conclusion
Year-end tax planning is always a good idea to make sure all your details are in order. With the OBBB, it is critically important to review the timing of income and deductions to capture the benefits and avoid the downsides of the new tax laws. Reach out to your advisor today to schedule your tax planning meeting.