Episode 224: Breaking Down the Big Beautiful Bill: What You Need to Know

If you have been watching the news, you know that the Big beautiful bill has gone through the House and the Senate and it has now been passed into law.

So today I want to spend a little bit of time talking about some of the things that the Big beautiful bill does, some of the things that it doesn't do, and also give just some generic tax planning thinking points that you and your financial advisor and maybe your accountant should be looking at now before we get to the end of the year when a lot of tax planning items are too late.

So I hope that you enjoy this episode.

And here we go.

Welcome to the Weekly Wealth Podcast.

I am certified financial planner David Chudick.

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All right, so you've probably been hearing about the Big Beautiful Bill now on the Weekly wealth podcast.

You know that I never tell you who to vote for.

I think that you should be informed.

I think that you should have your political beliefs, but I also believe that you should, you should make your own decisions.

And who I might vote for and who you might vote for might be different.

And I am totally cool with that.

So you can decide if you like.

The Big beautiful Bill, if you don't.

Like the big beautiful bill.

But I'm here to just give you some, some facts.

Speaking of facts, let's dive into it.

So the Big Beautiful Bill.

This is a nearly 900 page legislative package that was signed into law on July 4, 2025, and it's packed with tax reform, defense and border spending, some Medicaid and SNAP cuts and more.

So this wasn't meant to be easy.

This is a marathon slog through tight votes, midnight negotiations and massive pressure.

So let's break down both what's inside and how it got Obviously this bill is almost 900 pages.

We can't go through all of it.

But I want to hit some of the highlights of some of the things that you might have heard in the media.

Here are some key provisions of the bill.

So it does extend the 2017 tax cuts and job acts provisions for individuals.

It will expand deductions for TIP workers.

So we've all heard about no taxes on tips that is going to be in play now.

There are going to be some limitations with regard to income and so forth.

And it will require that you work in an industry that typically is tipped based.

There will be no taxes on overtime pay.

The standard deduction was increased by 10% across the board and it does lower capital's gains tax rate slightly for middle income earners.

Inside of the one big beautiful bill for 2025, 2026, 2027 and 2028, seniors will be entitled to an additional $6,000.

Exempt.

Limitations as far as cutoffs when adjusted gross income exceeds a certain amount.

But yes, many seniors will get an additional $6,000 exemption, which adds up to $12,000 for a couple let's talk a little bit about student loan discharge under the one big beautiful bill during the Biden administration Cancellation of indebtedness that COD income attributable to student loan discharge was made excludable from income through year end 2025.

This bill does extend the COD exclusion permanently for discharge on account of death or disability.

Now here is an interesting one and there are lots of caveats here, so remember to check out the details for yourself.

But Car Loan Interest this bill creates a deduction for qualified passenger vehicle loan interest.

It must be paid or accrued during the next year.

It excludes fleet sales.

This one is an interesting one and there are lots of caveats.

So don't go out and buy and finance a new car just because you're hearing this.

But for vehicles whose finally final assemblies occurs in the US and it's new vehicles, there will be some deductibility of interest.

So again, lots of caveats on this one.

Don't go out and buy a car just because you are hearing this.

And there will be a $10,000 deduction cap.

But there will be some deductibility potentially of car loans for personal vehicles, of vehicles manufactured inside of the United States.

Here's one that may apply to a lot of people.

Tax credit for contributions to scholarship granting organizations.

So the bill will create a credit.

For contributions to organizations which grant scholarships to elementary and secondary school.

This is 100% dollar for dollar credit and it does have a limit of $1,700.

Now exclusion for employer stud payments are made permanent.

So currently employers with education assistance programs can pay down employee student loans and the employee can exclude that amount from their taxable income.

That was scheduled to sunset at year end 2025.

But the bill strikes, makes the exclusion permanent and indexes the amount for inflation.

So those are some of the interesting new features and provisions tax wise of the big beautiful bill.

I'm actually going to put a link to the bill in the show notes so you can go ahead and take a look at it yourself.

Again, I wanted to give just some some highlights, some things that I thought were interesting.

By no means is this a comprehensive list with all the rules and make sure that you're consulting your CPA for complicated questions.

But yeah, there's lots of new things in this bill.

Some of them may affect you very positively.

Now as far as energy and infrastructure go, it expedited permitting for fossil fuel projects.

There's significant investment in nuclear and domestic energy production.

And 200 billion is allocated to modernized roads, bridges, energy grids and such, especially in rural areas.

Now as far as border and immigration policy, it does fund the construction of additional sections of a southern border wall.

It will expand the use of E verification nationwide.

And it will implement stricter penalties for companies employing undocumented workers.

Healthcare flexibility, it'll expend access to association health plans and short term limited duration insurance.

And it'll eliminate certain aca and that's the Affordable Care act mandated coverage minimums to promote a choice in coverage.

And yes, there will be a hundred billion.

That's billions.

Billion with a B boost in defense spending over four years.

And it will increase military aid to key allies, especially in Eastern Europe and the Indo Pacific.

Under the new law, able bodied adults between 19 and 64 without dependents or disabilities must meet monthly work or activity requirements in order to qualify for or maintain benefits.

So some of these qualifying activities can be employment.

Obviously you can have a part time or full time job.

You can be going to job training, vocational education, volunteer work, community engagement.

These might be things like GED classes, resume workshops, et cetera.

Supporters say this encourages self sufficiency, accountability, it reduces dependency on public assistance and it opens up Medicaid for people who truly can't work.

Now some critics will argue, and I'm here to give both sides that many Medicaid recipients already work in unstable or informal jobs that are hard to document.

So these might be gig work, seasonal work, et cetera.

This would add bureaucratic hurdles for low income people with limited access to technology and it leads to some or it can lead to some coverage losses for people who are eligible but can't comply with the paperwork.

All right, so again, we've heard about Medicaid cuts and part of the Medicaid cuts are going to be to add some work requirements and requiring an 80 hour per month mandate if you're not disabled and if you don't have dependents in order to qualify for Medicaid.

Marginal tax rates under the big Beautiful bill will remain at 10%, 12%, 22%, 24%, 32%, 35% and 37% rather than going to the pre2017 higher rates of 39.6 for the upper end.

So remember, our tax system is progressive.

Just because you hit a new tax bracket does not mean that all of your money will be taxed at that tax rate.

Only the dollars above that tax bracket will be.

So this should be a win for most middle and upper class upper middle class taxpayers, especially business owners with high earners because the tax brackets are not going up.

Now standard deduction has increased by 10% across the board.

We've already talked to that.

So that'll be 15,400 for individuals or 30,800 for married filing jointly couples.

This could reduce taxable income for many Americans, especially for those who don't itemize QBI.

The qualifies business income deduction.

The 20% QBI deduction for pass through businesses, that's S Corps partnerships and sole proprietorships is made permanent.

And this will favor entrepreneurs, consultants and small business owners.

Now finally, the lifetime exemption on the estate tax is doubled.

So the estate tax exemption has been doubled permanently.

Now It'll be about 27.2 million for married couples or about 13.6 million for individuals.

So this dramatically reduces the number of estates subject to estate taxes because your state, if you're single, will have to be worth over 13.6 million to come into play.

Or if you're married, 27.2 million.

So here is what I ask of you with regard to the big Beautiful bill.

You can get your news from some different sources.

If you get your news from Fox tv, you're going to get a certain narrative.

If you're going to get your news from cnn, you might get a slightly different narrative.

And each of the news channels will have a little bit of bias.

It's just the way it is.

They have certain audiences that they are trying to cater to.

So what I would suggest is like actually go out and look over the bill, look over what's in it, look over how it's worded and make your own decision.

Now I always say with regard to politics, again, I'm not going to tell you who to vote for, but if you always agree with your party and never agree with anything from the other party's point of, then you're probably just like blind party following, right?

So make your own decisions, decide which parts of this you like, how you can take advantage of it for yourself.

And yeah, let me know what you think.

Email me davidarallelfinancial.com or post something in in our Facebook group.

Go to Facebook and type in Weekly Wealth Podcast and let us know what you think about the Big Beautiful Bill.

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Welcome back to the show.

And now that we've talked about some of the aspects of the Big Beautiful Bill, I want to talk about some things that you might want to think about with your own personal and business tax planning for this year.

Now here's the disclaimer.

This is not tax advice.

We're just giving you some ideas.

You should see how these fit into your own personal situation.

And make sure to talk with your cpa, with your tax professional or your financial advisor to see if these might work for you.

But the first one that I want you to start thinking about because we're a little bit more than halfway through the year and you should have a pretty good idea of what your annual income for 2025 will be is let's think about filling tax brackets with Roth conversions.

So what does that mean if you are married, filing jointly, and if you.

Make between $206,700 for your taxable income.

And 394,600 for your taxable income you're in the 24% tax bracket.

Once you get above 394,600, then every dollar above that up until 5001000 will be taxed at 32%.

So that's a pretty big jump.

But if you convert just enough of your traditional IRA or pre tax retirement accounts to a Roth to get you to the upper edge of the tax bracket, then you'll realize 24% taxes on those conversions.

Now as we know, Roth conversions sometimes not.

Sometimes they do have a tax hit upfront.

But if you have a good bit of time before, between now and when.

You need the money, you'll typically be.

Pretty happy that you did a Roth conversion because then all of those proceeds come out tax free in retirement.

They're treated more favorably during an inheritance situation.

And you might even have some freedom.

To take money out before age 59 and a half.

So look at your federal tax brackets.

And if maybe you're having a low.

Income year, maybe you're a business owner.

And profit is down, or you have.

Some phantom deductions, this might be a great year for you to think about filling your tax brackets with Roth conversions.

If this makes sense to you, but you want to discuss it a little bit more in depth, remember I'm always.

Available for a 30 minute consultation.

You can email me davidarallelfinancial.com or you.

Can go to my calendar link www.calendly.com.

Davidpf and we can talk about it.

If it makes sense to move forward, we can give you that information as well.

Let's also look at our retirement plan contributions.

So if you have a 401k or a solo 401k for 20, 25 if your age, if you're under age 50, you can put $23,000 in your plan.

If you're over 50, you get that catch up provision and you can put 30,500 in the plan.

Again, at this point in the year, you should have a relatively good idea of what your annual income is going to be.

And if you're a little bit behind in maxing out those 401 s or those retirement plans, you still do have.

Time to make some bigger contributions or.

To just bump up what you're what's.

Coming out of every paycheck.

Now, once we get past a certain point, it may be too late.

So this is a good time to start thinking about that.

Now another thing that you can be thinking about, this one you can make some mistakes with.

So be very careful, make sure you're consulting with your CPA or your financial advisor.

But you can sell underperforming investments to offset gains or to reduce your taxable income by up to $3,000 a year.

So this is a tricky one because you don't necessarily want to let tax decisions always affect your investment decisions.

But if you do have some underperforming investments, you can sell those.

You can sell those, and then that can offset some gains from other investments, or it can reduce your taxable income by up to $3,000 per year.

So that's a good strategy.

That one can get a little bit complicated.

So you want to make sure that you're getting it right.

Business owners, we always have to talk about the business owners.

I love the business owners.

But business ownership can get a little bit tough when we're talking about taxes.

So here's some talking points.

Here's some things for you to be thinking about if you're a business owner.

So make sure that you're paying and withholding or putting aside the right amount of money for taxes.

Remember, we talked a few weeks ago.

If you're a business owner and if you bring in, let's say, $10,000 of revenue, you personally did not make $10,000.

The business did.

Some of that needs to be allocated to taxes, Some of that needs to be allocated towards expenses.

So make sure that you're withholding tax payments or putting enough money aside for tax payments.

Work with your cpa, work with your tax professional, but do not fall behind.

I see this all of the time with new businesses, but also with established businesses where they fall behind on their taxes.

Now, the S Corp election is also something that you should be discussing with your tax professional and basically your S Corp election, if you don't have it, your S Corp election, if you do have it, can allow you to only pay the payroll taxes on a portion of your profit, which would be your salary, and then any other monies that you take out of the business, which would be distribution of profits, would not have payroll taxes.

So again, make sure that you're discussing this with your tax preparer and ask them, is the S Corp election something that if I don't have that, that might make sense for me and we're getting towards the end of the year and business owners, again, should have some sort of a good idea of this going to be a profitable year if expenses are down and things like that.

But let's think about if there is equipment that you need, does it make sense to buy it this year, or does it make sense to hold off and buy it next year.

So remember section 179 or bonus depreciation is still in play.

So if there's something that you need to buy that could be a huge expense, ask your accountant, ask your fractional CFO if it makes sense to buy it this year and recognize the depreciation or the expense this year.

Or should you wait if it's possible to wait and buy it next year?

These are some of the decisions that can have a huge impact in your profit and loss statement over the course of years, affecting the amount of profit that you're realizing for the year.

This is why I always say the business owners need to run their businesses by the numbers.

They need to get out of the everyday day to day operations of the business so they can spend some time looking at their P and L statements, making decisions based on their P and L and their, and their balance sheets.

Hugely important.

So again, if there is some equipment that you're going to need now, don't go out and buy a hundred thousand dollar truck just for the tax deduction if you don't need the truck.

But if there is some equipment that you're going to need to buy, let's start thinking about should we buy it in 2025 or should we hold off and buy it in 2026?

And with regard to your taxes, whether they be business or personal, there are a couple things going on.

Number one is there are many, many, many CPAs retiring and they are not being replaced by new CPAs at a very fast rate.

So the industry is backed up and many CPA firms are.

They just, they're overworked and they don't necessarily have the bandwidth to give proactive tax advice and work on tax planning.

So Most of your CPAs, most of your tax preparers are very good at saying, hey, it is now April or May or February of 2026, I've completed your 2025 tax return, you're getting a refund.

Or here's how much you owe the government, here's how much you owe the state, here's how much you owe the federal government.

What most of them don't do, and it's generally because of a workload issue, is they don't have a proactive tax planning process.

So most of them are not looking at, hey, does it make sense to do Roth conversions this year?

And let's make sure that you're putting the right amount of money in your, in your retirement accounts and looking at selling off securities to realize a loss.

They're just not doing that.

Now, a good relationship with a financial advisor in a planning role certainly is a way that you can work on tax planning.

So if tax planning is something that interests you, if tax planning is something where you would like to potentially have a relationship with me again, email me davidarallelfinancial.com we have a lot of ways that we can look at your tax returns from last year.

We can make projections and we can give options.

And none of us like paying more taxes than we have to.

So let's have a proactive plan this year as opposed to, you know, after the clock strikes midnight on December 31, a lot of the tax planning strategies, it becomes too late to to implement them.

Okay, so that wraps up our episode on the big beautiful bill.

And also we gave some tax planning tips.

Now, remember, with this big beautiful bill, it has become highly politicized, like almost everything has been.

So we live in a world of social media, we live in a world of infotainment news channels.

And we just need to remember that.

Let's find out the facts and let's to the within our abilities and of course, within the guidelines of the law, let's make the best possible financial decisions that we can, right?

Let's pay the least amount of taxes that we can legally and let's just go out and have great lives by how we handle our money.

So until next episode, I wish everybody a blessed week.

Thanks, everybody.

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