Understanding the One Big Beautiful Bill (So Far)
The “One Big Beautiful Bill” was signed into effect on July 4, 2025, after months of intense negotiations in both the House and Senate. The law is 870 pages long so there’s a lot to digest but here are some key elements that are worth knowing about in the financial planning area:
- On the Medicaid eligibility side there is a “community engagement” requirement. Able-bodied adults must affirm on a monthly basis that they spend no less than 80 hours per month working, participating in a work program, completing community service, participating in education programs or doing a combination of all of the above. There are exceptions for those under 19 years of age and individuals with certain identifiable hardships.
- There are state requirements for quarterly reviews of records to verify deceased beneficiaries so they don’t remain on the Medicaid program after death.
- There is a newly created Rural Health Transformation Program that will provide $50 billion over five years to hospitals and other providers for states that submit a rural health transformation plan establishing how such funding will improve access to care and patient outcomes in rural hospitals.
- Existing tax brackets become permanent, and the standard deduction increases by $750 for single people and $1,500 for married joint filers. ($15,750 for single; $31,500 for married filing jointly)
- State and local tax deductions are increased to a cap of $40,000 for married joint filers over the next five years.
- There is now a deduction for tips up to $25,000 and overtime pay up to $12,500, but there is a phaseout based on income levels. This change ends after 2028.
- It is now possible to deduct up to $10,000 for car loan interest associated with vehicles in which the final assembly occurred in the United States. This is also phased out based on income levels. This change ends after 2028.
- Student loan repayment plans have been revamped. New borrowers going forward will choose between the following options: 1. A fixed monthly payment over 10 to 25 years based on total principal, or 2. Income-based repayment based on adjusted gross income with a minimum payment of $10 per month and payment continuing until the loan balance is zero or the borrower makes 360 qualified monthly payments, whichever is earlier. Existing borrowers will be transitioned into one of these two plans by July 2028.
- On the estate tax front, the law puts a lot of confusion to rest. The federal estate gift and generation skipping tax exemption will increase to $15 million per person starting January 1, 2026, and for married couples the exemption will be $30 million. These amounts will then be subject to a cost-of-living adjustment on an annual basis. You should note that Michigan has no state inheritance tax so Michigan residents can rely exclusively on these exemptions to plan their estates.
As I slowly wade my way through summaries of the tax bill, I realize just how extensive it is, from oil and gas interests to farming to nuclear power, to immigration and defense spending, it is truly massive. Like any major tax bill overhaul it will need clarification as time goes on, but I think the important elements above can be relied on for planning purposes.
Fun fact: Every year thousands of hours of planning and expertise goes into the avoidance or minimizing of income taxes. Perhaps you’ll feel better knowing that while US income taxes aren’t low per se, our maximum tax rate of 37% is not at the top of the list. The Republic of Côte d’Ivoire (or the Ivory Coast) has a 60% max income tax followed by Finland at 56% and Japan at 55%. In fact, if you look at it in terms of tax revenue as a share of gross domestic product, Denmark has the highest taxes, while the US comes in at number 31 with total tax revenue being roughly 25% of GDP.
