Big Tax Law Changes Create Financial Planning Opportunities

Key takeaways:

Some of the biggest changes to the tax code are permanent, including lower income tax rates, higher standard deduction amounts and higher estate and gifting exemptions.

New accounts for newborns, modeled after traditional IRAs, allow parents to save money specifically for future expenses for their children.

Tax law changes, even when they are “big and beautiful”, can create big opportunities for your clients’ financial plans. At over 900 pages, the recently passed 2025 Budget Reconciliation & Tax Bill (commonly referred to as the “One Big, Beautiful Bill”) contains a lot of changes, many of which are directed at individual taxpayers and households. While some of the biggest changes are permanent, others are in effect only for a few years. There are also limitations for some of the tax breaks, so the changes may impact different clients in different ways (or not apply at all.)

Keep in mind that every client has unique tax planning needs. They should review any changes to their financial plans with a tax professional to fully understand the implications to their tax liability.

“Permanent” tax cuts remove uncertainty from estate tax planning

The 2025 bill made the tax law changes passed in the 2017 Tax Cuts and Jobs Act permanent. These changes, which include lower income tax rates, higher standard deduction amounts and higher estate and gifting exemptions, were due to expire at the end of this year.

Now that the estate tax rules are more certain, it’s a good time for clients to review their existing estate plans and make legacy planning decisions with the new higher exemption limits in mind.

New & expanded deductions may alter income planning

Any changes to the taxation of income usually carries through to income planning decisions. For example, a series of new tax deductions for tips and overtime income may help some clients lower their overall tax liability.

An enhanced income deduction directed specifically for seniors (age 65+) can affect decisions for retirement income planning with clients, especially around Social Security. Unlike the other tax law changes, this deduction for seniors is set to expire in 2028, so the timing may come into play when deciding when to file for Social Security benefits.

Planning strategies for families with children

Parents and soon-to-be parents also enjoy some tax benefits from the bill that could introduce new financial planning decisions.

The bill allows the creation of “Trump accounts”, modeled after traditional IRAs, that allow parents to save money specifically for expenses for their children. These accounts may offer new opportunities for financial planning for higher education and college tuition expenses.

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