Five Actions You Might Want to Consider Based on the New Tax Law

With the recent enactment of the One Big Beautiful Bill Act, it’s essential to understand how these changes can impact your financial plan.

While I’m a big believer of “not letting the tax tail wag the dog”, it makes sense to make financial decisions in as tax-efficient manner as possible, without having tax drive the decision. Here are some actions you might want to consider based on the new tax law:

1. Review Your Tax Bracket

The new bill has permanently locked in the lower tax brackets introduced by the 2017 Tax Cuts and Jobs Act. This means that the lower rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% will remain in place. It’s always worth looking at your tax rates today compared to where they are projected in the future. If you happen to be in lower rates today than you project to be in the future, then consider Roth conversion and/or Roth contributions over tax deferral strategies.

2. Consider Ways to Maximize your Deductions

The standard deduction has been made permanent at $15,750 for single filers and $31,500 for married couples filing jointly, with an additional boost for those over 65. Most people are not going to have enough itemized deductions to exceed the standard deduction. Here are a couple things to consider:

• Charitable Giving: If you’re charitable with your dollars, consider “bunch gifting,” doing two years of charitable giving every other year. By doing this, you can drive your itemized deductions higher in one year and then take the standard deduction in the off year. The combined total deductions over two years can end up being higher than giving the same amount each year. For example, Sam and Sally give $15,000 to their favorite charities each year and have other itemized deductions of $20,000. If they give $15,000 to charity each year, their itemized deductions are $35,000, slightly above the standard deduction of $31,500. Over two years, their total deductions would be $70,000. If they do their charitable giving every other year, in year one, they would have charitable deductions of $30,000 plus other itemized deductions of $20,000 for a total of $50,000. In year two, they would take the standard deduction of $31,500, so over two years, their deductions would be $81,500.
• Track Itemized Deductions: Keep tabs on your total itemized deductions. If you usually take the standard deduction, track your itemized deductions because you may want to consider ways to increase your itemized deductions if you’ve crossed the threshold. The State and Local Tax (SALT) deduction cap has risen temporarily to $40,000 from 2025 to 2029, with a 1% annual inflation adjustment. Since 2017, the SALT cap was $10,000, meaning many people didn’t need to track their state and local taxes, including property taxes, because they easily exceeded the $10,000 cap or knew their itemized deductions wouldn’t exceed the standard deduction. With the SALT cap increased to $40,000, make sure to track things like property taxes and vehicle registrations, as they may now help increase your deductions.

3. Plan for the Senior Bonus Deduction

If you’re over 65, you could benefit from a temporary bonus deduction of $6,000 per person from 2025 to 2029. I don’t suggest letting the tax tail wag the dog, meaning I wouldn’t spend your year managing your income and spending just to get a $6,000 deduction. However, it might be worth looking at an income projection with your financial and/or tax advisor to see where you expect to come out. If it’s going to be close to that threshold, then you might consider ways to manage income to take advantage of this deduction.

4. Be aware of the new car loan interest deduction

From 2025 to 2028, interest on the purchase of a new passenger vehicle may be deductible. The deduction would be on interest of up to $10,000 and would phase out when income exceeds $100,000 for an individual or $200,000 for joint filers. Don’t let this be an excuse to go out and buy a car – but if you need a new vehicle, be aware of this deduction.

5. Consult Your Financial Advisor

The bill also includes various other changes, such as adjustments to estate taxes, energy credits and significant changes to the federal student loan program. These provisions may affect you depending on your personal situation. It’s always wise to consult with your financial and tax advisors to understand how these changes impact your overall financial plan.

Tax laws will continue to evolve, but staying disciplined and focused on your long-term financial goals is key. At Foster Group, we believe in partnering with our clients to navigate these changes and pursue meaningful and generous lives. What does it mean to be truly cared for? It means we understand your passions and use proven methods to help you reach your goals.

All statistics and data sourced from the One Big Beautiful Bill Act.