After months of back-and-forth in Washington, a new tax and spending bill was signed into law by President Trump on July 4th. It’s called the “One Big Beautiful Bill,” and it’s packed with big changes.

Why should you care?
Because taxes and government spending impact your wallet—and your investments. While trade news has dominated headlines recently, tax policy has quietly become a major source of uncertainty. This new law clears up a lot of that and avoids something called a “tax cliff,” which could have meant big, sudden tax increases.

Let’s walk through what this bill means for you, your financial plan, and the economy overall.

Tax Cuts and Jobs Act (TCJA) Rates Are Here to Stay

The bill makes many of the 2017 TCJA tax changes permanent, and adds a few new ones. Here’s what’s changing:

• Tax brackets stay the same instead of ending in 2025.
• Standard deduction jumps to $15,750 for individuals and $31,500 for married couples filing jointly.
• Extra $6,000 deduction for seniors with incomes under $75,000 (ends in 2028).
• Alternative Minimum Tax (AMT) exemption is permanent, with higher income limits ($500,000 for single filers).
• Child tax credit increases from $2,000 to $2,200 per child, with future increases tied to inflation.
• State and Local Tax (SALT) deduction cap increases to $40,000, rising 1% per year until 2029 before dropping back to $10,000 in 2030.
• New tip income deduction for service workers earning under $150,000—up to $25,000 in tips can be deducted through 2028.
• Green energy tax credits cut, including credits for electric vehicles and home energy improvements.
• Debt ceiling raised by $5 trillion, easing some political pressure and avoiding shutdown debates (for now).

Also good to know: The bill adds tax breaks for businesses to encourage jobs and investment in the U.S.

Bottom line? Tax rates are staying low compared to history. In the past, top tax rates hit 70%, even 90% during wartime. Today’s rates are much more manageable.

What This Means for Roth Conversions

With tax rates now locked in at relatively low levels, Roth conversions may become even more attractive for certain households.

When you convert traditional retirement savings into a Roth IRA, you pay taxes on the amount converted now, but then your money grows tax-free for life. Since this new bill keeps tax brackets lower for the long haul, it may be smart to consider converting sooner rather than later, especially if you’re currently in a lower tax bracket.

Here’s what to think about:

• Converting in 2025 could allow you to take advantage of the larger standard deduction and possibly the new senior (65+) deduction if you qualify.
• If your income is lower this year (maybe due to retirement or a job change), it might be a good window to do a partial Roth conversion.
• With tax brackets no longer scheduled to rise, the pressure to “beat the tax cliff” is off—but this also gives you more runway to plan multi-year conversions thoughtfully.
• Remember: Roth IRAs don’t have required minimum distributions (RMDs), which can give you more control over your future income and taxes.

Not sure if a Roth conversion makes sense for you? That’s where your financial plan comes in. We can run the numbers and help you decide.

But What About the National Debt?

Tax cuts mean less money coming in for the government. So, where will it make up the difference? That’s where things get tricky.

Many of the government’s biggest costs, like Social Security, Medicare, defense, and interest on debt, are hard to cut. In fact, here’s how your tax dollars were spent in 2025:

• 21% on Social Security
• 14% on Medicare
• 13% on National Defense
• 14% on interest payments

So what happens? The government borrows more.

The non-partisan Congressional Budget Office says this bill will add $3.4 trillion to the national debt over 10 years. And we’re already at $36.2 trillion, or over 120% of our country’s total economy.

That equals about $106,000 per person.

Does that mean disaster is coming? Not necessarily.

Sometimes tax cuts boost the economy, which can help make up for the lower tax income. But history shows Washington doesn’t always use booming economies to pay down debt. The last time we balanced the budget was in the 1990s.

Quick history note:

• The U.S. didn’t always have income tax.
• It started in 1913.
• Rates skyrocketed during the Great Depression and WWII—up to 94%!
• Major reforms in the 1980s cut rates and simplified the tax code.

Today, most government revenue comes from income taxes and payroll taxes (for programs like Social Security and Medicare). Other sources, like corporate and excise taxes, are much smaller.

For investors, taxes do matter. But over the long run, big-picture economic forces like inflation and interest rates tend to matter more than any single law. That’s why we focus on building diversified portfolios that work across different environments—good or bad.

The Estate Tax Exemption Stays High

One important part of the tax cliff was about estate taxes, the tax on wealth passed to heirs. The 2017 tax law doubled the limit for how much you can pass on without paying estate tax, but it was set to expire this year.

Good news: That higher limit is now permanent.

• Starting in 2026, individuals can pass on $15 million tax-free.
• Couples can pass on $30 million.

While this may seem like it only matters to the ultra-wealthy, it’s important for all families to think ahead about how wealth will be passed on. A good estate plan includes tax strategies, family goals, and sometimes charitable giving.

Also, remember: States can have their own estate tax rules, which are often less generous than federal ones.

Final Thoughts

This new law extends the current low-tax environment and reduces some of the uncertainty around tax planning. But it also adds to the national debt, which we’ll need to keep an eye on.

For investors, the smart move is sticking to a plan that adjusts to changes like these without overreacting. That’s how we stay on track through all kinds of markets and political news.

Have questions about how this affects your plan? Let’s talk.

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