A New Law with Long-Term Implications
On July 4, President Trump signed into law a comprehensive tax and spending bill that will significantly affect the financial landscape for years to come. Informally called the “One Big Beautiful Bill,” the legislation reinforces many provisions of the 2017 Tax Cuts and Jobs Act (TCJA), introduces new deductions, and aims to balance the changes with targeted spending cuts.
While political headlines often highlight trade or interest rates, significant tax policy changes can directly affect financial planning, investment choices, and estate strategies. For high-net-worth families, understanding tax law is essential, and this new bill removes the looming “tax cliff” that previously made long-term planning more difficult.
Key Takeaways: Tax Policy Becomes More Predictable
Here’s what the new law means in practical terms:
- Tax Brackets Made Permanent: The current individual tax rates under the TCJA will remain in effect permanently.
- Standard Deduction Increased: $15,750 for single filers and $31,500 for married couples.
- Senior Bonus: A $6,000 deduction for qualifying seniors, phasing out at $75,000 of gross income, available through 2028.
- AMT Relief: Permanent exemption with a $500,000 threshold for single filers, indexed to inflation.
- Expanded Child Tax Credit: $2,200 per child with inflation adjustments moving forward.
- Higher SALT Deduction Cap: Raised to $40,000 and indexed until 2029 before reverting in 2030.
- New Tip Income Deduction: Up to $25,000 annually for lower-earning service workers.
- Estate Tax Exemption: Increased to $15 million for individuals ($30 million for couples) in 2026.
Some green energy tax credits were repealed, and the federal debt ceiling was raised by $5 trillion to prevent short-term gridlock.
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Deficits, Debt, and the Broader Fiscal Picture
Tax cuts rarely exist in a vacuum. While they benefit individuals and businesses, they reduce federal revenue, leading to either increased borrowing or reduced spending. The latter is often politically untenable.
Current spending breakdown (2025 estimates, U.S. Treasury):
- Social Security: 21%
- Medicare: 14%
- National Defense: 13%
- Interest on Debt: 14%
The Congressional Budget Office predicts that the new law will increase the federal debt by $3.4 trillion over the next ten years, pushing the total debt above 120% of the nation’s GDP. What is often left unsaid is that these projections assume the 2017 Tax Cuts and Jobs Reconciliation Act would have expired, which would have led to a significant increase in taxes for all Americans.
History shows that tax rates and fiscal policies change based on economic conditions, wars, and political pressures. But for today’s investor, the key point is this: while government policy can cause uncertainty, your financial plan shouldn’t rely on forecasts.
HCM Perspective: How We Help Clients Adapt
At Holland Capital Management, we don’t chase tax headlines or try to outguess fiscal policy. We operate from a planning-first, product-agnostic philosophy, where all portfolios are built in-house using individual stocks, bonds, cash, and select ETFs.
This new law doesn’t change our core beliefs, but it does reinforce the need for:
- Tax Efficiency: We proactively manage capital gains and harvest losses throughout your portfolio, using asset location and withdrawal sequencing to reduce lifetime taxes.
- Estate Planning Integration: Even if your net worth is below federal thresholds, you might face state-level estate taxes or other transfer considerations. We design portfolios with flexibility and legacy in mind.
- Intelligent, Purposeful Risk: We steer clear of mutual funds, annuities, and private placement strategies that add cost or complexity without enhancing results.
- Whole-Balance-Sheet Thinking: Real estate, business equity, concentrated stock risk, and liquidity all influence your tailored investment strategy.
Most importantly, we view market volatility not as a threat, but as a source of long-term opportunity. We strive to generate value through informed decision-making and strategic investments, rather than following trends or merely selling products.
Bottom Line: Legislation Changes. Strategy Shouldn’t.
Markets may respond to policy changes in the short term, but your financial plan is designed to endure. This latest bill extends a favorable tax regime and provides breathing room for wealth planning, but long-term discipline remains the most reliable driver of success.
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Frequently Asked Questions
What are the key 2025 tax law changes investors should know about?
The 2025 tax law changes made the TCJA tax brackets permanent, raised the standard deduction, expanded the child tax credit, and increased the estate tax exemption to $15 million per person starting in 2026. These changes offer more planning clarity for high-income investors.
How do the 2025 tax law changes affect estate planning?
The estate tax exemption will rise to $15 million per individual ($30 million per couple) in 2026. While this provides more flexibility for ultra-high-net-worth families, smart estate planning remains critical for those with complex assets or state-level estate tax exposure.
Will the 2025 tax law changes impact retirement or investment strategy?
Yes. With the new law making rates more predictable, investors can better plan Roth conversions, withdrawal sequencing, and asset location strategies. These tax-efficient moves can reduce long-term tax liability and improve after-tax returns.
Are there any drawbacks to the 2025 tax law changes?
While the law reduces uncertainty for individuals, it may add $3.4 trillion to the national debt over ten years. This could lead to future policy shifts, especially around spending, entitlement reform, or new revenue sources. Long-term planning should remain flexible.
