Understanding Key Tax Law Changes in the “One Big Beautiful Bill”

Jul 16, 2025 | Taxes

On July 4, President Trump signed the “One Big Beautiful Bill Act” into law, enacting sweeping legislation that makes changes to everything from the debt ceiling to Medicaid to immigration to taxes.1

While the new law is one of the most fiercely debated in recent memory, it also has many of our clients asking what it all means for them.

Rather than diving into the political debate, we want to highlight the key provisions that could affect your taxes, retirement, and other areas we regularly plan for together.

While some of it may not apply to you, it could apply to members of your family. If so, feel free to share this information with them.

If you have any questions or concerns, please reach out. Remember, the Cornerstone team is here to help provide financial clarity.

 

Changes to Tax Deductions and Exemptions

1During President Trump’s first term, Congress passed the Tax Cuts and Jobs Act, which made major changes to the tax code. Many of those changes were set to expire at the end of this year, but the BBB has made them permanent. That means all current tax rates and brackets will continue for the foreseeable future.

In addition, several tax deductions are set to increase under the BBB. 

For example:

  • The standard deduction has been raised from $15,000 to $15,750 for single individuals, and from $30,000 to $31,500 for married couples filing jointly.
  • Future increases will be indexed to inflation.

For those who choose to itemize their tax deductions:

  • The SALT (state and local tax) deduction limit is increased $10,000 to $40,000 and this deduction will increase by 1% each year until 2030, when the cap reverts back to $10,000.
  • Note that the SALT deduction begins to phase out for taxpayers earning $500,000 or more in annual income.

Lastly, the exemption on estate and gift taxes is raised to:

  • $15 million (up from $13.99 million) for singles
  • $30 million (up from $27.98 million) for married couples

 

Changes to Tax Credits1

The BBB also makes some important changes to several types of tax credits — raising one while eliminating others.

  • The child tax credit, previously set to expire, has now been permanently increased to $2,200. (Note: If you see the $2,500 figure, that was from an earlier version of the bill and is no longer accurate.)
  • The BBB eliminates several “green” tax credits:
  • Electric vehicle credits (new and used) end September 30, 2025.
  • Energy-efficient heating/cooling system credits (e.g., rooftop solar panels) end December 31.

 If you’re considering “going green,” it may be best to act soon!

 

Changes That Could (Potentially) Affect 

Social Security Taxes1

This could have been included under tax deductions, but due to its complexity, it deserves its own section.

After the BBB became law, many Social Security beneficiaries received an email stating the law would eliminate federal income taxes on Social Security benefits for most recipients.² This claim has also circulated on social media.

That statement is not entirely accurate. The BBB does not directly change how Social Security benefits are taxed.

Instead, the law creates a temporary tax deduction for seniors:

  • Individuals aged 65+ can claim a $6,000 deduction if income is $75,000 or less.
  • Married couples filing jointly can claim $12,000 if income is $150,000 or less.
  • The deduction phases out entirely at $175,000 for individuals and $250,000 for couples.

What does this all have to do with Social Security? When coupled with other types of deductions, this provision can reduce taxable income for many retirees and pre-retirees. Given that Social Security taxes are dependent on a person’s annual income, some retirees who take this deduction may find that, as a result, they no longer owe taxes on their benefits.

If you are collecting Social Security, plan to start in the near future, or know somebody who is, keep in mind that it takes some careful number crunching to determine whether this new deduction will impact taxes on your benefits. Please let us know if you have any questions.

Finally, bear in mind this new deduction isn’t permanent — it’s slated to expire after 2028.

 

Child Savings Accounts1

For those welcoming a child or grandchild between 2025 and 2028, the BBB introduces a new tax-advantaged savings account:

  • The government provides a one-time $1,000 deposit.
  • Parents and relatives can contribute up to $5,000 per year.
  • Employers can contribute up to $2,500.
  • Earnings grow tax-deferred, and withdrawals are taxed as long-term capital gains when the child turns 18.

These types of accounts can be a handy way to help children save for the future, including higher education. However, there are lots of rules regarding these accounts, and they may not always be the best option compared to other alternatives. For these reasons, let’s chat before you or your family decide to open one!

 

Conclusion

As you can see the tax law changes in the BBB could have an impact on your financial plan.

Rest assured; our team is continuing to review these provisions closely. We’ll follow up with anything new that may be relevant to you — whether through a future update or during your next review.

In the meantime, please don’t hesitate to reach out with any questions.

 

 

Sources

1 Text of “ONE BIG BEAUTIFUL BILL ACT,” Congress.gov, https://www.congress.gov/bill/119th-congress/house-bill/1/text

2 “Social Security Email About ‘Big Beautiful Bill’ Tax Changes Sparks Confusion,” Kiplinger, July 7, 2025. https://www.kiplinger.com/taxes/social-security-email-on-big-beautiful-bill-tax-changes-sparks-confusion

 

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Material sourced by Bill Good Marketing, an independent third party.

 CSP #836829 Exp. 7.8.26

Avoiding Withdrawal Pitfalls: Retirement Planning for Federal Employees

Apr 18, 2025 | Retirement Planning

Retirement planning for federal employees comes with unique challenges – especially when it comes to deciding how and when to withdraw from your plan. As you approach retirement, you may be feeling a mixture of excitement and overwhelm. From understanding available options to avoiding penalties and meeting IRS deadlines, there’s a lot to consider.

You’ve worked hard, now it’s about making sure your retirement funding works just as hard for you. With the right guidance and planning, you can make confident decisions and avoid costly missteps.

 

Understanding Your Retirement Withdrawal Options

When it’s time to access your retirement savings, you’ll face decisions that can impact your income, taxes, and financial security for years to come. You may have the option to choose a lump-sum payout, monthly payments, or an annuity.

 

Pros and Cons of Common Withdrawal Methods
  • Lump-sum payments provide immediate access to funds but may increase your tax liability.
  • Monthly withdrawals help manage your tax bracket and provide steady income.
  • Annuities offer predictable payments but may limit flexibility.

Carefully review these options in light of your overall financial goals.

  

 

Avoid Early Withdrawal Penalties

Withdrawing before age 59½ may result in a 10% early withdrawal penalty. However, if you separate from service at age 55 or older, you may qualify for an exception.

 

Timing Matters

Planning your withdrawals around these milestones is key. Consider consulting with a financial advisor to create a timeline that minimizes taxes and penalties.

  

  

Planning for Required Minimum Distributions (RMDs)

Once you turn 73, the IRS requires you to begin taking minimum distributions from your retirement account.

 

Missing RMDs Can Be Costly

Failing to take your RMDs on time can lead to a 25% penalty. Setting up automatic reminders and a withdrawal strategy can help you stay compliant and maintain consistent cash flow.

  

  

Coordinate Retirement Income Sources

Retirement planning for federal employees often involves multiple income streams—such as Social Security, pensions, and other savings.

 
Manage Taxes with an Income Plan

Coordinating withdrawals can help balance your income and control your tax bracket. A well-planned income strategy ensures stability and reduces surprises during tax season.

  
 
 Talk to a Financial Advisor Who Understands Federal Benefits

We recommend working with a financial advisor who understands the federal system. Federal employee benefits can be complex, and strategic planning can help you avoid common pitfalls.

Two of our Wealth Advisors at Cornerstone—Gordon Wollman and Jill Mollner—hold the Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) designation. Their training helps ensure we understand the specialized needs and concerns of federal employees.

 

 

Ready to Take the Next Step?

If you’re seeking clarity and confidence in your retirement journey, we’re here to help. Schedule a complimentary strategy session today to talk through your goals and build a plan that fits your future.

Call 605-357-8553 in Sioux Falls or 605-352-9490 for our Huron office.
Email cfsteam@mycfsgroup.com

Raymond James and Cornerstone Financial Solutions are independent from, and are not affiliated with, or endorsed by, the U.S. Government, the Federal Employee Retirement System, or any other Federal Government-sponsored benefits programs or retirement plans. Clients should consult their plan administrator for detailed plan information.

Gordon Wollman and Jill Mollner hold the Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) designation. Federal Seminars and ChFEBCSM, Inc. owns the symbol marks ChFEBCSM, Chartered Federal Employee Benefits ConsultantSM and ChFEBCSM logo in the U.S. CSP #761837 Exp. 4.17.25.

Tax-Deferred Investment Mistakes

Feb 4, 2025 | Investing

What Are Tax-Deferred Investments?

Tax-deferred investments allow your money to accumulate tax-free until you make a withdrawal.  (Ideally, after retirement.)  These withdrawals are then taxed as ordinary income.  Traditional IRAs, 401(k)s, and annuities are all examples of tax-deferred investments.

 

Common Ways People Misuse Tax-Deferred Investments

Unfortunately, many pre-retirees misuse these types of investments in the following ways:

 

Taking withdrawals too early.

This can rob your retirement of much needed savings.  In some cases, it can also come with additional penalties.  For example, if you make withdrawals from an IRA prior to age 59½, the money would be subject to a 10% penalty from the IRS in addition to being taxed.

 

Not contributing the maximum annual amount.  

Most tax-deferred investments have a cap on how much you can contribute each year.  But many people vastly undershoot this cap.  It’s quite common to see people put their tax-deferred accounts on the bottom of the pole.  Other types of investments, or even just spending, take priority.  As a result, these people are not benefiting from all that tax-deferred investments have to offer.

 

Contributing after-tax dollars instead of pre-tax dollars.  

Sometimes, it’s easy to get careless and contribute money that you have already paid taxes on.  Remember, when you withdraw that money down the road, it will be taxed again as ordinary income.  That’s called double-taxation, and no one wants that!  Instead, make contributions with pre-tax dollars whenever possible.

 

Not choosing the right investments.  

A tax-deferred account may be great from a tax standpoint, but if you want the money inside those accounts to grow, you have to choose the right investments.  Some types of investments may actually lead to higher taxes in retirement than they would through capital gains in a taxable account.  Always pay close attention to which investments are going into each account you own.

 

Need Help With Your Tax-Deferred Investment Strategy?

If you are concerned you may be misusing your tax-deferred investments or just aren’t sure of it, let us know, we are happy to help!

401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.

Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Cornerstone Financial Solutions, Inc. and not necessarily those of Raymond James.  CSP # 704811. Exp. 1.24.26