5 Ways Wealthy Retirees Can Benefit From Big Beautiful Bill

7 6 minutes read

5 Ways Wealthy Retirees Can Benefit From Big Beautiful Bill

President Donald Trump signed the One Big Beautiful Bill into law on the Fourth of July. Here are some of the changes in the tax legislation and how they could affect wealthy retirees.

(Because I don’t think I have the stamina to continue to write out the full name of the law, from here on out, I’ll use OBBB.)

Our clients are retired, or are nearing retirement, and typically have $2 million to $10 million invested with us. They are willing to pay their fair share of taxes, but do not want to pay a dollar more. If you’re in that camp, this column is for you.

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1. Change: Marginal tax rates remain the same

How could an article about changes in tax law start with something that’s staying the same? Trump’s last tax bill, the TCJA in 2017, made tax cuts permanent at the business level, but they were temporary at the personal level. We were set to see a reversion to the older, higher marginal rates on January 1, 2026. No more.

What this translated to in conversations with clients was always an “if this, then that.” It just added uncertainty to tax planning done with an eye toward the future.

Of course, “permanent” in Washington is never “actually permanent,” but now we at least know what rates will be next year, which makes our planning more accurate.

Strategy: Roth conversions up to the 24% bracket.

No, not everyone should convert up to the 24% bracket, but many of our clients have quite large required minimum distributions (RMDs) that, when paired with Social Security benefits and other income sources, could boost them into the 30% rates in their 70s.

Here are the 2025 tax rates for single filers and those who are married and filing jointly:

Swipe to scroll horizontally

Tax Rate	Taxable Income (Single)	Taxable Income (Married Filing Jointly)
10%	Not over $11,925	Not over $23,850
12%	Over $11,925 but not over $48,475	Over $23,850 but not over $96,950
22%	Over $48,475 but not over $103,350	Over $96,950 but not over $206,700
24%	Over $103,350 but not over $197,300	Over $206,700 but not over $394,600
32%	Over $197,300 but not over $250,525	Over $394,600 but not over $501,050
35%	Over $250,525 but not over $626,350	Over $501,050 but not over $751,600
37%	Over $626,350	Over $751,600

That jump from 24% to 32% hurts, but the 24% bracket is wide. Many of our clients are and will continue to fill up that 24% bracket with their Roth conversions until their RMD age (73 or 75, depending on their birth year) in order to avoid big tax spikes later in life.

2. Change: SALT cap increased to $40,000 from $10,000

There are some significant exceptions for the SALT cap (which allows taxpayers who itemize to subtract certain state and local taxes from their federal taxable income).

First, it sunsets in 2029 (meaning it’s temporary).

Second, it’s got an income cap. The $40,000 SALT deduction declines when taxable income gets above $500,000 and reverts all the way back to $10,000 at $600,000 of taxable income.

This means that for our clients who are in this income range and who itemize deductions, we will be paying a lot of attention to those thresholds, just as we do with capital gains, income tax and Medicare brackets.

Strategy: All else being equal, you will get more bang for your charitable buck from 2025-2029 than you will in 2030, when this has expired. If it expires.

That means that you should maximize giving during these years if the SALT cap gets you closer to the standard deduction hurdle, and therefore, more of your giving gets you an actual tax benefit.

This one will be very personal, as the size of the gift and your future tax rates could actually make the opposite strategy make sense. We run tax projections for all clients using planning software. You can access a free version online.

3. Change: $2,000/$1,000 (MFJ/single) charitable deduction

If you don’t clear the standard deduction hurdle but give to charity, this is good news for you. This will allow couples who do not itemize to deduct up to $2,000 in cash contributions to qualified charities.

If this sounds familiar, it’s because there was a very similar provision in the CARES Act in 2020 and 2021.

Strategy: Larger gifts to fund trusts should likely still be done with appreciated securities. Gifts for those over age 70½ should probably still be done via a qualified charitable distribution (QCD).

However, this is good for those who are in their 50s and 60s and give smaller amounts in cash but don’t typically get a benefit from it. You should no longer hesitate to swipe that card or write that check when you donate, up to the $2,000 per couple.

Also, tucked into this bill was a charitable giving hurdle for itemized gifts. Think medical expense deductions, which are only deductible as they get above 7.5% of AGI. With charitable giving, the hurdle is 0.5%.

So, if your AGI is $100,000, the first $500 of your giving is not deductible, meaning the giving for those who do not itemize is even more advantageous.

If you got an email from the Social Security Administration over the holiday weekend touting this bill as the greatest thing since sliced bread because it eliminates income taxes on Social Security for 90% of beneficiaries, it’s because of this change.

Trump campaigned on eliminating taxes on Social Security. This is not that. However, because it will bring the standard deduction to about $45,000 for a married couple who are both over 65, it means that most beneficiaries will not pay income taxes on Social Security.

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Unfortunately, or fortunately, our clients will be in the group still paying taxes due to other income sources. It also must be noted that this, too, will expire — this bonus deduction goes away after 2028.

Strategy: If you are between 65 and 73 and your income is below $300,000/$150,000 (MFJ/single), you’re in luck. That is the threshold above which the bonus deduction goes away.

Other bonuses of this change: more room to do Roth conversions at lower tax rates, and we are looking at recognizing capital gains without any tax if you are in the 12% bracket or below.

5. Change: Estate tax exemption is going to be $15 million next year

Like the sunset of the current marginal tax brackets, the large estate tax exemptions that we have grown accustomed to were set to sunset at the end of this year.

The estate tax exemption was scheduled to come down to $7 million per person in 2026. Instead, it will be $15 million per person because of the OBBB.

This means that taxable estates need not worry about estate taxes below these thresholds. This does not mean that a couple can pass $30 million to their kids without taxes. You still need to consider income taxes and capital gains taxes.

Strategy: Estate planning will remain more about control, efficiency and income and capital gains taxes than it will be about estate taxes.

This means that very few people will need to implement irrevocable trusts to keep their taxable estates below the thresholds.

If you don’t care about leaving a legacy to individuals, don’t hesitate to spend Roth and taxable dollars. Charitable giving should be done via pretax accounts.

If you do want to leave a legacy to your kids, Roth conversions and spending down retirement accounts will probably be your best bet.

Taxable and Roth accounts and life insurance will be the most tax-friendly vehicles to leave to the next generation.

This bill came in just under 900 pages. You would have to read exactly zero pages to know that Elon Musk was not happy with it.

While his public gripes were mostly around the skyrocketing debt, I’m sure he wasn’t happy with the electric vehicle credits, which actually get eliminated even sooner than expected in the final bill.

Whether you’re Team Elon, Team Trump or team anyone else, if you’re planning on purchasing an electric vehicle, you’ll want to do that before September 30, 2025.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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