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President Trump’s “big, beautiful bill” has made it to the Senate, but it still faces a long road before some version of it becomes law.
The bill’s current form, which spans more than 1,000 pages, contains a number of tax provisions that may have significant implications for seniors and those planning for retirement.
But given the uncertainty, Lisa Featherngill, national director of wealth planning at Comerica Wealth Management, advised against making major financial decisions based on a proposed bill that could change significantly during the legislative process.
“We’re just in a wait-and-see mode,” she said in a recent Decoding Retirement podcast (see video above or listen below). “That is one thing I have learned over the years. You do not take the House version or the Senate version and make any plans. At least wait until we’ve got something coming out of Conference committee.”
That said, Featherngill sees at least one provision in the House version of the bill as having a good chance of becoming law: a proposed $4,000 additional standard deduction for individuals 65 and older.
If enacted, this deduction would apply to tax years 2025 through 2028 and, unlike the current age-based standard deduction, would be available to both itemizers and non-itemizers. It would phase out gradually at a 4% rate for single filers with modified adjusted gross income over $75,000 and for married couples filing jointly with income above $150,000.
With nearly 58 million Americans ages 65 and older as of 2022, Featherngill believes this provision has broad appeal and could be among those that make it into the final version of the legislation.
“It affects a lot of people, and it’s not a huge dollar amount,” she said. “I’m going to say it stays.”
According to the Bipartisan Policy Center, this provision would cost $72 billion from fiscal years 2025 through 2034.
Changes to SALT deductions, estate taxes
The proposed legislation has some additional tax considerations for retirees, though they could be subject to revisions.
For starters, the bill would extend the $10,000 cap on state and local tax (SALT) deductions first enacted under the Tax Cuts and Jobs Act (TCJA).
It also introduces a higher cap for certain taxpayers: Beginning in 2025, individuals would be able to deduct up to $40,000 of their state and local taxes, with the benefit phasing out at a rate of 30% for those earning more than $500,000. Both the $40,000 cap and the $500,000 income threshold would increase by 1% annually through 2033.
Read more: 4 ways to save on taxes in retirement
The SALT cap provision evolved on the House floor from a $30,000 deduction that phased out at $400,000 of income, Featherngill noted.
That’s a modest improvement for high-income earners, especially in high-tax states like California and New York, but it still offers limited relief. And given the political sensitivity and ongoing negotiations, there’s a good chance the final version will look different, Featherngill said.
Additionally, the bill would make permanent the higher estate tax exemption, which is currently set to expire after 2025. Under the bill, the exemption would be set at $15 million starting in 2026, with annual adjustments for inflation.
“There hasn’t seemed to be much controversy around that,” Featherngill said. “So I think that has a good chance of moving forward.”
Roth conversion considerations
The “big, beautiful bill” also has some tax implications for Roth IRA conversions, Featherngill explained.
Those looking to make a Roth IRA conversion have two key questions to consider: Do you have the liquidity to pay the taxes due on the conversion, and is the upfront tax cost worth it over time?
That calculation often hinges on your current and future tax brackets.
“Normally, we think about the break-even point if we’re looking at there being a lower tax bracket later,” Featherngill said. “Usually, there’s a break-even point because you’re accelerating the tax expense. And so at what point would you have been better off just waiting to take that money? You have to look at what your tax bracket is going to be down the road versus if you brought in that income through the Roth conversion.”
Read more: How do Roth IRA taxes work?
And that’s where the latest tax proposal comes into play — it maintains the wider tax brackets introduced by the TCJA that provide some breathing room.
“The thing to remember is that it’s not just the rates, it’s the brackets,” Featherngill said. “Whereas it used to be you would get into the 39% bracket at about $400,000, in the current world, you’re not even getting into the 37% bracket until you’re well above that. So there’s a lot of room to plan and to do some good tax arbitrage.”
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
