What the 2025 Tax Legislation Means for You

What the 2025 Tax Legislation Means for You:

Highlights from the “One Big Beautiful Bill Act”

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As we enter the second half of the year, one of the most consequential developments for individuals and businesses is the passage of the much-anticipated 2025 tax legislation—formally referred to as the Tax Relief for American Families and Workers Act, but popularly dubbed “One Big Beautiful Bill Act” (OBBBA).

Designed to extend and preserve many of the favorable provisions of the 2017 Tax Cuts & Jobs Act (TCJA), this new legislation provides clarity around tax planning for high earners and business owners, while introducing a handful of noteworthy new benefits. Here’s what you need to know:

1. Individual Income Tax Rates Remain Favorable

The bill “permanently” extends the individual tax brackets established under the TCJA, avoiding a scheduled reversion to higher pre-2017 rates. This means the 10%,12%, 22%, 24%, 32%, 35%, and 37% marginal tax brackets will continue—an important win for high-income individuals and families looking for long-term predictability. Notably the 10% and 12% bracket levels also received inflationary adjustments.

2. SALT Deduction Cap Expansion (with a Catch)

The cap on State and Local Tax (SALT) deductions increases from $10,000 to $40,000 for married couples filing jointly. However, this benefit starts to phase out for households with Modified Adjusted Gross Income (MAGI) between $500,000 and $600,000. This creates a planning opportunity for those taxpayers below the phaseout range—but may offer little relief for higher-income earners (with MAGI greater than $500,000). The marginal federal tax rate between $500,000 and $600,000 of MAGI can be as high as 45% taking into consideration the phaseout of the SALT deduction from $40,000 back to $10,000.

3. Standard Deduction and Itemized Limitations

The higher standard deduction established under the TCJA remains intact. The Pease limitation on itemized deductions is eliminated but replaced with a new limitation. Specifically, the effective itemized deduction benefit drops from 37% to 35% for those in the highest federal income tax bracket.

 4. Estate Tax Exemption Rises

The estate tax exemption will increase to $15 million per individual in 2026 (from roughly $13.99 million in 2025), adjusted annually for inflation thereafter. This increase provides a larger window for legacy planning and tax-efficient wealth transfer strategies, especially for those with complex estates. The OBBBA legislation did not make any material changes to basis step-up, family entity planning, or grantor trust regulations.

5. New Individual Provisions to Watch

Four new tax breaks have been introduced:

• Qualified Tips Deduction: Often referred to as the No Tax on Tips provision, this legislation doesn’t technically eliminate all tax on tips but provides a deduction on tip income received. The provision allows a taxpayer to deduct up to $25,000 of qualified tips from income for years 2025 to 2028. The deduction starts to phase out for Single Taxpayers with $150,000 of MAGI or Married Filing Joint Taxpayers with $300,000 of MAGI.

• Qualified Overtime Pay Deduction: Similarly, there is a deduction for Qualified Overtime Pay, which has been referred to as No Tax on Overtime. The deduction is $12,500 for Single Taxpayers and $25,000 for Joint Taxpayers. The phaseouts are similar to the Tip provision. Note only the overtime portion of pay is excluded, not the regularly hourly rate.  For example, if regular pay is $30.00 per hour and overtime pay is $45.00 per hour, ONLY the additional $15.00 per hour is deductible as “overtime pay,” subject to the aforementioned phaseouts.

• Enhanced Temporary Senior Deduction: The Enhanced Senior deduction, touted as No Tax on Social Security, is a deduction up to $6,000 for Single Taxpayers and $12,000 for Joint Filers. The deduction starts to phase out for Single Taxpayers with MAGI of $75,000 and Joint Filers with $150,000 of MAGI. Projections from the legislation suggest roughly 88% of Taxpayers will now not incur tax on their Social Security (up from approximately 65%), but Social Security can still create a tax liability for high income individuals.

• “Above the Line” Charitable Deduction: Starting in 2026, a new provision in OBBBA allows non-itemizers to deduct up to $1,000 ($2,000 for married couples filing jointly) for cash contributions made to public charities (does NOT apply to donations to Donor Advised Funds).  This provision is similar to temporary deductions offered during the Covid-19 pandemic, which saw significant participation.

While some of these provisions are unlikely to benefit high-net-worth families directly, they could be meaningful for employees or children entering the workforce.

Additionally, interest paid on loans used to purchase domestically-produced vehicles may now be deductible—an incentive aimed at boosting U.S. manufacturing.

6. Business Owner Provisions Offer Significant Opportunities

This bill continues to provide robust support for entrepreneurs, medical practice owners, and closely held businesses:

• 199A Deduction Extended: The 20% pass-through income deduction for qualified business income (QBI) remains in place, continuing to provide substantial tax savings for those individual business owners who are eligible.

• 100% Bonus Depreciation Restored: Businesses can once again claim 100% bonus depreciation on qualifying property. Before OBBBA, bonus depreciation was at 40%.

• Section 179 Expensing Increased: The limits on 179 Expensing (both the deduction and qualifying property place in service) have both increased.

• Improved QSBS Treatment: Enhanced tax treatment of Qualified Small Business Stock (QSBS) makes equity-based planning more attractive and entity-based planning more important. Depending on your long-term goals with a business, whether a business is a pass-through entity or a corporate structure could have significantly different tax results.

What This Means for You

This legislation offers continuity in many areas while providing new opportunities for proactive tax planning. For individuals with significant income or estate planning needs, the preservation of TCJA rates and the expanded estate exemption could be especially impactful.

For business owners, the extended deductions and accelerated depreciation rules can materially improve after-tax profits and support reinvestment.

Next Steps

At Gilbert & Cook, we view tax planning as a key component of your broader wealth strategy. With the 2025 legislative changes now in place, we encourage a mid-year review to assess how these updates align with your personal and business goals.

Whether you're evaluating gifting strategies, planning a business exit, or simply looking to optimize your income and deductions—our team is here to provide clarity and confidence in every decision.

Let’s talk about how these new provisions may impact your plan—and how to position yourself to live a life of abundance.

Disclosure: The material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Gilbert & Cook does not provide tax or legal or accounting advice, and nothing contained in these materials should be taken as such. Gilbert & Cook is a Registered Investment Adviser. SEC Registration does not constitute an endorsement of Gilbert & Cook by the SEC nor does it indicate that Gilbert & Cook has attained a particular level of skill or ability

Medicare: Understanding the Basics and Making Informed Choices

A summarized recap from our June 6th Medicare Event presented by Capitol Benefits Group.

Navigating the world of Medicare can be overwhelming, but Medicare is an essential aspect of an individual’s financial plan.  Gilbert & Cook recently hosted an educational seminar entitled “Medicare 101: Understanding the Basics and Making Informed Choices.”   This article will recap the information shared at the seminar.

Medicare Part A, provides coverage for inpatient hospital stays, skilled nursing facility care, home health care, hospice care and drugs administered in a hospital or nursing facility. For the year 2024, the deductible for Part A is $1,632.  Individuals are responsible for paying this amount before Medicare coverage kicks in.

Medicare Part B provides coverage for doctor office visits, outpatient mental health care, outpatient hospital care, home health care and clinical lab services.​ In 2024, the deductible for Part B is $240.​ After meeting the deductible, individuals typically pay 20% of the cost for covered services.  

Medicare Part D provides coverage for prescription drugs.  Medicare Part D is offered by private companies.​ The coverage provided by a Medicare Part D plan, including the covered drug list, can change annually.  You should review your Medicare Part D coverage annually to ensure your plan still covers your prescriptions and meets your needs.

Medicare Supplements, also known as Medigap plans, are designed to fill the “gaps” in Medicare Parts A and B.​ Medicare Supplement plans are offered by private insurance companies and provide coverage for deductibles, coinsurance, and other out-of-pocket costs.  Medicare determines whether a service is covered, not the Supplement carrier.​

Medicare Advantage, also referred to as Part C, is an alternative to original Medicare (Medicare Parts A, B and D with a Medicare Supplement).​ Medicare Advantage plans are offered by private insurance companies and only cover services provided by in-network (HMO or PPO) physicians and facilities.  Many Medicare Advantage plans have a $0 monthly premium and include dental and vision benefits, over-the-counter allowances, and prescription drug coverage.  It's important to review the specific details of each plan, as deductibles and coinsurance can vary from county to county and change annually.  If you choose a Medicare Advantage plan, you will still enroll in Medicare Parts A and B, but the insurance company will manage your care and pay claims, not Medicare.

Medicare Part A has no monthly premium, as long as the individual or his/her spouse paid Medicare taxes for at least 10 years.​ The Medicare Part B premium for 2024 is $174.70 per month.    The premiums for Medicare Parts B and D are adjusted for individuals who earned more than $103,000 in 2022 filing single or married but separate), and for married individuals who earned more than $206,000 in 2022 filing jointly.  The income lookback window for Medicare Parts B and D adjustments is two years.

You apply for Medicare through the Social Security Administration (SSA).  Your Initial Enrollment Period (IEP) typically begins three months before you turn 65 and ends three months after your birthday month. The SSA provides online resources and the option to schedule an appointment with your local office for assistance.​

Online Resources: www.ssa.gov/medicare
Schedule with your local office: www.ssa.gov/locator/

Understanding the basics of Medicare will help you make informed decisions. Whether you choose original Medicare -- Medicare Parts A, B and D plus a Medicare Supplement – or a Medicare Advantage plan, it is important to review the available options and select the plan that best meets your individual needs.  Consider consulting with a Medicare insurance professional for guidance on your Medicare decisions.

June means it's time for your Mid-Year Financial Checklist

What should you be looking at in June?

A mid-year financial check-in is a crucial practice for maintaining and improving one’s financial health. Typically this process is helpful during the month of June so that you can do a thorough review of your finances, including income, expenses, savings, and investments, to ensure you are on track with your annual financial goals.

By taking the time to assess your financial situation mid-year, you can make necessary adjustments, correct any deviations, and reinforce positive habits that will help you achieve your long-term financial objectives. This proactive approach allows for a more manageable and less stressful end-of-year financial review.

Mid-Year Checklist

Budget Review

·        Compare actual income and expenses against your budget.

·        Identify categories where you overspent or underspent.

·        Adjust budget allocations as needed for the remaining months.

Income Assessment

·        Verify all sources of income for accuracy.

·        Consider any changes in income, such as bonuses, raises, or additional income streams.

·        Plan for any expected changes in income for the rest of the year.

Expense Analysis

·        Review all regular and recurring expenses.

·        Identify any new or unexpected expenses that have occurred.

Debt Management

·        List all outstanding debts, including credit cards, loans, and mortgages.

·        Check balances, interest rates, and monthly payments.

·        Explore options for refinancing or consolidating high-interest debt.

·        Develop or update a repayment plan to stay on track.

Credit Health Check

·        Obtain a copy of your credit report from all three major bureaus (Equifax, Experian, TransUnion).

·        Check for any errors or signs of identity theft.

·        Confirm all open accounts are accurate and hard inquiries were approved.

·        Review your credit score and take steps to improve it if necessary.

  Savings Review

·        Evaluate the balance of your emergency fund.

·        Ensure you have at least three to six months of living expenses saved.

·        Review if cash on hand is in a high-yield checking or savings account.

·        Determine if cash in excess of the emergency fund should be invested.

·        Confirm you are taking advantage of employer funded savings such as an employer retirement plan match or HSA match.

·        Review savings goals for short-term and long-term objectives.

·        Adjust savings plan to meet these goals by year-end.

Investment Portfolio Review

·        Assess the performance of your investments.

·        Review asset allocation and rebalance your portfolio if necessary.

·        Check for any changes in risk tolerance or investment strategy.

·        Consider increasing contributions to retirement accounts if possible.

Insurance Coverage

·        Review all insurance policies (health, auto, home, life, umbrella, disability, etc.).

·        Ensure coverage is adequate and up-to-date.

·        Compare policies to find better rates or coverage if needed.

Tax Planning

·        Review the first half of the year's income and tax withholdings.

·        Estimate your tax liability for the year.

·        Make any necessary adjustments to withholdings or estimated tax payments.

·        If you need to make estimates, determine if estimates should be based on the prior year safe harbor or current year estimated liability.

·        Review for strategic opportunities to utilize Roth IRA contributions or conversions.

Financial Goals Update

·        Review your financial goals set at the beginning of the year.

·        Assess progress towards each goal.

·        Adjust timelines or strategies for achieving these goals if needed.

Financial Documentation

·        Organize financial documents and statements.

·        Ensure important documents are accessible and securely stored.

·        Consider going paperless if it helps with organization.

  Meet with your Advisor

·        Schedule a meeting with your Advisor

·        Discuss any major life changes that could affect your financial plan.

·     Seek guidance on any complex financial decisions or adjustments.

This holistic review ensures that your financial plans remain adaptable to any changes that may arise throughout the rest of the year. Reminder to keep an open line of communication with your Advisor for any changes in your financial situation.

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All opinions expressed in this article are for general informational purposes and constitute the judgment of the author(s) as of the date of the report. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual or on any specific security. The material has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Gilbert & Cook does not provide tax or legal or accounting advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital and past performance does not guarantee future returns; please seek advice from a licensed professional. Gilbert & Cook is a Registered Investment Adviser. SEC Registration does not constitute an endorsement of Gilbert & Cook by the SEC nor does it indicate that Gilbert & Cook has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Adviser and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Adviser unless a client service agreement is in place.