5 Ways the OBBBA Rewards the Midwestern Millionaire: You Won't Want to Ignore These Tax Planning Opportunities
Diligent savers who take proactive steps to take advantage of these tax-lowering opportunities can keep more of their wealth and even help build a tax-efficient legacy for the next generation.
The One Big Beautiful Bill Act (OBBBA) opens up several planning opportunities that could make a real difference in what you keep in your pocket — not just this year, but for years to come.
If you're like our clients, whom we call Midwestern Millionaires — hardworking, frugal and diligent savers with $1 million or more saved (I wrote a book on this that you can request here) — these are five of the most important provisions to understand for how they may affect your long-term tax strategy.
1. Lower tax rates aren't going away (for now)
One of the biggest concerns we hear from clients is whether today's historically low tax rates are about to disappear. Current legislation signals that lower marginal tax rates are likely here to stay longer than previously expected, at least for now.
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This creates a great window of opportunity for both retirees and pre-retirees to execute strategies such as:
- Roth conversions
- Accelerating income into lower-tax years
- Capital gains planning
If tax rates continue to remain relatively low, planning proactively and implementing various planning strategies now can dramatically reduce your lifetime tax liability.
This is especially important for those with significant IRA balances and/or pensions that will increase their income in the future.
2. A higher standard deduction — and bonus deductions
The standard deduction has already simplified filing for millions of Americans, and the OBBBA has increased the already large standard deduction once again.
For many households, this means that itemizing deductions will become even less common. But with the OBBBA comes an additional bonus deduction opportunity on top.
Specifically, the law introduces an enhanced deduction of $6,000 for taxpayers aged 65 and older. This additional deduction phases out at higher income levels, so it's most impactful for retirees and near retirees in moderate-income ranges.
This makes it more crucial than ever to revisit your tax strategy each year, rather than assuming your situation remains the same.
For those in or approaching retirement, the potential savings here are too significant to overlook.
3. A new charitable deduction for non-itemizers
Historically, if you did not itemize your deductions, you likely have seen no benefit from any charitable giving you have done over the years, but the OBBBA has changed that.
The law introduces a charitable deduction that's specifically designed for non-itemizers, so you can finally see a tax benefit for the giving you're already doing, even if you elect to take the standard deduction.
Those who file married filing jointly can deduct up to $2,000, and those who are single can deduct up to $1,000.
4. An expanded SALT deduction
The state and local tax (SALT) deduction cap has been a sticking point for years, particularly for higher-income households and those in high-tax states.
The OBBBA has increased the deduction cap, potentially allowing taxpayers to deduct more of their:
- State and local income taxes
- Property taxes
While the impact will vary depending on where you live, this could be a meaningful change for those who have felt limited by the previous cap of $10,000.
For some households, it may even make itemizing deductions viable again, especially when combined with mortgage interest, medical expenses and charitable deductions.
5. Trump Accounts for newborns
One of the more unique provisions in the bill is the introduction of so-called Trump Accounts, which are tax-advantaged savings accounts established for newborns.
These accounts are designed to create a financial head start for future generations.
While details will continue to evolve, the broader theme is clear: Early investing is being incentivized.
For parents and grandparents alike, this could be a great thing to do for their children/grandchildren. To find out more and to sign up your newborn, visit www.trumpaccounts.gov.
The bigger picture: Opportunity requires action
Tax legislation always creates winners and losers, but more importantly, it creates planning opportunities. The common thread across all five of these tax changes is flexibility:
- Lower rates extend planning windows
- Higher deductions simplify filing while adding targeted benefits
- Expanded deductions and new account types create new ways to reduce taxes over time
But none of these matters without a strategy. The households that benefit most won't be the ones who simply react — they'll be the ones who proactively adjust how and when they recognize income, take deductions and plan for the next generation.
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