It is a dangerous thing to try to summarize a complex piece of legislation.
As I’m sure you know, Congress recently passed the “One Big Beautiful Bill Act,” which runs close to 1,000 pages. Reading something that long would be difficult, even if it was a well-written, enjoyable book. “Les Miserables” is longer at about 1,500 pages, but a congressional bill will include a lot of secondary references, so it will say something like “8 US Code section 347(a)(4) is repealed” and if you want to understand it you have to go look up that section. Beyond that, any tax bill is going to involve subsequent regulations which the IRS has to enact to fill in the details.
So what I’m going to do today, rather than a fruitless attempt at telling you everything that is in the bill, is try to summarize a few of the provisions that I think will be of particular interest to Senior Voice readers.
Let’s start with the item the estate planners have been in a tizzy about, the estate tax/gift tax exclusion. If the estate you leave is less than the exclusion amount, you don’t pay any gift or estate tax. Above the exclusion amount, the tax is a whopping 40%, so this is critical. Back during the first Trump administration, the exclusion amount was temporarily doubled, but that provision was going to sunset at the end of this year. If Congress didn’t pass something, the exclusion amount would drop to half of what it was, which would be about $7 million. However, the OBBBA ratcheted that up, on a permanent basis, to $15 million. So as long as your estate is safely under that figure, you don’t have to worry about federal estate tax.
One of the things I find interesting about the OBBBA is that most people will not even notice most of the changes. The Tax Cuts and Jobs Act of 2017 had a lot of cuts which were scheduled to expire at the end of this year. For instance, the last eight years we have been enjoying an increased standard deduction, but that would have automatically disappeared at the end of this year. Your tax bill for 2026 may look a lot like the one for 2025, but if this OBBBA hadn’t passed, it would have gone way up.
One of the biggest headline items as the bill was moving along was that there would be no income tax on tips, overtime, or Social Security. That sort of happened, kind of, in a way, more or less.
Yes, generally speaking, there will be no income tax charged on tips or overtime for the next few years (this is a provision which sunsets in the future) although there are a lot of limitations on that. If you were thinking you could charge customers a low fee but let them know they need to double that for the tip if they actually want you to do a good job, forget it. The provision regarding tips only applies to jobs where tips have been traditional. And both the tip and overtime exemptions have dollar caps on them.
Social Security will still be subject to income tax, the same as it was before, at least technically. However, there is now a $6,000 additional deduction for taxpayers over age 65. It phases out if your income is more than $75,000 a year (double that for a couple) so some folks who are still working, or pulling a lot of money out of IRAs, for instance, probably won’t get the break. My understanding is that about 88% of taxpayers receiving Social Security retirement benefits, will not pay any tax on it. But on the other hand, as long as you are below those income limits, even if you are not pulling Social Security, you will still get the extra deduction if you are over age 65.
This added senior deduction expires after 2028, so for some folks this may be a good time to do things like converting a traditional IRA to a Roth or selling appreciated assets and taking the capital gains tax hit. In fact, if you have a modest taxable income now and you are over 65, you might want to consider pulling money out of IRAs, gradually over the next few years, instead of waiting until required minimum distributions hit at age 73. But that is very much an individual determination, so I am not going to advise you on that. Go ask your accountant.
Some folks with expensive homes should be pleased that they raised the SALT deduction (state and local taxes) from $10,000 to $40,000. A lot of homes in Alaska are expensive enough now that property taxes are more than what you can deduct, so this may help some people here.
One other thing seniors should keep an eye on are the “Trump Accounts” created by the OBBBA. These are accounts you can establish for a child born between 2025 and 2028. If you establish one of those, the government will pay $1,000 into the account, and then family members (I’m looking at you, grandma and grandpa) can add up to $5,000 each year after that. Money can be drawn out for higher education or other specified purposes, and otherwise it just ends up being an IRA. I would not try to do this yet, because there are a lot of regulations that still need to be adopted to flesh out the details, and I know some financial planners are questioning whether this is really that much better than a 529, but if your kids are still having kids, it might be worth looking at.
I won’t get into the rest of it; not too many of you have business depreciation to worry about, for instance, and I don’t think the Senior Voice is willing to have my column run to multiple pages. Hopefully this has been a help, though.
Kenneth Kirk is an Anchorage estate planning attorney. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. Like I said, go ask your accountant. I’m not kidding. That’s what they do, okay?
