Opportunities From the One Big Beautiful Bill
On July 4, 2025, President signed The One Big Beautiful Bill Act (OBBB) into law, creating significant tax legislation that extends expiring Tax Cuts & Jobs Act provisions and introducing new tax benefits and planning opportunities for individuals and businesses.
We are living in one of the lowest tax environments in history. Prior to the OBBB, our low tax rates were scheduled to end at the end of 2025. Many of our clients have been making Roth conversions and this would have been the last year to stay in our current tax brackets. Now we have up through 2028.
Up until now, federal employees could not convert from the Traditional TSP to the Roth TSP. Beginning January 2026, federal employees will be able to do this. Given our national debts over 37 trillion and the significant unfunded liabilities for Social Security and Medicare make us believe at some time we are going to have to reduce this debt. There are two ways to do this: 1) Raise taxes or 2) Grow our way out of this. Most people believe that taxes will have to go up.
This may be a great opportunity to convert qualified funds (TSP, IRA, 401k’s and 403b’s). It sounds like a great idea to go from forever taxed to never taxed, however it is highly recommended that you work with an advisor that can create different scenarios to see if Roth conversions make sense for you. We do something called bracket bumping. If you are in the 22% tax bracket and you are not willing to go up to the 24% bracket, then we need to do am analysis to see how much you can convert. The OBBB provides many opportunities.
Carol will be presenting a webinar, discussing other aspects of OBBB. Please join us.
Date: September 30th at 5:00 EST
Click link to register:
https://zoom.us/webinar/register/WN_R2Lk-UN6SVWdtYF5B0mDsA
Please follow link below to find out more. I wrote an article several years ago, but it still applies:
https://www.fedsmith.com/2014/10/13/pay-taxes-on-the-seed-not-the-harvest/
We look forward to seeing you on September 30th at 5:00 EST!