On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, bringing significant changes to the U.S. tax code. But what does it mean for you? What actions should you consider? And what exactly does this bill do?

In this week’s Money Wisdom Question Series, Heath Grossman, CFP® breaks down how the OBBBA could impact your personal retirement plan.

Lower Tax Rates

The main takeaway from the OBBBA is its permanent extension of key tax cuts from the 2017 Tax Cuts and Jobs Act. With lower tax rates and a higher standard deduction now locked in, this could present a strategic tax planning opportunity, specifically with Roth conversions.

A Roth conversion involves moving funds from a traditional retirement account to a Roth account. While you’ll pay taxes on the converted amount today, future growth and withdrawals will be tax-free — potentially reducing your lifetime tax burden.

Standard Deduction for Seniors

Along with extending a higher standard deduction and lower tax brackets for most taxpayers, the OBBBA introduces an additional standard deduction for individuals age 65 and older. There’s been some misinformation out there that the bill eliminates federal taxes on Social Security, but that’s not exactly true. The OBBBA does not change the way Social Security benefits are taxed.

Instead, it temporarily increases the number of people who will owe no federal taxes on benefits by offering an additional $6,000 deduction ($12,000 for couples) through 2028. It’s important to note that this deduction is not available to individuals younger than 65 or those with higher income levels.

Other provisions of the OBBBA that offer temporary tax relief include a federal income tax deduction for qualified tips and a car loan interest deduction.

New Opportunities for Retirement Planning

With favorable tax rates likely to remain in place for the foreseeable future, now’s an ideal time to speak with your advisor about whether Roth conversions or other retirement planning strategies are right for you.