It’s been roughly two months since Congress passed President Donald Trump’s One Big Beautiful Bill Act (OBBB), and American taxpayers are still unraveling exactly what it means for them. At the same time, the economy is starting to see the impact of a higher effective tariff rate.
Let’s take a look, first, at the main takeaways from the OBBB, focusing on what individuals and businesses should devote attention to within the 1,000-page legislation. Then we’ll dive into the outlook for the economy and markets, and how investors can move forward in this ever-shifting landscape.
With such sweeping legislation as the OBBB, there are changes that impact almost everyone, from high earners to low earners and young families to seniors. Here are several of those key areas that may apply to you.
What’s going on with Social Security and the One Big Beautiful Bill?
A big discussion point during Trump’s 2024 campaign was his desire to eliminate the tax on Social Security. Now that he’s pushed through major tax legislation, many are wondering what that means for their Social Security benefits.
The short answer: The OBBB did not get rid of Social Security tax. However, it did introduce a new deduction for seniors that can reduce their tax liability.
“Seniors aged 65 and older have a new deduction they can take for 2025 through 2028 that will reduce their income by $6,000 [for individuals] and $12,000 if they're married filing jointly,” said Sarah Daya, Central Division Lead of Wealth Planning & Advice for J.P. Morgan Wealth Management.
However, the deduction is subject to income limitations. It starts to phase out for single filers at $75,000 in modified adjusted gross income (MAGI), and for joint filers at $150,000.
“The deduction completely goes away when we hit MAGI of $175,000 for a single taxpayer and $250,000 for married-filing-jointly taxpayers,” Daya added.
Medicaid work requirement
The new Medicaid work requirement, which goes into effect on January 1, 2027, could disproportionately affect older adults who rely on Medicaid and aren’t yet 65. It stipulates that Medicaid expansion enrollees between the ages of 19 and 64 must work at least 80 hours per month to maintain coverage. They can also satisfy this requirement through qualifying activities like community service, a work program or half- to full-time enrollment in an educational program.,
“The thing to keep in mind there is [that] states have the ability to implement it sooner than January 1, 2027. So we are going to have to wait and see what each of the states decides to do with this,” Daya said.
She continued, “States can also have more stringent requirements than what the federal government is asking for. We really should think about the [federal requirements] as the bare minimum.”
Trump Accounts
Under the new tax law, the government will provide “Trump Accounts” to newborn U.S. citizens to help them pay for future expenses.
Some of the details still need to be made clear, but it should work like this: For children born in the 2025 to 2028 time period, the government will make a one-time contribution of $1,000 to an investment account. After that, it’s up to families and other eligible contributors to oversee the growth of the children’s accounts. There will be limited investment options available.
It’s likely that children born outside of the 2025-to-2028 window will still have access to these accounts, but won’t receive the $1,000 government contribution unless there’s legislation passed to extend it.
As far as account rules, up to $5,000 can be deposited each year, including up to $2,500 from employers, which are amounts that will be adjusted for inflation starting in 2027. The contributions must be made with after-tax dollars and aren’t tax-deductible, at least before the child turns 18.
Once the child is 18, contribution limits go up to IRA levels. Withdrawals also follow similar rules to IRAs. They can only start after the beneficiary is 18 years of age, and they’re subject to income tax and a penalty if taken before age 59 ½. However, there are exceptions, such as if the funds are being used for college tuition or a first-time home purchase (still, these types of withdrawals can only be made after age 18).
529 accounts
“With 529 accounts, prior to the OBBB, there was a limit in terms of how much we could use for K–12 expenses. And that limit was $10,000. Under the new bill, that gets increased [to] $20,000 that can be used for K–12 schooling,” Daya explained.
This gives families more flexibility to use 529 funds for expenses leading up to college.
SALT deduction
Another change detailed in the bill is the increase in the state and local tax (SALT) deduction. The previous cap of $10,000 has gone up to $40,000, which could mean significant relief for residents of tax-heavy states like California, Illinois and New York. It also has the potential to help residents of states like Texas and Florida, because even without a state income tax, property taxes also factor in.
Like many deductions, though, the SALT deduction is subject to income limitations. It starts to phase out at MAGI of $500,000, and at $600,000, it goes back down to the previous $10,000 cap.
“So just from a planning standpoint, one of the conversations that I'm having with clients is: Do we have an opportunity to defer some income?” Daya said. “Keep in mind, the $40,000 increase to that cap only goes through the end of 2029. Starting 2030, it comes back to $10,000, barring any action from Congress at that point. One of the things to think about is, is there an opportunity to defer recognizing some income into future years so that we're not necessarily going above that $500,000 or $600,000 limitation?”
Business owners may also want to pay close attention to the new legislation, and to two provisions in particular.
R&D expensing
Under the OBBB, “we have a permanent expensing of capital and R&D expenses,” Daya said.
She did note that it’s only for R&D that’s being used in the U.S. – any foreign R&D still has to be amortized over a period of 15 years.
She added, “Under the Big Beautiful Bill, taxpayers have the ability to go back and amend their tax returns, post-2021. So if [you had R&D] expenses that occurred in 2022, ‘23, ‘24, we have the ability to go back and amend the tax return to do that full 100% expensing in that year. That is an option that's available for small businesses that have $31 million in gross receipts or less who previously weren't doing that.”
Bonus depreciation
“The other important provision for business owners is the bonus depreciation component,” Daya said. “For acquired property that's qualified acquired property after Jan. 19, 2025, you have the ability to take 100% bonus depreciation on that property.”
However, Daya advised really planning out when and how to take that depreciation.
“If you’re going to take that full depreciation in 2025, we'll see an increase in cash flow in 2025, but what about in 2026 when we don't have depreciation to use to offset some of the taxes? While it's something that sounds great in theory that we can depreciate all of it in one year, careful tax planning is something that's going to be very important here, because we don't want there to be negative ramifications from a taxable income standpoint for business owners in the future,” she explained.
While the OBBB will certainly help inform financial planning in 2025 (and beyond), what’s going on with the economy and markets is another thing individual investors may want to keep an eye on. So far, J.P. Morgan Wealth Management strategists’ predictions for the economy are holding steady from where they were mid-year. That is, mainly, slowed growth and an uptick in inflation by the end of 2025.
Things are a little more exciting on the investment side.
“Despite the rise in the effective tariff rate that we've seen so far year-to-date, we have actually increased our expectations for how much the S&P 500 could continue to rise over the course of the next 12 months,” said Elyse Ausenbaugh, Head of Investment Strategy for J.P. Morgan Wealth Management.
She continued, “Large-cap corporate America is proving better than expected in terms of being able to navigate these potential tariff headwinds. This is happening relatively slowly, which means these businesses have time to plan and pivot accordingly. [This has been] aided by the big frontloading of imports in the spring and early summer that's created a buffer in the present time for them to continue to be agile in terms of their operations.”
Tariff impacts
That’s not to say the tariffs aren’t having an impact. According to Ausenbaugh, the effective tariff rate has risen and will likely settle in the 15%–20% range.
How is that pain being felt, exactly? It’s hard to say, but Ausenbaugh estimates American consumers are bearing about 40% of the tariff burden. Another 40% is being paid out by American businesses, and the final 20% rests on the foreign companies shipping the goods here.
Overall, “that's going to manifest as an ongoing slowdown in economic growth, probably a further modest pickup in inflation, and we need to brace for the possibility that the unemployment rate starts to rise,” she said. “All of that, though, seems to be well understood by markets, and we do think that equities in particular are doing a good job differentiating those pieces that are most exposed to tariff headwinds and those that can be relatively more insulated.”
Artificial intelligence as an area of opportunity
One of those more “insulated” pieces is artificial intelligence (AI).
“It's the big theme that's been driving markets so far year-to-date, and I think we're continuing to see this positive feedback loop grow stronger and stronger that helps us understand why these companies are so committed to continuing to pursue investment in that build-out regardless of what might be going on in the economic backdrop or the uncertainty that's plaguing it,” Ausenbaugh said.
Still, AI adoption amongst businesses is only around 10%. Ausenbaugh expects this to accelerate, as data suggests that early adopters of AI have seen more meaningful productivity gains than those who haven’t yet adopted it.
If you apply the same principle to investing, it could mean early investors will realize greater returns than those who wait it out.
As we move toward the end of 2025, and especially in the wake of major legislation, making sure your tax and investment plans are updated is a priority. But in this shifting landscape, it’s important not to let change overwhelm you.
“Tariffs, market returns, what the Fed is going to do with interest rates, expiration dates on the tax bill, etc. – those are all things we can't control,” Daya said. “I want to make sure everyone is focused on those things that we can control, and that's building out your financial plan. Think about what your short-term and long-term goals are. Are we able to help you fulfill those? What does that look like from a lifestyle standpoint? What does that look like from a legacy standpoint?”
Connecting with a J.P. Morgan advisor can help you answer these questions and find a measure of stability in turbulent times.
