Tax insights to help in 2025! The “One Big Beautiful Bill” and Washington State Changes

Six Things You Should Know

1. Equity Markets – were down this week with U.S. stocks (S&P 500) declining -2.41% while international stocks (EAFE) decreased – 3.81%. 
2. Fixed Income Markets – were mixed this week with investment grade bonds (AGG) increasing 0.67% and high yield bonds (JNK) declining – 0.70%. 
3. U.S. GDP – Real GDP grew at a pace of 3% in the second quarter, beating consensus expectations of 2.6%. The largest boost came from net exports as the economy saw a huge decline in imports, while the biggest drag came from a drop in inventories. 
4. Jobs Report – The U.S. economy added 73,000 jobs in July, lagging expectations for 104,000. May and June figures also saw a downward revision that has brought net job losses of 185,000. This snaps a string of strong jobs numbers and will be closely monitored by the Fed.  
5. Cybersecurity Reminder- Scammers are increasingly using Remote Access Tools (RATs) along with phishing emails or texts to take control of devices like phones, tablets, and computers. Once installed, these tools can give cybercriminals access to sensitive information, including your Schwab accounts. These attacks can be hard to spot, so if something doesn’t feel right- like unusual account activity or suspicious messages- trust your instincts. If you sense suspicious activity, please call us immediately or report any concerns to Schwab at 800-515-2157. 
6. Key Insight – [VIDEO & ARTICLE] We’re here to help you manage your wealth, not just your investment portfolio. With that, today we discuss two pieces of policy and some of the key elements that we feel affect a good portion of our clients. The “One Big Beautiful Bill” and Washington’s Capital Gains and Estate tax changes.

Insights for Investors

By Ben Klündt and Daryl Geffken

Tax insights to help in 2025! The “One Big Beautiful Bill” and Washington State Changes  

When we engage in financial planning with a client, we are taking a multitude of things into account; NOT just managing a portfolio, but helping you manage your wealth. There were two pieces of legislation, one at the federal level and one at the state level, that will likely affect a good portion of our clients. There is a good bit of data in this week’s commentary, so we hope you are wide awake when reading this one! 

The “Big Beautiful Bill” represents a sweeping federal tax reform package aimed at simplifying the tax code, maintaining key elements of the 2017 Tax Cuts and Jobs Act (TCJA), and providing targeted tax relief to individuals and families. The overall bill is just under 900 pages, so we want to dive into some of the more applicable impacts for individuals and address changes to capital gains tax and estate tax recently passed in Washington State. 

1. Tax Cuts and Jobs Act (TCJA) Extension  

One of the cornerstone features of the Big Beautiful Bill is the extension of several provisions from the TCJA, many of which were originally set to expire after 2025. If you would like more of an in-depth summary, you can read more here. The bill extends: 

• Reduced individual income tax rates for all brackets (keeps the TCJA brackets). 

• Expanded definition of qualified expenses that can be paid for with tax-free distributions from Section 529 plans. For example, tax-free distributions can now cover qualified post-secondary credentialing expenses.  

• Increased estate and gift tax exemption levels, preserving the higher threshold adjusted for inflation. For 2025, the federal exemption is $13.99 million per individual. But remember, the Washington state exemption is $3 million. So proactive estate planning will be important.  

2. State and Local Tax (SALT) Deduction Adjustments  

The original TCJA capped the SALT deduction at $10,000, which impacted taxpayers in high-tax states. From 2025-2029, the law temporarily modifies this cap by: 

• Raising the limit to $40,000 for married couples filing jointly. 

• Indexing the cap for inflation going forward by 1% each year. 

• Introducing phaseouts for high-income earners (e.g., cap begins to reduce for AGI above $500,000 for individuals or $1 million for joint filers). 

3. Standard Deduction Increase for Seniors  

The law includes a targeted provision to support older Americans through an increase in the standard deduction for taxpayers aged 65 and older. Currently, seniors receive an additional amount ($1,950 for singles and $1,550 per spouse for joint filers in 2025). The bill increases this benefit to: 

• $3,000 for individuals over 65. 

• $6,000 for married couples if both are over 65. 

4. Charitable Contribution Deduction Expansion  

Recognizing the decline in charitable giving following the TCJA’s standard deduction increase, the OBBBA includes a permanent and enhanced above-the-line charitable deduction. Key features include: 

• For Itemizers: 

• 0.5% AGI Floor: You can now only deduct charitable contributions that exceed 0.5% of your Adjusted Gross Income (AGI). For example, if your AGI is $100,000, you can only deduct the amount of donations exceeding $500. 

• Reduced Tax Benefit for High Earners: The maximum benefit from the charitable deduction is capped at a 35% tax rate, even for individuals in the 37% tax bracket. This means a $1,000 deduction will provide a $350 tax benefit instead of $370. 

• Carryforward Rule: You can still carry forward any excess contributions that exceed the applicable AGI limits for up to five years. 

• For Non-Itemizers: A new above-the-line deduction for cash contributions is available, allowing you to deduct up to $1,000 (individuals) or $2,000 (married filing jointly). However, this deduction excludes donations to donor-advised funds or supporting organizations.  

5. Washington State’s 7% Capital Gains Tax  

In addition to how this law will impact individuals, we want to highlight  the Washington State capital gains tax that imposes: 

• A 7% tax on long-term capital gains exceeding $280,000 per individual per year (2025 figure) (Kiplinger, 2025). 

• A 2.99% additional assessment on gains above $1 Million in taxable gain 

• Applies to sales of stocks, bonds, business interests, and other capital assets, with key exemptions (e.g., real estate, retirement accounts). 

6. Washington state estate tax changes  

Effective July 1^st of 2025 the Washington State estate tax provisions had a few changes that affect both the tax rate and the amount of the personal exemption (Department of Revenue, Washington State, 2025). 

• The $2.193M exemption amount was increased to $3M, this is a “use it or lose it” exemption. What that means is if your legal documents do not account for using the exemption in some way then it dies with you.  

• The tax rates increased, even though they increased the estate tax exemption they also increased the brackets. It is a marginal, bracketed system, just like income tax, with the top tax rate going from 20% to 35% assessed on the total of the taxable estate.  

If you’ve made it all the way through, honestly, we’re quite impressed. We’ve covered many key provisions that we feel will affect our clients, but there are more within the law that we can’t cover due to sheer volume. Given all of these and other tax law changes, now is a good time to review your tax situation and update your tax planning strategies. Be sure to contact us (and your tax and legal professionals) to see how these changes impact your financial life.  

As always, thank you for putting your faith and trust in us. We appreciate you, and please don’t ever hesitate to reach out with questions.  

Have a great weekend,  

– Ben, Daryl and the Team at TEN Capital   

Data, Just the Data

• U.S. Consumer Confidence – rose slightly in July to 61.7 for the 2nd consecutive monthly increase. Sentiment is now at its highest level since February.  
• U.S. Jobless Claims – initial claims rose by 1,000 last week to 218,000 and came in below expectations. Outstanding claims were left unchanged at 1,946,000. 

• U.S. ISM Manufacturing Index – fell to 48 in July and below expectations for 49.5. This marks the 5th consecutive month of contraction and the weakest level since October of last year.  
• Japan Industrial Production – rose 1.7% in June and beat expectations of a 0.6% decline. This marked the first month since March of expansion.