News made headlines this month that a new 389-page tax bill that includes trillions in tax cuts is on its way. While changes may still occur before final passage, most industry experts believe the majority of these proposals will move forward. This creates both challenges and opportunities for financial advisors and their clients.
Some of the most significant changes in the proposed legislation include:
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Tax-free tips through 2028 for eligible workers with incomes below $160,000. Workers in certain service industries would benefit from this provision, with the Treasury Department expected to release guidelines on qualifying occupations.
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Tax-exempt overtime earnings effective until 2028 for employees making less than $160,000 annually. This benefit applies to overtime as defined by the Fair Labor Standards Act, with employers still required to document these payments on W-2 forms.
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Enhanced deductions for older Americans with an extra $4,000 added to the standard deduction for taxpayers 65 and older from 2025-2028. This benefit gradually disappears for singles with incomes over $75,000 and married couples over $150,000.
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Car loan interest write-offs capped at $10,000 with eligibility restrictions based on income. Singles earning more than $100,000 and couples over $200,000 will see reduced benefits. Only vehicles assembled in America qualify, and several exclusions apply including fleet vehicles and refinanced loans.
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Expanded SALT cap moving from $10,000 to $30,000 for most filers ($15,000 for married filing separately). Taxpayers with incomes above $400,000 face progressive reductions, though the cap won't fall below current levels.
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Permanent extension of Trump-era tax rates instead of the scheduled 2026 reversion. The seven tax brackets (10% through 37%) would remain in place rather than returning to previous higher rates.
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Larger Child Tax Credit of $2,500 per qualifying child (up from $2,000) for tax years 2025-2028, after which it would return to current levels.
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Enhanced and permanent QBI deduction increasing from 20% to 23% for qualifying business owners with some service business restrictions loosened. The legislation removes the sunset provision that would have ended this benefit.
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Revised payment app reporting with 1099-K thresholds jumping to $20,000 AND 200 transactions (up from $600), easing compliance burdens for casual sellers and small businesses. The general business payment reporting threshold would also increase to $2,000.
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Full expensing for business investments with 100% bonus depreciation for qualifying property purchased between January 2025 and December 2029. Section 179 expense limits would also increase substantially.
Additional Key Tax Changes Worth Noting
Beyond the major provisions outlined above, the proposed legislation includes several other noteworthy changes that create planning opportunities that financial advisors need to be aware of:
- MAGA Accounts: The bill establishes "Money Accounts for Growth and Advancement" for children under 18 (and under 8 when established) with a $5,000 contribution limit. These accounts can be used to pay for higher education, small business loan expenses, or first-time homebuyer costs. For children born between 2025 and 2028, there's also a one-time $1,000 credit deposited into the account.
- HSA Enhancements: The proposal expands Health Savings Account eligibility to individuals enrolled in Medicare Part A due to age, broadens the definition of High Deductible Health Plans to include Bronze and Catastrophic plans, allows fitness expenses to qualify for reimbursement, and increases contribution limits for certain taxpayers with income-based phase-outs.
- Charitable Deductions for Non-Itemizers: A charitable deduction of $150 ($300 for joint returns) would be allowed for 2025 through 2028, benefiting the approximately 90% of taxpayers who take the standard deduction.
- Termination of Clean Energy Credits: Several green energy incentives would be eliminated in 2025/2026, including the used and new electric vehicle credits, energy-efficient home improvement credits, and clean energy system credits for installations like solar panels.
- Estate and Gift Tax Exemptions: The exemption will increase from $13.99 million in 2025 to $15 million in 2026, with future inflation adjustments, and the new proposal makes this base exemption amount permanent by removing the expiration date.
- Tax on Private Colleges and Foundations: The existing 1.4% excise tax on investment income for private colleges would be replaced with a graduated tax rate based on endowment size, with rates up to 21%. Large private foundations would face excise taxes of up to 10% on their investment income.
The "Wait and See" Approach Isn't Good Enough
Many advisors will tell their clients to "wait and see" what happens with this legislation. But the most successful advisors recognize that now is the time to position themselves as proactive planning partners.
This is where the Virtual Family Office (VFO) model offers a tremendous advantage.
Originally pioneered by the Rockefeller family in 1882, the family office concept brought together various professionals to work collaboratively for wealthy families. The Virtual Family Office modernizes this approach, making it accessible to a broader range of clients without the massive overhead of a traditional family office.
A Virtual Family Office creates a coordinated team of specialists across five key areas:
- Tax Planning - Critical for navigating the proposed changes
- Risk Mitigation - Protecting assets and managing potential changes
- Wealth Management - Investment strategies aligned with new tax realities
- Legal Services - Estate planning adjustments for higher exemptions
- Business Advisory - Leveraging accelerated depreciation and other business benefits
How Advisors Can Use the VFO Model to Help Clients Now
1. Position Yourself as the "Most Relevant Advisor"
Your clients are already hearing about these potential tax changes. By proactively reaching out with a comprehensive planning approach, you establish yourself as their go-to resource during this period of change.
2. Bring in Tax Planning Specialists
The proposed legislation creates immediate planning opportunities. For example:
- Business owners can benefit from accelerated depreciation and the enhanced QBI deduction
- Senior clients need strategies to maximize the new $4,000 standard deduction
- High-income earners need guidance on the new SALT deduction caps
- Families with children can optimize the enhanced Child Tax Credit
Rather than attempting to become an overnight tax expert yourself, the VFO model allows you to bring in specialists who can provide targeted expertise.
3. Create Multi-Year Tax Strategies
Many of these provisions have specific timelines (2025-2028), creating planning opportunities across multiple tax years. A VFO team can develop comprehensive multi-year strategies that:
- Accelerate or defer income based on the new tax landscape
- Time major purchases to maximize the vehicle interest deduction
- Structure retirement withdrawals to optimize tax brackets
- Implement business succession plans during favorable depreciation periods
4. Coordinate Estate Planning Adjustments
With the estate tax exemption increasing to $15 million in 2026 (and becoming permanent), many existing estate plans need review. Your VFO legal services team can help clients:
- Revisit estate planning documents
- Adjust gifting strategies
- Optimize charitable giving approaches
- Structure business succession planning
Getting Started with the VFO Model
If you're interested in leveraging the Virtual Family Office model to help your clients navigate these tax changes, here are three steps to get started:
- Identify your highest-value clients who will be most affected by these tax changes
- Connect with a Virtual Family Office like what Elite Resource Team offers that provides access to specialists across all five key areas
- Schedule proactive planning meetings with clients to discuss how you can help them navigate these changes
Remember: Your clients will be getting tax advice from someone. The only question is whether that advice will come through you as their most trusted advisor.
