Rate Cuts & Your Portfolio
The market is now pricing in at least a 0.25% rate decrease by the Federal Reserve after September's meeting, which would mark the first rate cut since December 2024.
After reducing the Fed's overnight borrowing rate by a full 1.00% in the last four months of 2024, the Fed has taken a wait-and-see approach in 2025. Stubborn inflation data, coupled with the uncertainty of tariff policy and a resilient U.S. economy, have kept the Fed on hold through the first eight months of the year. Recent weakness in jobs data, as well as a steady contraction in the ISM manufacturing survey over the last six months, is likely to be enough to push the Fed towards action.
What does this mean for your financial situation? First, the Fed's overnight rate does not directly impact mortgage rates — those are primarily influenced by the 10-year U.S. Treasury yield. The most direct impact of a rate cut is a reduction in what investors can expect to earn from Money Market Funds and short-term U.S. Treasury bills. Borrowers with exposure to floating-rate loans — Home Equity Lines of Credit, Securities-Backed Lines of Credit, and Margin Loans — will be among the first to see relief in their interest expenses.
"One Big Beautiful Bill" — Key Changes
Below is an overview of some of the notable changes to be aware of from this summer's passage of the "One Big Beautiful Bill Act" (OBBBA) and what they mean for your plan.
Increased Standard Deduction
Permanent$15,750 for Single Filers · $31,500 for Married Filing Jointly. Increases are indexed to inflation going forward.
Increased Child Tax Credit
PermanentRaised from $2,000 to $2,200 per child under the age of 17. Phase-out begins at $200K for Single Filers and $400K for Married Filing Jointly.
Bonus Senior Deduction (Age 65+)
2025–2028Provides an extra $6,000 deduction per senior.
New Estate Tax Planning Threshold
PermanentThe Federal Estate & Gift Tax Exemption has been increased to $15M per individual starting in 2026. Married couples now have a combined $30M that can pass to heirs without estate tax.
Increased SALT Deduction
2025–2028The so-called SALT Cap has been raised to $40K from $10K. Phase-out starts at $250K for Single Filers and $500K for Married Filing Jointly.
529 Account Uses Broadened
Parents can now utilize up to $20K per year from 529s for K-12 education costs, up from $10K. Allowable usage expanded to include curriculum materials, tutoring, standardized test fees, dual enrollment programs, and education therapy for students with disabilities.
Charitable Giving Deduction Reduced
For itemized deductors, charitable deductions are only allowed to the extent they exceed 0.5% of Adjusted Gross Income. For example, a couple with $400K of AGI would not receive any tax benefit for the first $2,000 donated to charity. If they gave $10,000, they would receive an $8,000 deduction.
Overtime Pay Deduction
2025–2028Up to $12,500 for Single Filers (phased out at $150K+). Up to $25,000 for Married Filing Jointly (phased out at $300K+).
Deductible Car Loan Interest (U.S.-Assembled Autos)
2025–2028Up to $10K annually of interest paid on vehicles purchased after 12/31/24. Must be assembled in the U.S., weigh less than 14K pounds, and be for personal use.
Trump Accounts for Children
2025–2028Beginning in 2026, all U.S. children born between 2025 and 2028 will be eligible for $1,000 seeded by the U.S. government. If invested at a 7% annualized return, that would be worth ~$60,000 by the time the child reaches retirement age.
Please contact the Tilia advisory team if you would like to discuss how any of these changes may impact your specific financial plan.