Under the new law (Public Law 119-21), many ordinary income tax rates at the lower levels from the 2017 act were made permanent. That means your employer withholding may drop, and your net salary per paycheck will go up.

Not everyone benefits equally. High earners face phaseouts, deduction limits, or bracket creep that still bite state and local tax (SALT) deductions remain capped, and itemized deductions like mortgage interest or charitable gifts still face limits.

Now What Do You Do With the Tax Cut Bonus?

With more disposable income, savvy investors can accelerate savings, invest more aggressively, or pay down debts. It also shifts the balance: before, taxes often constrained risk tolerance; now, the ceiling moves. In other words, you keep more. But you must act to leverage it. Treating a tax cut like a windfall instead of a weapon would be your biggest mistake. So don’t let your paycheck gains slip into passive consumption.

Here are some suggestions on how to turn higher take-home pay into your advantage. You have two angles: you can deploy the surplus, which we’ll cover in our Finance Play, or you can legally increase take-home pay or savings further, where possible. Everyone will find something they can do here.

Increase Savings and Take-Home Pay via Financial Engineering

When the code changes, your tactics should change as well. Here is a list of suggestions to maximize your wealth.

Max Out Pre-Tax Accounts

Use 401(k), 403(b), HSAs, and FSAs to shield more income from taxes. The extra net pay gives breathing room to boost pre-tax contributions.

Roth Conversions in Low-Bracket Years

If you land temporarily in a lower bracket, convert taxable accounts to Roths. Pay tax now while marginal rates are low, as history and our large deficits point to much higher tax rates down the road.

Review Withholding

Adjust your W-4 or state withholding to reflect lower tax rates so more of your net income stays with you rather than being overwithheld.

Tax-Efficient Asset Placement

Place muni bonds or tax-exempt funds that are free of federal and, in some cases, also state taxes in your taxable accounts. Don’t waste your non-taxable accounts on those, but keep ordinary income from REIT holdings in non-taxable accounts like your IRA or 401(k).

Entity Structuring for Side Income

For side gigs or small-business income, consider S corporations or LLC pass-through elections to shift income efficiently (follow the IRS’s reasonable compensation rules).

Charitable Planning

Use donor-advised funds or qualified charitable distributions to bunch deductions and reduce taxable income.

Bottom Line

Lower tax rates and bigger paychecks make 2025 a rare policy-driven income boost. Investors should channel that windfall toward companies and ETFs positioned for rising consumer activity and domestic growth and stay alert to policy reversals and inflation that could erode those real gains.

Read today's edition.

November 28, 2025