FRS After the Big Beautiful Bill: 5 Fast Wins (and Watch-Outs)
By Andrew Trammell, MSFP, CFP®, RICP®, EA
Quick take: The “Big Beautiful Bill” doesn’t change FRS pension formulas, DROP rules, or the Investment Plan. Those are Florida statutes. What does change is your federal tax picture and health-account options—which affects your paycheck today and how you plan DROP/pension distributions tomorrow.
1) Bigger Standard Deduction (plus a temporary boost) & Child Tax Credit
Fast win: Lower taxable income on your salary now and on pension/DROP later.
The nearly doubled standard deduction is made permanent and gets an extra inflation bump. For 2026 (projection): Single $16,300, Head of Household $24,500, Married Filing Joint $32,600.
There’s also a temporary add-on for 2025–2028 (+$1,000 single / +$1,500 HoH / +$2,000 MFJ).
The Child Tax Credit remains and is temporarily increased to $2,500 per child for 2025–2028 (then indexed).
Watch-outs: Personal exemptions stay repealed; run a fresh withholding and tax projection—especially if you’re planning a DROP payout or pension start in 2025–2028.
What to do: Update your W-4/W-4P, re-run your tax plan for any 2025–2028 distributions, and coordinate with spouse filing status and credits.
2) “No Tax on Overtime” (translation: a new above-the-line deduction)
Fast win: If your job earns FLSA overtime, the bill creates an above-the-line deduction for the overtime premium (the amount over your regular rate) for tax years 2025–2028. That can trim AGI and sometimes unlock other credits.
Watch-outs: Highly Compensated Employees over the IRC §414(q) threshold aren’t eligible. You’ll need a work-eligible Social Security number to claim it.
What to do: For police, fire, public works, corrections, and other FRS roles with overtime: make sure payroll is separately tracking the premium so you can substantiate the deduction.
3) HSA Super-Powers for Working (and Retiring) FRS Families
Fast wins:
If you’re 65+ and still working on an HDHP, you can keep contributing to an HSA even if you’re entitled to Medicare Part A.
Direct Primary Care (DPC) can pair with HSAs, and HSA funds can pay for DPC (monthly caps apply).
Bronze and Catastrophic Exchange plans are HSA-eligible under the bill—more plan flexibility around COBRA/retiree shopping.
Employers may allow FSA/HRA → HSA conversions when you switch to an HDHP (capped).
Spousal “gotchas” eased: You can stay HSA-eligible even if your spouse has an FSA; both spouses 55+ may make catch-ups to one HSA.
Extra HSA room for many families: additional contributions if income is under roughly $75k single / $150k family (phasing out by $100k/$200k).
Watch-outs: Some features need employer adoption or show up at open enrollment. Don’t assume your agency auto-adopts them—check your benefits guide.
What to do: During open enrollment, ask HR about: HDHP availability, HSA contribution limits, FSA/HRA conversion policy, and whether DPC is offered/compatible.
4) SALT Cap: Helpful (Sometimes) for Florida Homeowners
Fast win: The SALT cap increases to $30,000 MFJ (with a phase-down above $400k MAGI) and is made permanentafter 2025. Florida has no state income tax, but higher property taxes can make this matter for some households who itemize.
Watch-outs: Many FRS families will still take the standard deduction—run the math before changing withholding or donation timing.
What to do: If you own a home and itemize, compare itemized vs. standard under the new cap. Timing property tax payments may (or may not) help.
5) New Above-the-Line Deduction for Car Loan Interest
Fast win: Deduct up to $10,000 of qualifying vehicle loan interest for 2025–2028.
Who qualifies? Cars, vans, SUVs, pickups, motorcycles—and even ATVs and RVs—if final assembly is in the U.S.The deduction phases out above $100k MAGI (single) / $200k (MFJ).
Watch-outs: VIN/build location matters. It’s not “any car, any loan.”
What to do: Check your vehicle’s final assembly; keep lender interest statements for your return.
Bonus win for near-retirees
Senior deduction: A temporary $4,000 per eligible filer (65+) for 2025–2028, with income limits ($75k single / $150k MFJ). Good news if you ease into retirement while still on payroll or start pension/DROP income in that window.
What this means for FRS members (by stage)
Active employees: Overtime tracking + HSA upgrades can raise net pay and future flexibility.
12–24 months from retirement / DROP window: Bigger standard deduction (and temporary boosts) can soften taxes on DROP rollovers/partials and your first pension year—plan timing carefully.
Retirees on Florida property: SALT cap changes might help itemizers, but many still win with the standard deduction—run both.
Open-Enrollment & Year-End Checklist
☐ Confirm whether your agency will adopt the new HSA-friendly features (DPC, FSA/HRA → HSA, spouse FSA compatibility).
☐ Re-run your withholding for 2025–2028 distributions (DROP/457/IRA) under the larger standard deduction and updated credits.
☐ If you work overtime, ensure the FLSA premium portion is clearly separated on pay stubs.
☐ Homeowners: compare itemizing vs. standard after the SALT update.
☐ Vehicle loan? Verify U.S. final assembly if you plan to use the interest deduction.
☐ Near-retirees (65+): check eligibility for the senior deduction and coordinate with pension start.
Plan • Protect • Prosper (CTA)
Want a clear, customized plan for DROP timing, pension vs. IP, and tax-smart withdrawals under the new rules? Book a 15-minute intro call—no jargon, just straight answers tailored to your dates, class, and goals.
Compliance note: This is general education, not individualized tax or investment advice. Confirm specifics with FRS, your agency’s benefits guide, and your tax professional.
