Summary of Legislative Activity
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”) into law following its passage through both the House and Senate. The legislation represents the most significant tax overhaul since the Tax Cuts and Jobs Act (“TCJA”) of 2017 and includes sweeping extensions, new deductions, and structural reforms.
Key components include:
- Permanently extending or enhancing several TCJA-era provisions
- New deductions and tax-advantaged savings opportunities
- Meaningful updates to estate tax exemptions, small business income treatment, and family office planning tools
Note: This summary focuses on factual updates and forward-looking planning implications. It does not address the bill’s funding sources, budget scoring, or political dynamics.
Important Notes and Planning Implications
1. Permanent Extension of 2017 TCJA Tax Cuts
- The OBBBA permanently extends key individual tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA)
- Maintains top marginal income tax rate at 37%
- Prevents sunset of TCJA provisions originally set to expire after 2025
- If these provisions had been allowed to expire, an estimated 62% of taxpayers could have faced a tax increase
Why this matters: Provides long-term clarity and prevents tax increases that would have impacted many households and business owners.
2. Estate and Gift Tax Changes
- Life-Time Gift and Estate Tax Exemption increased to $15 million per individual ($30 million joint) beginning in 2026
- Indexed for inflation starting 2027
- Earlier proposals to limit Grantor Retained Annuity Trusts (“GRATs”), dynasty trusts, and valuation discounts were not included in the final law
Why this matters: Prior to the OBBBA, the Life-Time Gift and Estate Tax Exemption was scheduled to revert back to the pre-TCJA amount of approximately $7M (after adjustment for inflation) for individuals. The OBBBA makes permanent the $15 million exemption per individual and provides clarity for long-term gifting and trust planning.
3. QBI Deduction (199A) Enhancement
The Section 199A deduction for Qualified Business Income has been made permanent. For tax years beginning after Dec. 31, 2025, the income limitation phase-in will be increased from $50,000 to $75,000 for individuals (from $100,000 to $150,000 for joint filers). The enhancement also creates a minimum deduction of $400 for taxpayers with $1,000 or more of qualified business income (QBI) for material participants.
Why this matters: Offers an additional planning lever for private business owners and family office structures.
Planning action: Review pass-through structure design and consider aggregating income thresholds for optimal QBI efficiency.
4. State & Local Tax (SALT) Deduction Reform
- Cap raised to $40,000 (2025-2029) for AGI ≤ $500,000 joint ($250,000 single)
- Phased out by 30% of income above those thresholds, but not below $10,000
- Indexed for inflation starting in 2026 (e.g., $40,400 in 2026)
- Cap reverts to $10,000 baseline in 2030
- No impact on pass-through entity (“PTE”) tax workarounds (e.g., PTE tax elections)
Why this matters: This five-year window may offer meaningful relief for residents in high-tax states, especially for those under the AGI phaseout threshold. However, the benefit phases out quickly for higher earners, and the change is not permanent.
Planning action: Work to coordinate itemized deductions, explore timing opportunities, and evaluate PTE elections during the expanded window. Bunching deductions and managing Modified Adjusted Gross Income (“MAGI”) can improve outcomes for those near the thresholds.
5. Alternative Minimum Tax (“AMT”) Exemption Expansion
- Exemption amounts and phase-out thresholds permanently extended and indexed to inflation
- Applies to individuals and certain trusts and estates
Why this matters: Reduces AMT exposure for trusts and high earners with large deductibles.
6. Trump Accounts: A New Long-Term Savings Vehicle
- New account type created to promote long-term saving for children
- Initial $1,000 federal deposit for eligible children born 2025-2028
- Annual contributions of up to $5,000 are allowed (parents, relatives, or other entities), including up to $2,500 tax-free from a parent’s employer. Contributions grow tax-free until it’s withdrawn and must be invested in a diversified fund that tracks an established index of U.S. equities
- Access allowed in tiers, starting at age 18 for qualified uses, full access after age 30
- Eligibility: U.S. citizens born within the qualifying timeframe, with parents holding valid Social Security numbers
Why this matters: Trump Accounts offer a hybrid between 529 plans and Roth IRAs, encouraging early contributions, investment growth, and flexible use for life milestones. For families with long-term gifting goals, this adds a new, tax-efficient option for intergenerational planning.
Planning action: Distributions from Trump Accounts are taxed at ordinary income tax rates unless the distributions are used for a “qualifying purpose.” The OBBBA considers higher education expenses, small business expenses, and a first-home purchase as qualifying purposes.
7. Business Incentives
- Starting after January 19, 2025, 100% bonus depreciation will be available again
- Starting in 2025, domestic Research and Experimental (“R&E”) expenses can be deducted when incurred and will no longer be required to be capitalized and amortized. Certain “Small Businesses” may be able to amend prior filed returns to deduct previously capitalized domestic R&E costs. Other taxpayers may be able to deduct prior unamortized R&E over one or two years
- The limitation on deductible business interest expense that was subject to a more restrictive Earnings Before Interest and Taxes (“EBIT”) limitation will revert back to the less restrictive Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) amount, as it was when it first became law
- The Opportunity Zone program, which allows for the deferral of capital gain income by investing in certain types of new investments, has been extended
- The sale of Section 1202 Qualified Small Business Stock that is held for at least 3 years can qualify for a gain exclusion of 50%. Stock held for 4 years can qualify for an exclusion of 75% and stock held for 5 years or more can qualify for an exclusion of up to 100%. Also, the $10,000,000 per taxpayer exclusion limit has been increased to $15,000,000 per taxpayer
Why this matters: Provides strong incentives for business reinvestment and capital expenditures, particularly in U.S.-based operations.
Planning action: Evaluate timing of large capital purchases and potential benefits from accelerated depreciation schedules under the updated rules.
