The One Big Beautiful Bill (OBBB), signed into law on July 4, 2025, is the biggest tax overhaul since the 2017 Tax Cuts and Jobs Act (TCJA). For high-net-worth individuals (HNWIs) and those involved in estate, trust, and gift planning, it brings significant changes that could reshape your tax strategy and wealth transfer plans. Here are the key provisions in OBBB to know:

Key Changes for High-Net-Worth Individuals

Income Tax Rates and Brackets: Makes permanent the current individual rates and brackets, including the top 37% rate, preventing the scheduled increase to 39.6% in 2026. This keeps planning predictable for those with substantial investment or business income.

SALT Cap Temporarily Raised: Increases the SALT deduction cap to $40,000 for joint filers through 2029, with the cap phasing out for incomes over $500,000 and reverting to $10,000 for anyone with income greater than $600,000. This provides modest relief for middle- to upper-middle-income taxpayers in high-tax states, but higher earners will see no benefit compared to the $10,000 cap imposed under the TCJA.  Fortunately, the Pass-through entity tax (PTET) deduction was untouched in OBBB, which will allow business owners to continue to benefit from deductions on some additional state-level tax.

Charitable Giving Adjustments: Charitable deductions are reduced by 0.5% of adjusted gross income (AGI) for itemizers. For non-itemizers, there’s now a permanent above-the-line deduction of up to $1,000 ($2,000 for joint filers). The 60% AGI limit for cash donations to public charities is also permanent. Review giving strategies carefully to maximize deductions.

QSBS Enhancements: Expands the capital gains exclusion for qualified small business stock (QSBS) with a tiered benefit: 50% exclusion after 3 years, 75% after 4 years, and 100% after 5 years. The maximum exclusion per issuer rises from $10 million to $15 million, and the gross assets cap for eligible companies goes from $50 million to $75 million for stock acquired after July 4, 2025. This rewards investors in startups and small businesses, offering increasing tax benefits for longer holding periods, but now also provides substantial incentives for those who exit earlier.

Deduction Limitation for High-Income Taxpayers: Revives a pre-TCJA limit on itemized deductions for top-bracket taxpayers. The benefit drops slightly, from 37 cents to 35 cents per dollar above the threshold, effectively capping the value of deductions for the highest earners.

Section 199A QBI Deduction: Makes the 20% Qualified Business Income (QBI) deduction for pass-through owners permanent, preserving a key benefit for business owners, subject to limits and phaseouts.  Making the deduction permanent brings added certainty and allows for more effective long-term planning.

Alternative Minimum Tax (AMT) Exemption Extended: Extends higher AMT exemption amounts but resets phaseout thresholds to 2018 levels ($1 million for joint filers), indexed for inflation. More high earners will continue to avoid the AMT for now.

Key Changes for Estates, Trusts, and Gifts

Estate and Gift Tax Exemption Increased: Permanently raises the federal estate and gift tax exemption to $15 million per person ($30 million for couples), indexed for inflation from 2026. This preserves the TCJA’s higher limits, giving more room to transfer wealth tax-free during life or at death.

GST Exemption Aligned: The generation-skipping transfer (GST) tax exemption matches the new estate and gift exemption, also indexed for inflation – a key benefit for multigenerational planning and dynasty trusts.

Practical Planning Considerations

• Update Estate Plans: Revisit your plan, trusts, and gifting strategies to align with the new higher thresholds.
• Make Lifetime Gifts: Larger tax-free gifts can reduce your taxable estate and shift appreciating assets sooner.
• Optimize Charitable Giving: Structure gifts and trusts to maximize deductions under new rules.
• Leverage QSBS: Review startup investments to take advantage of the expanded capital gains exclusion.

Final Thoughts

The OBBB creates major opportunities and new planning challenges. Staying informed and working with experienced advisors is key to navigating this evolving tax landscape. At Snyder Cohn, we’re here to help you adapt your plan, protect your wealth, and make the most of these changes.

Contact your Snyder Cohn advisor to discuss how the OBBB may affect you.

 

By: Zane Sanchez