On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, ushering in the most sweeping federal tax reforms since the 2017 Tax Cuts and Jobs Act (TCJA). The OBBBA extends and enhances numerous individual and business tax provisions, introduces new deductions, and adjusts estate and gift tax thresholds. Below is a summary of the key provisions most likely to impact future individual, estate, and business tax planning.
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A. Provisions Affecting Individual Tax Planning

1. Extension of Current Tax Rate Schedules

The OBBBA permanently extends the individual, estate, and trust tax rates and brackets originally enacted under the TCJA.

2. Increase in Standard Deduction

The elevated standard deduction amounts introduced by the TCJA have been extended and modestly increased for 2025

3. Personal Exemption for Seniors

While the personal exemption remains set to zero, the OBBBA introduces a $6,000 exemption for individuals aged 65 and older from 2025 through 2028. This exemption phases out beginning at $150,000 of income for joint filers and $75,000 for all others

4. Expansion of the State and Local Tax (SALT) Deduction

The $10,000 SALT deduction cap is raised to $40,000 for 2025 and 2026 ($20,000 for married individuals filing separately) for taxpayers with modified AGI up to $500,000. The cap is reduced by 30% (but not below $10,000) for AGIs exceeding $500,000 in 2025, $505,000 in 2026, and 101% of the prior year’s threshold thereafter. Both the cap and AGI thresholds will increase by 1% annually through 2029, reverting to the $10,000 cap in 2030.

5. New Floor for Charitable Contribution Deductions

Beginning in 2026, only charitable contributions exceeding 0.5% of AGI will be deductible.

6. Mortgage Interest Deduction Adjustments

The $750,000 cap on mortgage acquisition indebtedness is made permanent. Deductions for home equity loan interest are eliminated, but mortgage insurance premiums on acquisition debt remain deductible.

7. Permanent Repeal of Miscellaneous Itemized Deductions

The OBBBA permanently repeals miscellaneous itemized deductions, including investment management fees. However, unreimbursed expenses for eligible educators remain deductible. High-net-worth individuals may still consider family office structures to preserve deductibility of management fees.

8. Auto Loan Interest Deduction

Taxpayers may deduct up to $10,000 in interest on loans for qualifying vehicles assembled in the U.S. The deduction phases out above $200,000 for joint filers and $100,000 for all other filers.

9. Introduction of “Freedom Savings Accounts” (a.k.a. “Trump Accounts”)

Starting in 2026, these new tax-exempt accounts allow contributions of up to $5,000 annually for minors. Contributions are not deductible but are excluded from the beneficiary’s income. Employers may contribute up to $2,500 per eligible employee or dependent. A federal pilot program will contribute $1,000 to accounts for children born between 2025 and 2028. Upon reaching age 18, the account is treated like a Traditional IRA.

10. Enhanced Child Tax Credit

The child tax credit increases to $2,200 per child beginning in 2025, with permanent income phaseout thresholds of $400,000 for joint filers and $200,000 for all other filers. The $500 nonrefundable credit for other dependents is also made permanent.

11. Expanded Child and Dependent Care Credit

The maximum credit rate increases from 35% to 50% of qualifying expenses, with a new phase-out schedule with a 20% floor.

12. Limitations on Wagering Losses

Beginning in 2026, deductions on wagering losses are limited to 90% of such losses and only to the extent of wagering gains.

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B. Provisions Affecting Estate Tax Planning

1. Permanent Increase to Estate and Gift Tax Exemption

The estate and gift tax exemption, which was scheduled to revert to approximately $7 million per person in 2026, has been significantly increased under the OBBBA. Beginning in 2026, the exemption rises to $15 million per individual (or $30 million for married couples), with annual inflation adjustments thereafter.

2. Extension of Current Estate and Trust Tax Rates

The OBBBA permanently extends the tax rate schedules for estates and trusts originally enacted under the TCJA. This preserves the top marginal rate of 37%, avoiding the previously scheduled increase to 39.6% after 2025.
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C. Provisions Affecting Business Tax Planning

1. Expanded Gain Exclusion for Qualified Small Business Stock (QSBS)

The OBBBA enhances Section 1202 QSBS benefits by:

o Shortening Holding Periods: Investors acquiring QSBS issued after July 4, 2025, may now qualify for

– 50% exclusion after 3 years

– 75% exclusion after 4 years

– 100% exclusion after 5 years

 o Raising the Exclusion Cap: The per-issuer cap increases from $10 million to $15 million (or 10x basis, whichever is greater) for post-enactment shares.

o Increasing the Corporate Asset Threshold: The gross asset limit for QSBS eligibility rises from $50 million to $75 million, allowing more startups to qualify.

 2. Permanent Extension of the Qualified Business Income (QBI) Deduction

 Section 199A deductions of up to 20% of QBI are now permanent. The phase-in thresholds increase to $75,000 for single filers and $150,000 for joint filers.

 3. Preservation of Pass-Through Entity SALT Workaround

 Despite earlier proposals to restrict SALT cap workarounds, the final legislation maintains the ability for pass-through entities to pay state income taxes at the entity level, allowing full deductibility.

 4. Permanent Reinstatement of Bonus Depreciation and Expansion of Section 17

 o Bonus Depreciation: Restored to 100% for property acquired after January 19, 2025.

 o Section 179 Expensing: The deduction limit increases to $2.5 million, with a phase-out beginning at $4 million. These changes apply to property placed in service in tax years beginning after December 31, 2024.

5. Permanent R&D Expensing Options

 Taxpayers may now:

 – Deduct domestic R&D expenses immediately,

 – Elect to amortize over 5 years (from benefit realization), or

 – Capitalize and recover over 10 years.

 These options apply to amounts paid or incurred after December 31, 2024.

 6. Permanent Expansion of Qualified Opportunity Zone (QOZ) Incentives

 Key enhancements include:

 – Rolling 10-Year Designation: Governors may designate new OZ tracts every 10 years starting July 1, 2026.

 – Revised Deferral and Step-Up Rules: For post-2026 investments, gains must be recognized after 5 years, with a 10% basis step-up applied just before recognition.

 – Extended Holding Period Benefits: The 2047 sunset is replaced with a rolling 30-year window. Investments held 10–30 years receive a step-up to fair market value at disposition; those held 30+ years are frozen at the 30-year FMV.

– Rural QOZ Enhancements: A new Qualified Rural Opportunity Fund offers a 30% basis step-up after 5 years and relaxed improvement requirements (50% of adjusted basis must be reinvested in property improvements).

 – Increased Reporting Requirements: Enhanced disclosures and penalties apply to new QOZ investments and dispositions.

 7. International Tax Amendments

 o GILTI Deduction: Reduced from 50% of tested income to 40% for tax years beginning after December 31, 2025.

 o Foreign Tax Credit Haircut: Decreased from 20% to 10% for foreign corporations’ tax years beginning after December 31, 2025.
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Conclusion

 The One Big Beautiful Bill Act represents a transformative shift in federal tax policy, with far-reaching implications for individuals, businesses, and estate planning. We encourage you to consult with your tax counsel at DUGGAN BERTSCH to evaluate both immediate opportunities and long-term strategies in light of these changes.
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