Wealth Planning Commentary – July 7, 2025

The OBBA Has Landed: First Look at Key Tax Provisions

Last week, President Trump signed the “One Big Beautiful Bill” (OBBA) into law. The new mega bill permanently extends important provisions from the 2017 Tax Cuts and Jobs Act (TCJA), including today’s lower individual income tax rates and higher standard deduction. Notably, the estate and lifetime gift tax exemption will rise in 2026 to $15 million per individual and $30 million for married couples. In other words, today’s tax rates are here to stay…until a future Congress rewrites the rules!

Taxpayers in high-tax states can celebrate: the State and Local Tax (SALT) deduction cap jumps from $10,000 to $40,000 starting this year through 2029, with inflation adjustments. It reverts to $10,000 in 2030. The SALT cap starts phasing down for those with modified adjusted gross income above $500,000, but it never drops below $10,000. Crucially, the bill keeps state-level Pass-Through Entity Tax (PTET) workarounds alive, allowing many business owners to continue shifting state income tax deductions from their individual returns to the entity level.

The Qualified Business Income (QBI) deduction has also been made permanent at a 20% rate. It remains available to owners of pass-through businesses such as partnerships, LLCs, and sole proprietorships.

For investors and founders of early-stage companies, changes to Qualified Small Business Stock (QSBS) are especially advantageous. Previously, to qualify for any capital gains exclusion, QSBS had to be held for a minimum of five years. The new law introduces tiered capital gains exclusions: 50% gain exclusion for stock held three years, 75% for four years, and 100% for five or more years. The per-taxpayer exclusion also increases from $10 million to $15 million, and the corporate asset ceiling for QSBS qualification rises from $50 million to $75 million. These provisions apply to QSBS issued after July 4, 2025.

The legislation also includes a $6,000 senior deduction, available through 2028, though the deduction will mostly benefit middle- and lower-income seniors. Income phaseouts begin at $75,000 for individuals and $150,000 for couples.

To fund the bill – estimated to add $3.3 trillion to the deficit – Congress authorized major cuts to entitlement programs, including roughly $1 trillion in Medicaid reductions. Around 12 million low- to middle-income Americans are projected to lose coverage. While most high-net-worth individuals are not on Medicaid, reduced funding could lead to hospital closures, increased wait times, and rising healthcare costs…even for those with private insurance.

We are closely monitoring the potential impacts of the new tax law and will continue to provide updates. Please reach out to your Wealth Manager with any questions about how the OBBA may affect your wealth plan.