Beyond Sunset: Tax Planning for the One Big Beautiful Bill

The One Big Beautiful Bill Act contains significant tax changes for individuals, businesses and charitable organizations.

After weeks of negotiations in the House and Senate, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, as planned, on the Fourth of July. At its core, the tax provisions of the bill are an extension of key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were scheduled to sunset at the end of 2025, with significant implications for individuals, businesses and business owners, and charitable organizations.

Below, we provide insights and analysis of the key tax provisions of the One Big Beautiful Bill Act and, where applicable, associated wealth planning opportunities.

IMPACTS ON INDIVIDUALS

Permanent Increase to the Estate, Gift and GST Tax Exemption

Exemptions were raised for 2026 to $15 million for individuals and $30 million for married couples, indexed for inflation in future years, with no scheduled sunset.

Currently, exemptions for 2025 are $13.99 million for individuals and $27.98 million for married couples. Barring the OBBBA, the significantly increased exemptions from the TCJA would sunset at the end of this year — resulting in 2026 exemptions approximately halved, to $7.4 million for individuals and $14.8 million per couple. In stark contrast, the new, elevated exemption amounts have no built-in sunset provision and are indexed for inflation. This provides substantially elevated planning certainty.

Individual Income Tax Rates and Alternative Minimum Tax (AMT) Exemption Extended Indefinitely

Lower income tax rates introduced by the passage of the TCJA in 2017 are permanently extended for U.S. taxpayers, holding top tax rates at 37% and avoiding the TCJA sunset reversion to 39.7%.

Under the OBBBA, only the lowest two brackets, of 10% and 12%, are indexed for inflation. Notably, the OBBBA extends the TCJA’s higher AMT exemptions. However, the exemption will be phased out at twice the rate as under the TCJA for higher income taxpayers ($500,000 for single filers, $1 million for married filing jointly).

Temporary Increase in State and Local Tax Deduction Limit

The OBBBA temporarily increases the TCJA’s cap on deductions for state and local taxes (SALT) from $10,000 to $40,000 for 2025, with 1% annual increases for 2026-2029 for those making less than $500,000. In 2030, the SALT deduction cap reverts to $10,000.

For those making more than $500,000, the added $30,000 deduction is phased out. However, the final version of the legislation made no changes to the passthrough entity tax deduction, leaving certain SALT cap workarounds intact.

Increased Standard Deduction, and Other Changes to Itemized Deductions

Like the TCJA, the OBBBA continues to favor the standard deduction over itemized deductions. Beginning this year, the standard deduction rises to $15,750 (from $15,000) for individuals and $31,500 (from $30,000) for married couples filing jointly, indexed for inflation.

Additionally, the OBBBA indefinitely extends the TCJA’s repeal of the individual exemption and limitations on deductions for gambling losses, moving expenses, casualty losses and business losses of non-corporate taxpayers. The child tax credit is increased to $2,200, and the refundable portion is increased to $1,400, with enhancements to the adoption credit.

For those in the top income tax bracket, the OBBBA includes an incremental reduction of the tax benefit from itemized deductions and places a floor on the charitable contribution deduction.

Additionally, the OBBBA contains several other new deductions that are limited to years 2025-2028 and phase out for higher-income taxpayers:

• A bonus deduction of $6,000 for seniors over 65
• Deductions for certain tip and overtime income
• A deduction up to $10,000 in interest on loans used to purchase domestic vehicles

Note that the senior deduction and the deductions for tip and overtime income are available to non-itemizers as well as itemizers.

The Elimination of Clean Energy Tax Credits for Individuals

The OBBBA repeals the clean energy tax incentives enacted as part of the Inflation Reduction Act.

Provisions repealed include clean energy car credits (for vehicles acquired after September 30, 2025) as well as energy-efficient home improvement and new home credits (which end for items placed in service after December 31, 2025). This leaves a short window for taxpayers to take advantage of these credits before they expire.

Trump Accounts

The OBBBA creates a new savings vehicle, the Trump Account, an IRA for minors.

There are limits on the permitted investments, and no withdrawals are allowed before the beneficiary turns 18. However, these new accounts allow family members to donate up to $5,000 in aggregate, per year, to a beneficiary’s account. Additionally, the OBBBA creates a pilot program for government contributions of $1,000 for children born between 2025-2028 as well as provisions that allow state, tribal and local governments and non-profits to make contributions.

New Opportunity Zones

The OBBBA creates new opportunity zones, with the ability to defer recognition of, and even exclude from income, capital gains invested in a qualified opportunity fund.

New zones will be created on a rolling 10-year basis for investment after 2027, when those created under the TCJA are scheduled to end.

IMPACTS ON BUSINESSES

Investment and Hiring Incentives

The OBBBA creates multiple business incentives, including extending the deduction for qualified business income available to owners of passthrough entities and enhanced employer tax credits for paid Family Medical Leave Act leave and employer-provided childcare. The TCJA’s increased cap on deductions for business interest (the “EBITDA rule”) that sunset in 2022 is reinstated. This increases the allowable deduction, retroactive to 2022.

Under the TCJA, bonus depreciation had dropped to 40% for 2025 and was scheduled to be fully eliminated by 2027. However, the new legislation brings back 100% bonus depreciation permanently. Research and development costs can now be fully expensed in the year incurred, and the limitation for section 179 deductions for depreciable business property is increased to $2.5 million from $1.25 million.

The Elimination of Clean Energy Tax Credits for Businesses

Business tax credits for clean energy, including clean energy production and clean electricity production credits, are eliminated.

The provisions of the Green New Deal are repealed, with staggered effective dates between December 31, 2025 and 2027. Businesses investing in energy production, clean energy improvements and energy storage will want to review the effective dates as well as the limitations on benefits for foreign-controlled or foreign-influenced entities.

Qualified Small Business Stock (QSBS) Enhancements

More businesses can qualify as QSBS, allowing shareholders to exclude a portion of their capital gains from income when shares are ultimately sold.

As noted, the OBBBA changes the gross asset threshold to be considered a “small business” from $50 million to $75 million, increases the cumulative per-taxpayer gain exclusion from $10 million to $15 million, and allows a partial benefit after only three years instead of five.

IMPACTS ON CHARITIES AND DONORS

Increased Tax on University Endowments and Changes to Charitable Deductions

The new legislation increases the tax on university endowments, with a sliding rate between 1.4% and 8%, depending on the school’s endowment per student.

Note that schools with fewer than three thousand students are excluded from the tax increase. As a result of the calculation method, schools with significant foreign student populations will face higher taxes.

Additionally, the OBBBA allows a limited charitable contribution deduction of $1,000, applicable even for non-filers beginning in 2026. There is also a new tax credit for contributions to scholarship organizations.

Charitable contributions by corporations and individuals in the highest tax bracket are subject to new floors beginning in 2026 — 1% for corporate donors and 0.5% for individuals in the 37% bracket.

As noted, a significant benefit of the new legislation is the relative certainty that many of its provisions will remain in effect indefinitely, removing the complexities of planning around potential looming sunsets. Given the staggered effective dates for many of the provisions, however, it is important to consult with your advisors in order to optimize planning for transactions based on the effective dates.