One Big Beautiful Bill Tax Act ("OBBBA")

There has been a great deal of news out of Washington, but one of the most important for our clients has been the tax act known as the "One Big Beautiful Bill Act" (the "OBBBA"). As more specifically described below, the OBBBA generally extends many of the provisions of the 2017 Tax Cuts and Jobs Act, and adds a number of other income tax provisions.

From an estate planning perspective, the OBBBA allows for a continuation of current planning. For 99% of the country, that means with proper planning there will be no estate tax . For those clients that have the prospect of an estate tax liability, there is much to be said for continuing to make use of the basics of estate planning -- gift as much as one can as early as possible, make use of trusts for spouses and descendants, maximize the annual exclusion gifting (currently, $19,000 per person per year), and consider the role of charity in your and your family's lives. The estate planners at Katz Baskies & Wolf are happy to discuss how these and other planning techniques can help you accomplish your goals – we look forward to speaking with you!  

General Overview of Key Provisions of the

One Big Beautiful Bill Tax Act

In 2017 the Tax Cuts and Jobs Act (“TCJA”) increased the federal estate, gift and generation skipping tax exemption level (the “transfer tax exemption”) from Five Million Dollars ($5,000,000) (adjusted for inflation) to Ten Million Dollars ($10,000,000) (adjusted for inflation). For 2025, the transfer tax exemption reached Thirteen Million Nine Hundred Ninety-Nine Thousand Dollars ($13,990,000). However, the transfer tax exemption increase in the TCJA was scheduled to “sunset” and thus the transfer tax exemption was set to revert to Five Million Dollars ($5,000,000) (adjusted for inflation) on January 1, 2026.

The new OBBBA prevents this “sunset” provision by making the TCJA transfer tax exemption increase permanent. Indeed, the OBBBA even increases the transfer tax exemption to Fifteen Million Dollars ($15,000,000) per individual on January 1, 2026 (to be adjusted in future years for inflation).

Thus, for a married couple, with proper planning, the transfer tax exemption will be Thirty Million Dollars ($30,000,000). Without an expiration date, this means that the exemption will also continue to increase for inflation.

While nothing in politics is “permanent”, clients can now make decisions regarding wealth transfers without the uncertainty of the transfer tax exemption sunsetting, as per the TCJA.  For some clients the extension and increased exemption may require some thought into additional gifting into exiting trusts or creating new trusts. For other clients, the extension and increased exemption may reduce any desire to make irrevocable transfers. Either way, this is a very significant and important estate planning change which passed in the new OBBBA. 

General Overview of Key Provisions of the

One Big Beautiful Bill Tax Act

On July 4, 2025, President Trump signed into law the OBBBA, which extended many of the tax cuts implemented in the 2017 Tax Cuts and Jobs Act (“TCJA”) and added other important changes to the Internal Revenue Code (the “IRC” or the “Code”). Some of the important tax provisions of the OBBBA include the following: 

·    Individual Income Tax Rates. Starting with the 2025 tax year, the current federal income tax brackets and rates (introduced through the TCJA) have been made permanent (with certain adjustments to the brackets for inflation applying going forward). The federal income tax rate for the highest income tax bracket will remain 37%.

·    Standard Deduction. The increased standard deduction introduced by the TCJA has been made permanent. For 2025, the standard deduction will be increased to $15,750 for single filers or for married filing separately filers, $23,625 for head of household filers, and $31,500 for those married filing jointly. These amounts will be adjusted for inflation for tax years beginning after 2025.

·    Itemized Deductions. The TCJA’s disallowance of miscellaneous itemized deductions has been made permanent. Additionally, new deduction limitations have been imposed. Taxpayers in the 37% tax bracket who itemize their deductions will only be able to take deductions at a 35% rate. 

·    Charitable Deductions. The existing limit allowing individual taxpayers to deduct up to 60% of their AGI for cash gifts to public charities (including Donor Advised Funds) has been made permanent, starting in 2026. Further, starting in 2026, all taxpayers who itemize their deductions will be subject to a new 0.5% floor on charitable deductions, meaning deductions will only be available for donations exceeding 0.5% of adjusted gross income. However, taxpayers who take the standard deduction will be able to claim charitable deductions of up to $1,000 for single filers and $2,000 for joint filers. This new 0.5% of AGI floor is a significant change in the law that may prompt clients to make large gifts to Donor Advised Funds in 2025. One change that was often discussed but did not make it into the OBBBA was a proposed change to allow Qualified Charitable Distributions (“QCDs”) from IRAs to Donor Advised Funds. For now, QCDs cannot be made from IRAs to Donor Advised Funds or private foundations; however, this change may be proposed again, in the future.

·    SALT Deduction Cap. Beginning in tax year 2025, the $10,000 cap on itemized deductions of state and local taxes (“SALT”) has been temporarily increased to $40,000 and will be indexed for inflation through 2029. However, there is a phase out reducing the SALT limitation for taxpayers with a modified adjusted gross income over $500,000 (for joint filers - $250,000 for separate tax filers). In addition, despite early versions of the OBBBA including limitations on the use of the state-level pass-through entity tax (“PTET”), which developed as a SALT cap workaround. the OBBBA did not limit the ability to use the state-level pass-through entity tax (“PTET”) SALT cap workaround.

·    Home Mortgage Interest Deduction. The mortgage interest deduction has now been made permanent for interest paid on the first $750,000 of home mortgage acquisition debt.

·    Child Tax Credit. The $2,000-per-child tax credit has been made permanent and increased to $2,200 for 2026. The amount of the child tax credit will be adjusted for inflation for tax years beginning after 2026.

·    No Tax on Tips. Subject to clarifying regulations, the OBBBA provides a temporary deduction of up to $25,000 for cash tips received by those who work in industries that customarily receive tips (i.e., restaurant employees, yes; attorneys, no).

·    No Tax on Overtime. "Qualified overtime compensation" (as defined under the Fair Labor Standards Act) is now deductible up to $12,500 ($25,000 for married filing jointly), subject to a phaseout for those with incomes in excess of $150,000 ($300,000 for joint filers).

·    QSBS. Certain changes were made to the rules regarding the Qualified Small Business Stock Exclusion. The OBBBA continues the tiered gain exclusion for sales of QSBS which is originally issued after July 4, 2025, as follows: 50% exclusion for QSBS held for 3 years, 75% exclusion for QSBS held for 4 years and 100% exclusion for QSBS held for 5 years. Also, the OBBBA expanded the exclusion by raising the per-issuer cap from $10million to $15 million, which is indexed for inflation.  

·    Senior Deduction. For the years 2025 through 2028, taxpayers over the age of 65 will be entitled to a deduction of $6,000, subject to phase out.

·    Opportunity Zones. There will be a new set of opportunity zones commencing in January 2027. The definition of opportunity zones will be far narrower than under the pre-OBBBA law, and with income deferral rules that are ratcheted up based on holding period.

·    Bonus Depreciation. Many clients have benefited from 100% bonus depreciation, which has now been permanently extended for qualified property acquired and placed in service after January 19, 2025.

Please be mindful of the various rules regarding the phaseout of the income tax benefits described above. While we mentioned the SALT Deduction rules specifically, many of these deductions or credits have their own very specific phaseout rules, making the benefits largely unavailable to high-earning taxpayers.