Summary of Legislative Activity
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law following its passage through both the House and Senate. The legislation represents the most significant tax overhaul since the Tax Cuts and Jobs Act (TCJA) of 2017 and includes sweeping extensions, new deductions, and structural reforms.
Key components include:
- Permanently extending or enhancing several TCJA-era provisions
- New deductions and tax-advantaged savings opportunities
- Meaningful updates to estate tax exemptions, small business income treatment, and family office planning tools
Note: This summary focuses on factual updates and forward-looking planning implications. It does not address the bill’s funding sources, budget scoring, or political dynamics.
Important Notes and Planning Implications
1. Permanent Extension of 2017 TCJA Tax Cuts
- The OBBBA permanently extends key individual tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA).
- Maintains top marginal income tax rate at 37%
- Prevents sunset of TCJA provisions originally set to expire after 2025
- If these provisions had been allowed to expire, an estimated 62% of taxpayers could have faced a tax increase
Why this matters: Provides long-term clarity and prevents tax increases that would have impacted most households and business owners.
2. Estate and Gift Tax Changes
- Exemption increased to $15 million per individual ($30 million joint) beginning in 2026
- Indexed for inflation starting 2027
- Earlier proposals to limit GRATs, dynasty trusts, and valuation discounts were not included in the final law.
Why this matters: This provision eliminates the 2026 “sunset cliff” and provides clarity for long-term gifting and trust planning.
Planning action: With long-term clarity now in place, families may want to revisit wealth transfer strategies involving GRATs, dynasty trusts, and valuation discounts, especially for illiquid or closely held business interests. The expanded exemption and absence of new restrictions provide a more stable backdrop for thoughtful, tax-efficient planning.
3. QBI Deduction (199A) Enhancement
- Permanently extended
- Applies to pass-through income for sole proprietors, partnerships, and S corps
Why this matters: Offers an additional planning lever for private business owners and family office structures.
Planning action: Review pass-through structure design and aggregate income thresholds for optimal QBI efficiency.
4. State & Local Tax (SALT) Deduction Reform
- Cap raised to $40,000 (2025-2029) for AGI ≤ $500,000 joint ($250,000 single)
- Phased out by 30% of income above those thresholds
- Indexed for inflation starting in 2026 (e.g., $40,400 in 2026)
- Cap reverts to $10,000 baseline in 2030
- No impact on PTE tax workarounds (e.g., pass-through entity tax elections)
Why this matters: This five-year window may offer meaningful relief for residents in high-tax states, especially for those under the AGI phaseout threshold. However, the benefit phases out quickly for higher earners, and the change is not permanent.
Planning action: Work to coordinate itemized deductions, explore timing opportunities, and evaluate PTE elections during the expanded window. Bunching deductions and managing MAGI can improve outcomes for those near the thresholds.
5. AMT Exemption Expansion
- Exemption amounts and phase-out thresholds permanently extended and indexed to inflation (approximately $500,000 for Single, $1,000,000 for Joint)
- Phase-out rate increases from 25% to 50% starting in 2026
- Applies to individuals and certain trusts and estates
Why this matters: OBBBA makes permanent the higher AMT exemptions introduced under the TCJA, shielding more taxpayers from AMT. However, the faster phase-out rate beginning in 2026 means high earners will lose the exemption more quickly once they cross the income threshold.
6. Trump Accounts: A New Long-Term Savings Vehicle
- New account type created to promote long-term saving for children
- Initial $1,000 federal deposit for eligible children born 2025-2028
- Annual contributions of up to $5,000 are allowed (parents, relatives, or other entities)
- Access allowed in tiers, starting at age 18 for qualified uses, full access after age 30
- Eligibility: U.S. citizens born within the qualifying timeframe, with parents holding valid Social Security numbers
Why this matters: Trump Accounts offer a hybrid between 529 plans and Roth IRAs, encouraging early contributions, investment growth, and flexible use for life milestones. For families with long-term gifting goals, this adds a new, tax-efficient option for intergenerational planning.
7. Business Incentives
- Temporary incentives allow 100% expensing for machinery, equipment, R&D, and new factory construction through 2029 to promote domestic business investment.
Why this matters: Provides strong incentives for business reinvestment and capital expenditures, particularly in U.S.-based operations.
Planning action: Evaluate timing of large capital purchases and potential benefits from accelerated depreciation schedules under the updated rules.
Additional Notable Provisions
| Provision | Summary |
| Standard Deduction | Increased with additional inflation adjustment after 2025; $15,750 Single, $31,500 Joint, plus a temporary $6,000 increase (in addition to existing extra deduction already available to older adults) for eligible seniors through 2028 |
| Child Tax Credit | Raised to $2,200 starting in 2025, indexed to inflation thereafter |
| 529 Expansion | Covers homeschooling, licenses, certifications |
| ABLE Accounts | Increased limits extended, 529 rollovers allowed |
| Car Loan Interest Deduction | Up to $10,000 deductible on new car loans through 2028 for U.S.-assembled vehicles; income limits apply |
| Repeal of Clean Energy Credits | Eliminates tax credits related to solar, EV, and energy-efficient home upgrades starting 2026 |
| HSA Changes | Eligibility expanded, catch-ups allowed, and new expenses (e.g., gym memberships) covered |
| No Tax Overtime/Tips | This provision, which runs through 2028, excludes those above certain income thresholds and maintains caps on deductions |
Final Thoughts
The OBBBA introduces meaningful long-term certainty around wealth transfer, business ownership, and savings strategies. For families with complex financial lives, trust structures, or intergenerational goals, this bill opens new doors and reinforces the need for a coordinated plan.
We’ll continue to assess how these provisions interact with state-level changes and international considerations. For clients with significant estate, business, or gifting needs, we recommend reaching out to your TFO advisor to revisit long-term planning assumptions under the new rules.
