Joan Humes, CPA | Director of Tax Strategy & Planning
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Key Takeaways
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The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, includes a broad set of tax changes affecting high-net-worth individuals and business owners. The legislation both extends expiring tax code provisions and introduces new measures with implications for income, estate, and business taxation. While many of these changes may prove advantageous for high-net-worth individuals, the breadth and complexity of the legislation highlight the importance of ongoing conversations with your private wealth management team to assess and adjust your planning and tax management strategy accordingly. Spanning nearly 900 pages and including hundreds of provisions, the wide range of the OBBBA can make it difficult to discern which changes could have a meaningful impact on your taxes.
Tax Cuts and Jobs Act (TCJA) provisions were made permanent
A number of provisions in the OBBBA are extensions of temporary provisions introduced in the Tax Cuts and Jobs Act (TCJA) signed into law in 2017, many of which were set to expire on December 31, 2025. These extensions generally lowered taxes for high-net-worth individuals and, because they have been made permanent, there is less uncertainty around how to plan for certain key tax provisions.
Lower federal marginal income tax rates: The OBBBA made permanent federal marginal income tax rates that had been reduced by the TCJA. From a tax planning standpoint, this development is a welcome one, as rates were scheduled to increase to their higher, pre-TCJA levels after 2025. The TCJA reduced federal marginal income tax rates for tax years 2018 to 2025 and changed many income brackets to encompass different ranges of taxable income. This change likely benefited high earners by lowering their federal income tax liability, with the top marginal rate dropping from 39.6% to 37%.
Higher federal estate and gift tax exemption: When the OBBBA was signed into law, it increased the federal estate and gift tax exemption to $15 million for estates and gifts made after December 31, 2025. For married couples, this figure is effectively doubled to $30 million as each spouse may capture the full use of their individual exemption. Put simply, the full fair market value of your estate, plus any taxable gifts1 you made during your lifetime, can transfer free of federal estate and gift taxes up to the federal estate and gift tax exemption.
Remember, in 2018, the TCJA temporarily raised the federal estate and gift tax exemption from $5.49 million to $11.18 million, with the 2025 exemption amount of $13.99 million scheduled to revert to $5 million and then be adjusted for inflation in 2026. The permanent increase set by the OBBBA allows high-net-worth individuals to transfer more wealth to family members by lowering their federal gift and estate tax liability. And with the potential sunset to this provision no longer looming, the permanence of the exemption levels may provide greater clarity for long-term estate planning.
Increased standard deduction: The OBBBA made the increased standard deduction permanent at its post-TCJA level and slightly increased the standard deduction for tax year 2025. The 2025 standard deduction is $15,750 for single filers or married filing separately, $23,625 for head of household, and $31,500 for those married filing jointly.
Remember, the TCJA nearly doubled the standard deduction for tax year 2018 but was scheduled to revert to pre-TCJA levels and then be adjusted for inflation in 2026. With the standard deduction locked in at a historically high level, many taxpayers have less incentive to itemize their deductions.
And though the Joint Committee on Taxation found the TCJA increase to the standard deduction caused the number of taxpayers who itemize deductions to drop by approximately 61%2, high-net-worth individuals may still find it beneficial to itemize deductions if they have significant deductible expenses such as charitable gifts, state and local taxes, or mortgage interest. Careful tax planning for your personal situation is important to evaluate whether itemizing deductions or taking the standard deduction yields the greatest overall tax savings.
Raised state and local tax (SALT) deduction limits: If you itemize your deductions, you may now deduct up to $40,000 of certain state and local taxes for tax year 2025 under the new cap set by the OBBBA.3 The deductible limit starts to phase out above $500,000 in modified adjusted gross income (MAGI), gradually reducing the available deduction to a minimum of $10,000.
The new $40,000 deduction limit is an increase from the previous $10,000 limit imposed by the TCJA, which was scheduled to expire at the end of 2025. Before the TCJA, there was no cap on the SALT deduction, so imposing a limit significantly reduced the benefit for taxpayers in states that impose high income or property taxes.
Those subject to higher state and local taxes may benefit from using the increased deduction limit to lower their federal income tax liability. The new OBBBA provision that increased the limit is set to expire in tax year 2030, when the SALT deduction cap will revert to $10,000 unless extended by future legislation.
Qualified residence interest deduction limits made permanent: The OBBBA made the $750,000 limit on the mortgage interest deduction permanent ($375,000 if married filing separately). The deduction applies to the first $750,000 of combined acquisition debt on primary and secondary homes if you itemize your deductions. The TCJA lowered the mortgage interest deduction cap from $1 million to $750,000, but the provision was set to expire after 2025.
New tax provisions were introduced in the Big Beautiful Bill
In addition to making many TCJA provisions permanent, the OBBBA introduced a range of new tax rules for individuals. While some changes may provide new tax planning opportunities, others reduce the value of certain deductions or otherwise could increase your exposure to taxes. Taking these new provisions into account can help guide informed conversations with your tax planning professional going forward.
Above-the-line charitable deduction for non-itemizers: Starting in tax year 2026, those who claim the standard deduction can also reduce a portion of their taxable income for charitable contributions. Now, non-itemizers can deduct up to $1,000 for single filers and $2,000 for those married filing jointly to reduce their taxable income and their federal income tax liability.
Previously, only taxpayers who elected to itemize deductions could deduct charitable contributions from their taxable income. Given the high level of the standard deduction, even some high-net-worth individuals may opt to take the standard deduction in certain years, and if this is the case, the new charitable deduction is a benefit for non-itemizers with qualifying charitable contributions.
Floor on charitable deductions for itemizers: Starting in the 2026 tax year, the OBBBA now requires itemizers to exceed 0.5% of their adjusted gross income (AGI) before qualified charitable contributions can be deducted. In other words, the first 0.5% of AGI given to charity is not deductible, effectively creating a floor that must be exceeded before any charitable deduction can be claimed. Even with the AGI requirement, itemizing deductions may still provide a more substantial deduction for charitable contributions, as taxpayers who itemize can generally deduct up to 60% of their adjusted gross income (AGI), depending on the assets donated and the recipient organization.
Value of itemized deductions capped at 35% for top earners: The limit on itemized deductions has returned with the OBBBA, but this time it only applies to taxpayers in the highest tax bracket. In effect, those taxed at the top federal income tax rate will see their itemized deductions limited to 35% of the value of the deductions.
Alternative minimum tax (AMT) exemption phaseout threshold decreased: With the passage of the OBBBA, changes to the AMT may subject more high-net-worth individuals with a significant amount of itemized deductions to the tax. The main function of the AMT is to ensure that all taxpayers pay at least a minimum level of taxes, regardless of the deductions or credits claimed. The AMT exemption shields a certain amount of income from the AMT, and this exemption is reduced as taxpayer income exceeds the phaseout threshold.
The AMT exemption phaseout threshold has decreased from its 2025 levels of $626,350 for single filers and $1,252,700 for married couples filing jointly to $500,000 and $1,000,000, respectively, beginning in tax year 2026. The new legislation also increased the phaseout rate from 25% to 50%, meaning those above the phaseout thresholds lose more AMT exemption faster, which can make more income subject to the AMT.
New limit on deduction for wagering losses: The OBBBA rules reduce how much taxpayers can deduct for wagering losses if they itemize deductions. Starting in tax year 2026, only 90% of wagering losses up to the amount of winnings are deductible. This means individuals could still owe taxes even when total losses are greater than winnings.
Previously, taxpayers could deduct wagering losses up to 100% of their winnings, effectively offsetting the full amount of gambling income for tax purposes. For example, if someone won $100,000 and lost $100,000 from gambling in the same tax year, no taxes would be owed. Under the new rule, only $90,000 of losses could be deducted, leaving $10,000 of winnings subject to tax even without a net gain. If you plan to itemize deductions and expect to deduct gambling losses in 2026 or beyond, it is important to keep this change in mind.
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Trump Accounts: The OBBBA created a new investment account that parents can open on behalf of children under 18. The so-called “Trump Accounts” are subject to specific contribution, investment, and withdrawal restrictions. The federal government will contribute $1,000 to the account for children born in the U.S. from 2025 to 2028. |
What business owners and those with closely held business interests should know
The OBBBA includes several changes that may impact business owners, particularly those with pass-through entities, capital equipment investments, or qualified small business stock. Some provisions extend key tax benefits introduced by the TCJA, while others expand existing incentives. Note that this is not an exhaustive list, so discussing other new potential impacts to your business with your private wealth management team is paramount.
Deduction for pass-through business income made permanent: The OBBBA made the temporary TCJA deduction for pass-through business income permanent, allowing business owners to continue to deduct up to 20% of qualified income received from their business. This deduction is available whether you itemize your deductions or claim the standard deduction. Because the deduction will no longer expire at the end of 2025, business owners can plan on continuing to deduct qualified business income on their individual returns, subject to certain limitations.
Full bonus depreciation made permanent: Under the OBBBA, full bonus depreciation for qualifying business assets acquired and placed into service after January 19, 2025, is permanent. Though the TCJA introduced this provision, the bonus depreciation rate was set to gradually decline and phase out completely by 2027.
Now that the provision is permanent, business owners may deduct the entire cost of eligible purchases in the first year the assets are acquired and put into use, rather than depreciating the assets over time. This can significantly reduce a business’s taxable income in the year of purchase, which may benefit cash flow and free up capital for reinvestment or other strategic business needs.
Expansion of qualified small business stock exclusion: Under the new OBBBA rules, those who own certain qualified small business stock (QSBS) may benefit from partial capital gain exclusions for shorter holding periods, a raised exclusion cap beginning in 2027, and an increased asset limit for qualifying companies. For QSBS acquired on or after July 5, 2025, investors can exclude 50% of the gain if they sell the stock after three years, 75% after four years, and still qualify for the full 100% exclusion if the stock is held for five years.
In addition, the cap on the capital gain exclusion will increase from $10 million to $15 million beginning in 2027 for QSBS acquired on or after July 5, 2025. The amount of assets a company may hold and still qualify for QSBS tax treatment has also increased from $50 million to $75 million, meaning more companies may now qualify for QSBS eligibility under the expanded rules.
There are several requirements a company and investor must meet for stock to qualify as QSBS, but if you believe you may be positioned to benefit from the new rules, it may be worth reviewing whether this expanded opportunity could play a role in your future business and personal financial planning.
Plan for the future with a team of specialists in your corner
With legislation continually evolving, staying informed of and navigating changes that may affect your finances, investments, tax strategy, or business can be challenging. Working with a private wealth management team that knows your situation and has deep experience serving the holistic needs of high-net-worth individuals and business owners can help you identify and take advantage of potential tax planning opportunities and avoid surprises, allowing you to move forward with greater confidence.
At Commerce Trust, your private wealth management team is comprised of specialists in tax management*, estate planning, and investment strategy, who get to know you and your family or family business before developing a comprehensive personal wealth management plan tailored to your goals. When questions arise regarding how legislative changes could impact you or your business, you have a dedicated team to turn to for personalized consultation and guidance.
KEY TAX CHANGES FOR HIGH-NET-WORTH INDIVIDUALS RESULTING FROM THE ONE BIG BEAUTIFUL BILL ACT
1 A taxable gift is any transfer of money or property during your life that exceeds the annual gift tax exclusion ($19,000 in 2025) to an individual in any given calendar year.
2 https://taxfoundation.org/taxedu/glossary/itemized-deduction/
3 For those with a tax filing status of "married filing separately," the maximum SALT deduction limit is $20,000.
*Commerce does not provide tax advice to customers unless engaged to do so.
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The opinions and other information in the commentary are provided as of August 21, 2025. This summary is intended to provide general information only and may be of value to the reader and audience.
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