The One Big Beautiful Bill Act ("OBBBA”) was signed into law last week, continuing the applicability of many individual federal income, estate, and gift tax provisions from the 2017 Tax Cuts and Jobs Act (“TCJA”), and in some cases increasing deduction and exemption amounts even further.
While many provisions in the OBBBA do not have sunset provisions and are referred to as “permanent,” these provisions are subject to change with subsequent legislation by a future Congress or federal administration.
Below is a breakdown of what has, and has not, changed from the 2017 TCJA for individual federal income, estate, and gift tax purposes following the passage of the OBBBA.
Estate, Gift, and Generation-Skipping Transfer (GST) Taxes
What Hasn’t Changed:
- The 40% tax rate on non-charitable wealth transfers over the estate, gift, and GST tax exemption amounts remains the same.
What Has Changed:
- One of the most notable changes is the permanent increase of the federal estate, gift, and GST tax exemption to $15 million per person, indexed for inflation starting in 2026. This provides expanded opportunities for wealth transfer planning.
Individual Income Tax
What Hasn’t Changed:
- The OBBBA makes the TCJA individual federal income tax rates permanent. Single filers reach the top (37%) bracket when their taxable income exceeds $626,350 in 2025; for married couples filing jointly, that threshold is $751,600. Without the OBBBA, the top tax rate would have increased to 39.6% in 2026.
- Capital gains rates remain the same (0%, 15%, and 20%).
- Mortgage Interest Deduction remains the same ($750,000 limit).
- The OBBBA preserves a workaround to the SALT cap for pass-through businesses, allowing owners to potentially avoid the limit through entity-level taxes (“PTET”) in states that allow it, such as California.
- The Qualified Business Income Deduction (also known as Section 199A of the Internal Revenue Code) for owners of pass-through entities is expanded and made permanent.
- For those who itemize deductions:
- Individual Charitable Deduction - The rule providing for a 60% of adjusted gross income (“AGI”) ceiling for cash gifts to public charities is made permanent.
- The overall limitation on itemized deductions (also known as the “3%/80% rule” or the “Pease Limitation”), in effect before the TCJA, is permanently repealed.
What Has Changed:
- Qualified Small Business Stock (“QSBS”) Exclusion - Prior to the OBBBA, gain from the sale of QSBS held for more than 5 years was fully exempt from capital gains tax. For QSBS stock issued after July 4, 2025, a tiered capital gain exclusion applies (subject to the gain exclusion cap): a 50% gain exclusion for a 3-year holding period, a 75% gain exclusion for a 4-year holding period, and a 100% gain exclusion for a 5-year or more holding period. Further, the per-issuer gain exclusion cap is raised from $10 million to $15 million, and the aggregate gross asset limitation for a corporation’s QSBS eligibility is raised from $50 million to $75 million, subject to inflation indexing.
- Senior Deduction – The OBBBA authorizes a new $6,000 deduction for taxpayers age 65 and older for the 2025 to 2028 tax years, subject to phase out for taxpayers with modified AGI greater than $75,000 for single filers ($150,000 for joint filers). The deduction is fully phased out when modified AGI reaches $175,000 for single filers ($250,000 for joint filers). The new deduction is available regardless of whether a taxpayer itemizes or claims the standard deduction.
- Standard Deduction - The OBBBA raises the standard deduction slightly from $15,000 for single filers ($30,000 for joint filers) in 2025 to $15,750 for single filers ($31,500 for joint filers) in 2026 and beyond, subject to inflation indexing.
- For those who itemize deductions:
- Individual Charitable Deduction - Starting in 2026, only the portion of a taxpayer’s charitable contributions greater than 0.5% of AGI will be eligible for deduction. For example, for an individual with $1 million in AGI, the first $5,000 of charitable gifts will not be deductible. “Bunching” charitable contributions for multiple years into a single tax year, and possibly using a donor-advised fund, remains a helpful strategy for high AGI individuals.
- SALT Cap - The OBBBA authorizes a temporary increase in the permitted state and local tax deduction, from $10,000 to $40,000 per household in 2025, increasing 1% annually until 2030, when the cap reverts to $10,000. The deduction begins to phase out for taxpayers with income over $500,000 in 2025.
Much of the OBBBA provides relatively good news, or few changes, for high-net-worth individuals from a tax perspective; however, existing planning and structures should be reassessed in light of the OBBBA to ensure alignment and optimization.
