The One Big Beautiful Bill Act (OBBBA), signed into law on July 4 of this year, contains hundreds of provisions in its 1,000-plus pages, but some of its most significant impacts are on tax rules that affect high-net-worth individuals and families.

Permanent Lower Income Tax Rates

The Act makes permanent the individual income tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) that were established by the 2017 Tax Cuts and Jobs Act (TCJA).

Under the TCJA, the maximum individual income tax rate had been set to revert from 37.0% to 39.6% on January 1, 2026. OBBBA maintains the 37.0% maximum rate. The top bracket in 2025 for married couples filing jointly begins at about $750,000 of taxable income. The top 2026 bracket will be further adjusted for inflation.

OBBBA did not change the additional 3.8% net investment income tax (NIIT), and the rates for capital gains and qualified dividends remain at a maximum of 23.8%, including the NIIT.

(It’s important to understand that “permanent” only means that these rates are not scheduled to change or expire. It does not mean that Congress is barred from making changes to the tax code in the future, but it does offer some stability for tax planning.)

Increased Estate and Gift Tax Exemption

Federal law imposes a total 40% tax on the transfer of wealth through the tax code’s combination of gift, estate, and generation-skipping transfer (GST) taxes. Exemptions that were available under the 2017 Tax Cuts and Jobs Act (TCJA) had been scheduled to sunset to pre-2018 levels at the end of 2025, so individuals who currently have a $13,990,000 exemption ($27,980,000 for married couples) would have seen this reduced to about half beginning in 2026.

However, the Act permanently raises the federal gift, estate, and generation-skipping transfer (GST) tax exemptions. Effective January 1, 2026, this exclusion is set at $15 million per individual ($30 million for a married couple), indexed for inflation.

These new exemption amounts give high-net-worth individuals and families the opportunity to place significant wealth into irrevocable long-term trusts for the benefit of current and future generations, without facing wealth transfer taxes on the trust over time. It is important that the asset protection features and other terms of such trusts be properly drafted and implemented.

Charitable Donations 

The rules for deducting charitable gifts were changed by OBBBA. Starting in 2026, taxpayers who do not itemize their deductions can deduct qualifying donations of up to $1,000 for an individual or $2,000 for married couples.

However, beginning in 2026, donations must exceed 0.5% of AGI for itemizers to claim deductions, and for individuals in the highest tax bracket (37%) the value of the deduction is reduced from 37 cents on the dollar to 35 cents. For that reason, consideration should be given to accelerating charitable deductions into 2025.

Enhanced Business Tax Benefits

OBBBA restores a 100% bonus depreciation for qualified property, encouraging capital investment and improving cash flow for business owners.

It also increases the maximum amount a taxpayer may expense to $2.5 million and raises the phaseout threshold amount to $4 million, with both amounts indexed for inflation for taxable years starting in 2025. This provision is also effective for property placed in service after 2024.

The act also makes permanent a 20% deduction for Qualified Business Income (QBI) from pass-through entities. Phase-in thresholds have also been expanded. For married filers, the limit has been increased from $100,000 to $150,000. A minimum deduction of $400 is also guaranteed for qualifying business owners who earn at least $1,000 in QBI.

With the extension of the QBI deduction, the income taxation of participants in sole proprietorships, partnerships and S corporations will be similar to that of C corporations.

The act raises the size limit for companies having Qualified Small Business Stock (QSBS) from $50 million to $75 million in total assets, and also increased the maximum capital gains exclusion for QSBS from $10 million to $15 million or 10 times the cost basis, providing new opportunities for tax-free gains on qualifying investments.

OBBA also makes it easier for investors to benefit from reduced taxes on QSBS purchased after OBBBA took effect. If the taxpayer holds the stock for at least three years, 50% of the gain can be excluded from taxes. A three-year hold period raises the exclusion to 75%, and at five years or more 100% of the gain is tax-free.

The bill also increases the amount of gain that can be excluded from $10 million to $15 million (or 10 times what you invested, whichever is more.)

Businesses making qualifying capital investments will be able to write off those investments sooner, lowering their taxable income.

Increased SALT Deduction Cap

The cap on the deduction for State and Local Taxes (SALT) is increased to $40,000 through 2029. This can benefit taxpayers in high-tax states such as California, although it is important to understand that this deduction phases out for very high incomes. 

Savings for Youngsters

A novel feature of OBBBA is the introduction of “Trump Accounts,” savings accounts for children born between 2025 and 2028. Each eligible child receives a $1,000 federal seed contribution, and parents or grandparents can contribute up to $5,000 per year (after-tax), with funds growing tax deferred.

OBBBA enhanced the advantages of 529 college savings plans. New rules allow 529 plan funds to be spent on tutoring, educational therapy, testing fees for credentialing programs, and for the costs of non-traditional schooling or technical training. 

Negative Impacts

Not all of OBBBA’s many provisions are beneficial for high-net-worth taxpayers. Some will increase the tax bill for these individuals or impose limits on the tax breaks the bill provides.

  • Itemized Deduction Limits: For taxpayers in the highest 37% tax bracket, the tax benefit of all itemized deductions is capped at 35%.
  • Alternative Minimum Tax (AMT): Changes to the AMT thresholds and phase-out rates may subject more high-net-worth individuals to this tax.
  • Elimination of Clean Energy Credits: The act eliminated several green energy incentives, including tax credits for electric vehicles and residential solar energy. 

Overall, the OBBBA provides significant stability and several advantageous planning opportunities for wealthy taxpayers, especially involving long-term estate planning and business investments. To maximize these opportunities, consult your professional advisors.

By Michael R. Morris