The One Big Beautiful Bill Act (OBBB) marks one of the most comprehensive tax and fiscal policy overhauls since the 2017 Tax Cuts and Jobs Act (TCJA). Designed to prevent a looming $4 trillion tax increase from the expiration of TCJA provisions, the OBBB makes many of those provisions permanent while introducing new rules that directly affect high-net-worth (HNW) individuals. From estate planning to charitable giving, the OBBB reshapes the financial landscape for affluent taxpayers in profound ways.
Permanent Extension of the 20 percent Qualified Business Income (QBI) Deduction
One of the most favorable provisions for HNW individuals is the permanent extension of the 20 percent QBI deduction for pass-through entities, such as S-corporations, partnerships and sole proprietorships. Originally set to expire after 2025, this deduction allows eligible business owners to exclude up to 20 percent of their qualified business income from taxation.
Increase in SALT Deduction Cap Through 2029
The State and Local Tax (SALT) deduction cap has been temporarily increased from $10,000 to $40,000 for joint filers (and $20,000 for single filers) for tax years 2025 through 2029. The expanded cap does, however, phase out for taxpayers with adjusted gross incomes above $500,000. The cap also reverts to $10,000 in 2030.
This change is particularly impactful for HNW taxpayers in states like New York, California and New Jersey, where property taxes and state income taxes are substantial compared to other states. Even though the SALT cap phaseout limits the benefit for ultra-high earners, many HNW households will still see meaningful tax relief during the five-year period.
Estate and Gift Tax Exemption Increased and Does Not Sunset
The OBBB increases the estate and gift tax exemption to $15 million per person ($30 million for a married couple). The exemption will be adjusted annually for inflation and this change does not sunset. This increased exemption provides more certainty for those who are working to reduce their estate and gift tax.
For HNW taxpayers, prompt use of the estate/gift tax exemption provides more opportunities to transfer wealth tax-free. Techniques such as Spousal Lifetime Access Trusts (SLATs), Grantor Retained Annuity Trusts (GRATs) and dynasty trusts remain highly effective at the new exemption levels. Because future administrations could revisit and reduce the exemption, HNW taxpayers should meet with their advisors to assess estate and gift tax exposure and develop a plan to manage this tax liability.
Investment in Qualified Opportunity Zones
The qualified opportunity zone program, originally set to expire for new investments on Dec. 31, 2026, is now permanent. For investments made after Dec. 31, 2026, capital gains can be deferred until the fifth anniversary of the investment (instead of a fixed date like 2026). This change creates a rolling deferral window, offering more flexibility for investors. The new law also provides a 10 percent basis increase at the end of the five-year deferral period.
Investors who earn capital gain income for 2027 and future years may want to consider investing sales proceeds in qualified opportunity zone investments to take advantage of the extension of this program.
Changes in Charitable Contribution Deductions
The OBBB increases the adjusted gross income (AGI) limit for cash contributions to public charities from 50 percent to 60 percent. Beginning in 2026, there is a new floor in determining the charitable contribution deduction. The change is that only contributions which exceed 0.5 percent of modified AGI will be deductible.
Because of this change in the contribution deduction, HNW taxpayers may want to consider accelerating charitable contributions into 2025. However, contributions which are larger than the amount which can be deducted in 2025 will be carried forward to 2026 and subject to the new limits. Those individuals considering acceleration of charitable contributions into 2025 should consult with their tax advisor prior to taking action.
Qualified Small Business Stock
Many start-up businesses structure their stock so that it meets the definition of qualified small business stock. Investors who own QSBS for the required holding period can earn tax-free gain on the sale of QSBS, subject to certain limits. The new tax law increases the maximum gain exclusion from $10 million to $15 million per taxpayer, with the possibility of higher gain exclusion. Prior to the new law, investors had to own QSBS for five years to qualify for tax-free gain. The new law made changes so that a three-tiered capital gain exclusion now applies – 50 percent for stock held at least three years, 75 percent for stock held at least four years and 100 percent for stock held at least five years.
Investors should expect to see increased use of QSBS due to the new higher tax-free gain amounts and the shorter holding period.
Windham Brannon Understands the Needs of HNW Taxpayers
The OBBB represents a pivotal moment in U.S. tax policy, offering substantial benefits for HNW taxpayers, but still requires such taxpayers to manage their tax planning with even more care and precision. Windham Brannon’s High-Net-Worth Tax Practice professionals understand that this proactive tax planning is more crucial now than ever; that’s why our team is ready to help you work through opportunities, as well as complexities, of the new legislation. For questions or more information, contact your advisor today, or reach out to Courtnay Bazemore.
