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On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA), the most sweeping tax overhaul since the 2017 Tax Cuts and Jobs Act (TCJA). The Act delivers substantial opportunities for high-income Americans.
According to the Tax Policy Center, households earning above $217,000 will receive more than two-thirds of the total tax cuts, with those making over $1.1 million taking home nearly a quarter of the benefits. The average tax cut for the top 20% of earners is estimated at $12,500 in 2026.
According to the Tax Policy Center and Penn Wharton, the OBBBA’s impact on after-tax income in 2026 shows that the top 1% could see income increases up to 4.9%, while the bottom 20% may face income declines as steep as 10.8%. Unlike middle-class households, whose relief is more temporary or offset, HNW clients stand to capture lasting benefits through expanded estate exemptions and permanent clarity on income tax brackets.
Read below to understand some of the biggest impacts to high-net worth clients that advisors should be aware of.
1. Permanence brings clarity for long-term planning
For years, one of the greatest challenges in planning for HNW clients has been uncertainty. Many TCJA provisions were scheduled to sunset after 2025, raising the specter of higher rates and lower exemptions. The OBBBA resolves much of this ambiguity:
- Individual tax rates: The seven TCJA brackets (10% through 37%) are now permanent, avoiding the automatic increase that would have pushed the top rate above 39% in 2026.
- Standard deduction: Permanently at $15,750 (single), $23,625 (head of household), and $31,500 (married filing jointly), indexed for inflation.
- Estate tax: Permanently increased the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026.
Pro tip: For advisors, this permanence allows more reliable modeling and forecasting, particularly for multi-year wealth transfer and liquidity planning strategies.
2. Estate, gift, and GST exemptions expanded
One of the most impactful permanent changes for high-net-worth clients is the permanent increase in transfer tax exemptions. The exemption amount will now increase to $15 million per individual, or $30 million for married couples in 2026, indexing with inflation. The top estate, gift, and generation-skipping transfer (GST) tax rate remains at 40%, and portability is preserved, allowing married couples to continue combining exemptions to shield up to $30 million (and growing) from transfer taxes.
This expands upon the $13.99 million exemption in 2025 and avoids the previously scheduled “snap back” to roughly $7 million. However, state-level estate taxes remain a key planning variable, given much lower exemptions in states such as New York and Massachusetts. As a reminder, 12 states and the District of Columbia have an estate tax and five states have an inheritance tax. (Maryland levies both.)
Estate planning is still important, it’s just time to think of it more broadly. The focus now for many clients who fall comfortably under the lifetime exemption should be income tax planning around their asset transfers, and flexibility when creating trusts.
Pro tip: Advisors should be reviewing existing estate plans immediately. For many clients, the urgency to “use it or lose it” before 2026 is gone, but the opportunity to move significant wealth out of the estate remains. The expanded exemptions allow clients to shift focus to non-tax priorities such as asset protection, succession, and philanthropic legacy.
3. Charitable deduction changes
Beginning in 2026, the OBBBA reshapes charitable deductions in three key ways.
First, non-itemizers can claim a new below-the-line charitable deduction of up to $1,000 (single) or $2,000 (joint) for cash gifts to qualified charities, expanding access but excluding donor advised funds, private foundations, and non-cash donations. In practical terms, “below-the-line” means this deduction comes after AGI is calculated. It reduces taxable income but does not reduce AGI itself, which means it won’t help with thresholds tied to AGI such as Medicare IRMAA surcharges, surtaxes, or AGI-based credits.
Second, for high-income taxpayers in the top bracket, the tax benefit of itemized deductions, including charitable gifts, will be capped at 35%, reducing the marginal value of giving compared with current law (significantly impacting clients in the highest tax bracket). Third, both individuals and corporations will face new income-based floors: Itemizers can only deduct contributions exceeding 0.5% of AGI, while corporations can deduct only the portion of gifts above 1% of taxable income.
Pro tip: Together, these provisions broaden benefits for non-itemizers while limiting deductions for wealthier donors. Advisors will need to revisit timing, bunching, and vehicle choice in charitable giving strategies.
4. SALT deduction expanded but limited for HNW clients
The state and local tax (SALT) deduction cap increases temporarily:
- Cap: Raised to $40,000 through 2029 before reverting to $10,000 in 2030.
- Phaseout: Begins at $500,000 AGI, reduced by 30% of excess income, with the deduction never falling below $10,000 at $600,000.
The cap and threshold limits above apply to all filing statuses except married filing separately, whose limit is 50% of the other limits (i.e., cap of $20,000 for those married filing separately with MAGI of $250,000 or less).
At first glance, this looks like relief for wealthy taxpayers in high-tax states. But in practice, many HNW households will see the deduction sharply reduced or phased out entirely. For example, consider a joint filer with $550,000 of AGI and $45,000 in state and local taxes. Because income is $50,000 above the $500,000 threshold, the $40,000 cap is reduced by 30% of $50,000, or $15,000. The allowable deduction falls to $25,000 leaving $20,000 nondeductible.
This phaseout creates a steeper effective marginal rate. In our example, the client loses $20,000 in deductions due to the phaseout. At the 37% bracket, this costs an additional $7,400 in federal taxes ($20,000 × 37% = $7,400). Combined with the 35% charitable gift cap deduction on benefits for high earners, the interaction of these provisions can push effective marginal rates well above the stated 37% bracket rate.
The result is that some high earners may find it’s actually better to abandon itemizing altogether and just take the standard deduction which completely defeats the purpose of the expanded SALT cap.
Pro tip: For high-income clients who own pass-through businesses (i.e., partnerships, S corps, and certain LLCs), the Pass-Through Entity Tax (PTET) workaround has been a game-changer. By electing into a state’s PTET program, the business pays the state tax directly, which then becomes fully deductible at the federal level as a business expense, sidestepping the SALT cap entirely. Currently, 36 states still have PTET programs in place and the increased SALT cap does not diminish PTET’s value.
5. Mortgage interest deduction lowered
The Tax Cuts and Jobs Act of 2017 (TCJA) lowered that limit from $1 million to $750,000 from 2018 through 2025, and the OBBBA made the lower limit permanent. This amount will not be adjusted for inflation over time.
A second home qualifies for an interest deduction if two criteria are met: 1) The home loan must be a secured debt, meaning there is collateral that covers the cost of the debt (usually the property itself). 2) The second home is not rented out or, if it is, the homeowner occupies it for more than 14 days a year or 10% of the time it is used as a rental, whichever is larger. If a home is classified as a rental property, the mortgage interest is typically deductible as a business expense. However, the combined amount of interest deducted for a first and second home cannot exceed $750,000 in associated mortgage debt.
Overall, for upper-middle-class families in high-cost areas like California, New York, or the D.C. suburbs, this has reduced a deduction many once relied on.
Pro tip: To qualify for the mortgage interest deduction, a taxpayer must elect to itemize their deductions rather than take the standard deduction.
6. Qualified Business Income (QBI) deduction enhanced
The OBBBA also makes permanent the 20% qualified business income (QBI) deduction, which was slated to sunset after 2025. This deduction applies broadly to pass-through businesses, partnerships, LLCs, S corporations, sole proprietors, farmers, and even some landlords. It allows eligible owners to deduct 20% of their allocable business income directly from taxable income. The deduction excludes SSTBs and investment income. For 2025, the deduction phases out between $197,300–$247,300 for single filers and $394,600–$494,600 for joint filers (indexed for inflation).
The permanence of this provision provides clarity for millions of small business owners who had been planning around its expiration. For 2025, the QBI deduction begins to phase out for single filers at $197,300 taxable income and for married filing jointly at $394,600. Service businesses in fields like law, health, and finance face special restrictions, but the overall benefit remains significant.
Pro tip: While W-2 employees cannot use it, clients with side businesses, rental properties, or 1099 income can lower their taxable income significantly if they structure it properly.
7. Qualified Small Business Stock (QSBS) exclusion is more attractive than ever
Starting January 1, 2026, the QSBS exclusion becomes more generous and flexible. The lifetime exclusion increases from $10 million to $15 million per taxpayer, with a new tiered holding period system that provides partial benefits sooner. For stock acquired after July 4, 2025, excluded-gain cap increased to $15 million with tiered exclusions (50% at three years, 75% at four, 100% at five); applies to firms with up to $75 million in assets.
Example: An entrepreneur sells qualified stock in 2029:
- three-year hold: 50% exclusion (up to $7.5 million excluded)
- four-year hold: 75% exclusion (up to $11.25 million excluded)
- five-year hold: 100% exclusion (up to $15 million excluded)
The issuer qualification threshold also rises from $50 million to $75 million in assets, making more companies eligible. Stock acquired before July 4, 2025, remains under the original rules: 100% exclusion up to $10 million after five years.
For family offices and entrepreneurs, these changes make QSBS more versatile, especially when combined with gifting or trust strategies. For businesses, they create stronger incentives to attract growth capital.
Pro tip: Advise clients to ensure companies are structured to qualify and investors stay compliant to fully capture the expanded benefits.
8. 100% bonus depreciation restored and other depreciation opportunities expanded
The OBBBA restores full bonus depreciation for assets placed in service after January 19, 2025 and also provides for other depreciation opportunities. Businesses can now deduct the entire cost of qualifying assets with useful lives of 20 years or less in the first year, rather than depreciating them over time.
The Act also introduces a new category, qualified production property (QPP), which allows manufacturers to expense certain real property tied to new facilities, provided construction begins after January 19, 2025, and the property is placed in service by January 1, 2031.
- 100% bonus depreciation: Full expensing for qualifying assets placed after January 19, 2025; new “qualified production property” also eligible if in service by 2031.
- Section 179 expensing: Limit doubled to $2.5 million with phaseout after $4 million; capped by taxable income.
- Domestic R&D: Permanent first-year expensing of U.S. research; smaller firms (<$31 million receipts) can apply retroactively to 2022.
- Section 163(j): Depreciation and amortization now included in interest deduction limits.
Pro tip: For HNW clients with business interests, bonus depreciation can accelerate deductions and improve cash flow planning. Advisors should coordinate with business owners and CPAs to ensure new purchases and facility investments are structured to qualify.
The strategic implications for advisors
For advisors serving HNW families, the OBBBA creates both relief and complexity. The permanence of TCJA provisions and expanded exemptions provide clarity, but the nuanced phaseouts, deduction caps, and temporary benefits require a proactive planning approach.
Key priorities include:
- Estate plan reviews: Ensure clients are positioned to leverage the $15 million exemption, while balancing state estate tax exposure.
- Charitable strategy optimization: Evaluate donor-advised funds, charitable lead trusts, and bunching strategies to offset reduced deduction value.
- Communication and education: Many HNW clients will read headlines about “permanent tax cuts” and assume simplicity. Advisors must guide them through the complexities of phaseouts and temporary rules.
The OBBBA locks in a favorable environment for HNW families, especially regarding estate and gift taxes.
Yet the law is far from uniformly beneficial. The interplay of phaseouts, deduction limits, and temporary provisions ensures that sophisticated planning remains essential. HNW clients can certainly translate OBBBA’s permanence into long-term wealth preservation and multi-generational planning opportunities.
Advisors who act early can help clients secure meaningful tax and estate benefits while navigating deduction caps and phaseouts.