Understanding the One Big Beautiful Bill Act: Key Tax Changes for Business Owners and Estate Planning Clients

The One Big Beautiful Bill Act (OBBBA) became law on July 4, 2025. This legislation introduces changes that will impact estate, tax, and business planning strategies for many business owners and high-net-worth individuals and their families.

The following summary highlights some of those changes and explores how the OBBBA presents both new opportunities and potential challenges within the estate planning context.

Permanently Increases the Estate and Gift Tax Basic Exclusion Amount

Effective January 1, 2026, the OBBBA raises the federal estate, gift, and generation-skipping transfer tax exclusion amount to $15 million for US individuals (currently $13.99 million). The new basic exclusion amount will be indexed to inflation for subsequent years.

The 2017 Tax Cuts and Jobs Act (TCJA) had doubled the basic exclusion amount but the increase was slated to sunset at the end of 2025. Now the OBBBA preserves and further increases these historically high exemption thresholds.

This is a significant and taxpayer-favorable change in the law. Taxpayers with large estates will benefit from this change, as it provides an opportunity to shift more wealth to heirs free of transfer taxes and, because there is no sunset provision, it will allow the implementation of long-term estate and gift tax planning strategies with greater certainty.

Raises the State and Local Tax (SALT) Deduction Limit

The OBBBA temporarily raises the SALT deduction cap from $10,000 to $40,000 (indexed for inflation at 1% annually) for 2025 through 2029. However, for taxpayers who earn more than $250,000 ($500,000 for married couples), the added $30,000 is phased down to a floor of $10,000.

The cap on SALT deductions reverts to $10,000 beginning in 2030.

The TCJA had previously capped the individual SALT deduction at $10,000 and was set to expire on December 31, 2025.

The OBBBA did not make any changes to the so-called SALT cap workaround used by certain pass-through entities (such as partnerships and S corporations) to allow its owners to deduct state and local taxes paid by the pass-through entity and bypass the individual SALT deduction cap.

This temporary increase may provide relief to taxpayers in high-tax states such as New York and Massachusetts. For others, it could be an opportunity to discuss strategies for maximizing the pass-through entity tax (PTET) and for shifting income and/or deductions to stay under the $500,000 threshold, including through the use of nongrantor trusts.

Limits Charitable Deductions

The OBBBA introduces a floor for charitable deductions for individuals who elect to itemize. Beginning in 2026, only contributions exceeding 0.5% of the individual’s adjusted gross income will be deductible.

For taxpayers claiming the standard deduction, the OBBBA limits charitable deductions to $1,000 ($2,000 for married couples).

Cash gifts to certain qualified charitable organizations will continue to be deductible for up to 60% of the individual’s adjusted gross income, instead of falling to 50% as scheduled under the TCJA.

Donors should consider whether accelerating or postponing their charitable contributions makes sense in light of these changes.

Expands Businesses that Qualify for the Qualified Small Business Stock (QSBS) Gain Exclusion

Prior to enactment of the OBBBA, small business founders and investors who met certain requirements could exclude up to 100% of the gain upon the sale or exchange of QSBS.

The OBBBA will allow more investors to qualify for the QSBS gain exclusion by substantially revising the rules relating to QSBS in three ways:

• introducing a tiered exclusion for stock that does not meet the five-year holding period (50% if held for three years, 75% if four years, 100% if five years or more);
• increasing the amount of gain eligible for exclusion from $10 million to $15 million (or ten-times basis, whichever is greater); and
• increasing the gross asset threshold to be considered a “small business” from $50 million to $75 million.

These revisions apply to QSBS shares issued after July 4, 2025. Shares issued prior to this date are subject to the older rules. For more information on changes to the QSBS tax benefits, please see QSBS Benefits Expanded Under One Big Beautiful Bill Act.

Conclusion

The OBBBA brings several taxpayer-friendly provisions into law, including raising the estate and gift tax exemption, a temporary increase to the cap on SALT deductions, and enhancements to the QSBS rules. The legislation also brings long-awaited clarity and predictability to estate planning.

Please contact us if you have any questions about how the One Big Beautiful Bill Act will impact your estate plan. For more detailed information about the other key provisions of the new legislation, please see The One Big Beautiful Bill Act Signed into Law: Tax Implications at a Glance.

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