Overview
The One Big Beautiful Bill Act (the “Act”) was signed into law on July 4, 2025. This sweeping tax law extends several provisions introduced in the 2017 Tax Cuts and Jobs Act (the “TCJA”) and provides several new measures with far-reaching effects. This article provides an overview of the Act’s key provisions, with a focus on their practical impact on estate and tax planning.
These changes will have significant implications and create new planning opportunities. If you have any questions on how these changes may affect you, please contact your estate attorney at Twomey, Latham, Shea, Kelley, Dubin & Quartararo, or reach out directly to the author of this article.
I. The Estate, Gift and Generation-Skipping Tax Exemption
The Act raises and permanently sets the estate and gift tax exemption at $15 million per person in 2026, and thereafter will be adjusted annually for inflation. For married couples, that means $30 million can be passed on to future generations free from federal estate tax. The generation-skipping transfer (GST) tax exemption will also be raised to $15 million per individual in 2026 (and thereafter indexed for inflation). This will expand the use of multigenerational family trusts for estate planning.
Even if your assets fall below the new federal exemption amount, it’s still worth considering additional estate and tax planning. While the $15 million exemption is now “permanent” (i.e., there is no planned sunset), future changes in the tax law could always reduce the exemption. Additionally, many states, including New York, will continue to impose their own estate tax laws. Effective planning now can help secure long-term tax savings and protect your legacy, no matter how tax laws may change in the future.
II. The State and Local Tax (“SALT”) Deduction
The SALT deduction has been increased to $40,000 until 2030, indexed for inflation, with a built-in phase out once a taxpayer’s adjusted gross income exceeds $500,000. Once income exceeds that threshold, the deduction will be reduced by 30% of the excess, but it will not fall below $10,000. Notably, non-grantor trusts will be permitted to benefit from the SALT deduction.
New York taxpayers may be familiar with Pass-Through Entity Tax (PTET) structures introduced to mitigate the TCJA’s SALT deduction cap. Under a PTET structure, taxpayers may shift SALT costs to a pass-through entity (such as an LLC or S-Corp). The entity may then generally deduct the full amount of the tax paid, while entity owners receive a corresponding state credit. Notably, proposed restrictions on the use of PTET were excluded from the Act’s final iteration.
Given the temporary increase to the SALT deduction, taxpayers and their advisors should consider whether it is prudent to adjust or unwind existing PTET structures. Careful consideration should also be given before terminating grantor trust status solely for SALT deduction purposes, as doing so may forfeit the many advantages that grantor trust status provides.
III. Select Individual Income Tax Provisions
- Income Tax Rates: The individual rates introduced by the TCJA are now
permanent. The current individual rates are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. - The Standard Deduction: The higher standard deduction introduced by the TCJA has also been made permanent. For 2025, the standard deduction for single filers is $15,750 ($31,500 for joint filers). These amounts will be adjusted annually for inflation.
- Home Mortgage Interest Deduction: The $750,000 cap on the mortgage interest deduction for acquisition debt is now permanent, in addition to the prohibition on deductions for home equity loan interest.
- Charitable Contribution Deduction: Beginning in 2026, non-itemizing taxpayers may deduct up to $1,000 ($2,000 for joint filers) of charitable contributions to qualifying entities. Itemizing taxpayers will have their charitable contributions reduced by 0.5% of their adjusted gross income, excluding net operating loss carrybacks.
- Miscellaneous Itemized Deductions: The elimination of miscellaneous itemized deductions has been made permanent. However, eligible educators will be permitted to deduct these expenses.
- Limitations on Itemized Deductions: The Pease limitation (which reduced the amount of allowable deductions for high-income taxpayers) has been replaced by a 35% cap. For taxpayers in the top income tax bracket, this means that every dollar of itemized deductions will reduce their liability by no more than 35%.
- Senior/Personal Deduction: The personal deduction has been permanently
eliminated for taxpayers under age 65. Taxpayers age 65 and over can claim a temporary $6,000 deduction though 2028. This benefit phases out when an
individual taxpayer’s modified adjusted gross income exceeds $75,000 ($150,000 for joint filers), and is completely phased out at $250,000. - The Alternative Minimum Tax (AMT): The AMT exemption is permanently
increased to $500,000 for single filers ($1,000,000 for joint filers), indexed for inflation. In 2026, the phaseout exemption will be increased from 25% to 50%.
IV. Qualified Business Income (“QBI”) Deduction
The QBI deduction has been made permanent, which permits a 20% deduction of qualified business income generated by certain business entities. While this benefit will remain limited for Specified Service Trades or Business (“SSTBs”), the income thresholds have been expanded to $75,000 for a single taxpayer ($150,000 for joint filers), even for SSTB owners.
V. Qualified Small Business Stock (“QSBS”):
The Act significantly strengthens the tax benefits associated with small business stock. Previously, gains on the sale of QSBS held for at least five years were eligible to be fully exempt from capital gains tax, with a $10 million cap per issuer, subject to a greater exclusion based on 10 times the taxpayer’s basis in the stock. To qualify, shares must have been acquired directly from a domestic C corporation with less than $50 million in
aggregate gross assets.
Now, taxpayers will be able to take advantage of the following tiered capital gain exclusion: 50% if the stock is held for 3 years; 75% if held for 4 years; and 100% if held for at least 5 years. Furthermore, the maximum capital gain exclusion has been increased to $15 million, and the aggregate gross asset limitation has been increased to $75 million. These changes are poised to substantially reshape investment in QSBS for years to come.
Jesse Frost is an associate in Twomey Latham’s Trusts and Estates department. This publication is for general information purposes only and does not constitute legal advice. If you have questions or would like to discuss any of the topics covered, the author is available to speak with you at your convenience.
