The “One Big, Beautiful Bill” (OBBBA) represents a significant shift in U.S. tax policy, bringing a mix of permanent and temporary changes. This is more than just political rhetoric; it has real implications for financial strategies across different income brackets, ages, and occupations. Here's what you need to know about wealth transfer planning, business transition planning, and other key financial strategies.
Income Tax, Deductions & Credits
You might find the permanency of lower income tax brackets and ESOP consulting from the TCJA beneficial, alongside the adjusted thresholds. The higher standard deduction will also continue, adjusting yearly for inflation. For families, the Child Tax Credit has been expanded, including various refundable and nonrefundable changes based on income. Moreover, if you own a U.S.-assembled vehicle, you could benefit from the new $10,000 car loan interest deduction.
Another temporary benefit is the tax break on up to $25,000 in tips, with more occupations being eligible soon. Additionally, the SALT deduction cap has increased to $40,000, providing relief in high-tax states, though there are phaseouts for high-income earners.
Wealth Transfer, Investment & Retiree Provisions
The act introduces a temporary $6,000 "Senior Bonus" deduction for eligible seniors, while permanently increasing estate, gift, and generation-skipping transfer tax exemptions to $15 million, critical for high net worth estate planning. Inflation-adjusted capital gains brackets are designed to help investors stay in lower tax ranges. Plus, there's now permanent relief from the Alternative Minimum Tax (AMT), though higher-income earners may experience a quicker phaseout. Consider consulting a 1042 exchange advisor for more personalized strategies.
Other Noteworthy Changes
Significant Medicaid changes bring $1 trillion in funding cuts, alongside new work or volunteer requirements and stricter eligibility. The introduction of “Trump Accounts” provides eligible children with tax-advantaged growth, while clean energy and EV tax credits will soon phase out, prompting immediate action for those considering purchases or upgrades.
Overall, the OBBBA affects a wide range of taxpayers, from low-income families to wealthy investors and retirees. Don't wait until tax season to understand its impact—start evaluating your tax strategy now. Consult with a financial advisor or tax professional for tailored guidance, especially if you are exploring executive benefits plans or succession planning for business owners.