This article is reprinted with permission from Esq. Wealth Management, Inc.
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, marks one of the most sweeping legislative overhauls of the federal tax code in recent memory. While the bill spans hundreds of provisions across defense, healthcare, energy, and immigration, this briefing focuses on 13 changes most consequential for high-net-worth (HNW) individuals and families.
At EsqWealth, we help our clients translate complex legislation into actionable strategies. These provisions—ranging from estate tax reform to charitable giving thresholds and education savings expansions—are not mere technicalities. They carry real implications for how wealth is preserved, transferred, and optimized across generations.
Where relevant, we’ve also referenced our recent article Evaluating Roth Conversions in Light of the New Tax Laws, which explores how several of these changes may affect the timing, magnitude, and viability of converting tax-deferred retirement assets to Roth IRAs.
1. Permanency of TCJA Tax Cuts and Estate Exemption
The OBBBA makes permanent the lower tax rates introduced under the 2017 Tax Cuts and Jobs Act (TCJA), including the Qualified Business Income (QBI) deduction for pass-through entities. It also prevents the federal estate tax exemption from reverting to its pre-TCJA level.
Planning Implication: This permanency removes the uncertainty that previously surrounded sunset provisions, allowing for more deliberate long-term planning. While the lifetime gift exemption is discussed in greater detail below, the broader stability of the tax code supports more confident structuring of trusts, business entities, and income strategies.
2. Increased Standard Deduction (2025)
Beginning in 2025, the standard deduction will rise to:
| Filing Status | New Deduction |
| Joint Filers | $31,500 |
| Heads of Household | $23,625 |
| Single Filers | $15,750 |
These amounts will be indexed annually for inflation.
Planning Implication: While many HNW clients itemize deductions, the increased standard deduction may influence planning for clients with variable income or charitable strategies that fall below itemization thresholds. It also interacts with the SALT cap (see #8), potentially affecting the decision to itemize in certain years.
3. Charitable Giving Reforms (2026)
The bill introduces a new $1,000/$2,000 charitable deduction for standard deduction filers, but excludes donor-advised funds (DAFs) and private foundations. For itemizers:
- Deduction capped at 35% of donation value
- Only contributions exceeding 0.5% of AGI are deductible
Planning Implication: Clients relying on DAFs may see reduced tax efficiency. These changes may prompt a shift toward direct charitable trusts or qualified charitable distributions (QCDs), especially for those seeking to maintain deductibility while maximizing philanthropic impact.
4. Lifetime Gift Tax Exemption Raised to $15 Million (2026)
The lifetime gift tax exemption will increase to $15 million per individual, indexed for inflation, with no expiration date.
What This Means: If your estate is under $15M ($30M for couples), you can gift assets during your lifetime without incurring federal gift tax. Above that threshold, excess gifts are taxed at 40%, unless mitigated through advanced planning.
Why It Matters: Under prior law, the exemption was scheduled to revert to approximately $5M per person in 2026. The new law provides long-term certainty, allowing clients to structure SLATs, GRATs, and dynasty trusts without racing against sunset provisions. For estates near or above the threshold, this is a critical opportunity to revisit gifting strategies and irrevocable trust structures.
5. Child Tax Credit Increase (2025)
The child tax credit rises to $2,200 per child, indexed for inflation.
- Phaseouts begin at $200,000 (single) and $400,000 (joint) MAGI
- Refundable portion capped at $1,700
Planning Implication: While modest, this may benefit clients with dependent children, particularly those near phaseout thresholds. For most HNW families, the credit may be phased out entirely, but it remains relevant for younger family members or clients with fluctuating income.
6. Repeal of Green Energy Credits
The $7,500 EV credit ends for purchases after September 30, 2025. The Residential Clean Energy Credit—used for solar panels, battery systems, and energy-efficient upgrades—expires December 31, 2025.
Planning Implication: Clients considering solar installations, geothermal systems, or high-efficiency HVAC upgrades should act quickly. These credits previously covered up to 30% of qualifying costs, including installation and equipment. The repeal may also affect valuation and tax treatment of energy-efficient properties held in trusts or LLCs.
7. Expanded 529 Plan Uses
529 plans now cover a broader range of K–12 expenses:
- Curriculum materials, tutoring, dual-enrollment college courses
- Annual K–12 cap doubled to $20,000 per child starting in 2026
- Funds may be used for credentialing and licensing programs recognized under federal or state standards
Planning Implication: This expansion enhances the flexibility of 529 plans and may reduce the need for supplemental education trusts or taxable outlays. It also supports families pursuing alternative education paths or professional training outside traditional college settings.
8. SALT Deduction Cap Temporarily Raised
From 2025–2029, the SALT deduction cap increases to $40,000 for taxpayers earning less than $500,000, with a 1% annual increase. The cap reverts to $10,000 in 2030.
Planning Implication: Clients in high-tax states may benefit from itemizing again. However, be cautious with Roth conversions—excess income could push MAGI above the $500K threshold, nullifying the benefit. For further analysis of how Roth conversions interact with deduction phaseouts, see our article Evaluating Roth Conversions in Light of the New Tax Laws.
9. Tip Income Exemption (2025–2028)
Tip income is exempt from federal income tax during this period.
- Phaseouts begin at $150,000 AGI ($300,000 joint)
- Applies to occupations listed by IRS as “customarily tipped”
Planning Implication: This provision likely won’t apply to most HNW clients directly, but may affect household employees or younger family members working in qualifying roles. Employers should ensure proper reporting and documentation to support eligibility.
10. Overtime Pay Exemption (2025–2028)
Overtime wages are exempt from federal income tax:
- Capped at $12,500 per individual / $25,000 per couple
- Phaseouts begin at same AGI thresholds as tip income
Planning Implication: While not relevant for most HNW clients, this provision may apply to household staff, adult children, or extended family members. We include it here for completeness and to support broader family planning conversations.
11. Trump Accounts for Newborns
Children born between 2025 and 2028 are automatically enrolled in federally sponsored savings accounts with a $1,000 seed deposit.
- Annual contributions up to $5,000, indexed for inflation
- Withdrawals begin at age 18; rules resemble Roth IRAs
Planning Implication: These accounts are not a replacement for 529 plans. They’re broader in scope—not limited to education—but lack clarity on qualified expenses, investment options, and parental control. Most advisors view them as supplemental vehicles, useful for early financial literacy but not central to long-term education or estate planning.
12. Senior Deduction Enhancement (2025–2028)
Seniors aged 65+ receive an additional $6,000 deduction ($12,000 for couples), applicable to both standard and itemized filers.
- Phaseout begins at $75,000/$150,000 AGI
- Fully phased out at $175,000/$250,000 AGI
Planning Implication: This may influence income planning for retirees, especially those drawing from IRAs, pensions, or annuities. For deeper analysis of deduction phaseouts and their impact on Roth conversion timing, see Evaluating Roth Conversions in Light of the New Tax Laws.
13. Car Loan Interest Deduction (2025–2028)
For the first time, personal car loan interest will be deductible:
- Up to $5,000 per year for individuals, $10,000 for joint filers
- Applies only to non-business vehicles
- Phaseouts begin at $150,000/$300,000 AGI
Planning Implication: This provision is unlikely to benefit HNW clients directly, as most purchase vehicles outright or lease through business entities. However, it may be relevant for adult children or family members financing personal vehicles. Advisors should clarify that this deduction does not apply to business-use vehicles or luxury purchases exceeding IRS thresholds.
Final Thoughts
The One Big Beautiful Bill Act is more than a tax overhaul—it’s a recalibration of how wealth is taxed, transferred, and incentivized. For HNW families, the most impactful changes center on estate planning, charitable giving, and education funding. But even provisions that seem peripheral—like tip income exemptions or car loan interest deductions—may affect household employees, younger generations, or broader family planning strategies.
At EsqWealth, we believe clarity is power. By understanding these provisions in context, clients can make informed decisions that align with their legacy goals, risk tolerance, and long-term financial vision.
Sources
- Congressional Research Service – TCJA Expiring Provisions https://www.congress.gov/crs-product/R47846
- Penn Wharton Budget Model – House Reconciliation Bill Analysis https://budgetmodel.wharton.upenn.edu/issues/2025/5/20/house-reconciliation-bill-illustrative-calculations-with-permanence-may-20-2025
- Council on Foundations – Impact on Philanthropy https://cof.org/page/one-big-beautiful-bill-impact-philanthropy
- IRS – Estate and Gift Tax FAQs https://www.irs.gov/newsroom/estate-and-gift-tax-faqs
- U.S. Department of the Treasury – Child Tax Credit Overview https://home.treasury.gov/policy-issues/coronavirus/assistance-for-american-families-and-workers/child-tax-credit
- White House – Ending Green Energy Subsidies Executive Order https://www.whitehouse.gov/presidential-actions/2025/07/ending-market-distorting-subsidies-for-unreliable-foreign%E2%80%91controlled-energy-sources/
- IRS Publication 970 (2024) – Tax Benefits for Education https://www.irs.gov/pub/irs-pdf/p970.pdf?v=20250322010112
- Bipartisan Policy Center – SALT Deduction Changes https://bipartisanpolicy.org/explainer/salt-deduction-changes-in-the-one-big-beautiful-bill-act/
- IRS – Tip Income Exemption Fact Sheet
https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors - USA Today – No Tax on Overtime Explained https://www.usatoday.com/story/news/2025/07/31/no-tax-overtime-pay-2025-big-beautiful-bill/85458266007/
- White House – Trump Accounts for Newborns Announcement https://www.whitehouse.gov/articles/2025/06/trump-accounts-will-chart-path-to-prosperity-for-a-generation-of-american-kids/
- AARP – Senior Deduction Details
https://www.aarp.org/money/taxes/what-to-know-new-tax-law-2025.html - IRS – Car Loan Interest Deduction Fact Sheet
https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
The information above is not intended to and should not be construed as specific advice or recommendations for any individual. The opinions voiced are for general information only and are not intended to provide, and should not be relied on for tax, legal, or accounting advice. To discuss specific recommendations for any unique situation, please feel free to contact us.
