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The One Big Beautiful Bill Act (OBBBA) is now law, ushering in one of the most consequential overhauls of the U.S. tax system in recent memory. Its scope is sweeping\u2014locking in the Qualified Business Income deduction, expanding Section 1202 gains exclusions, accelerating bonus depreciation timelines, raising the estate and gift tax exemption, and stabilizing federal income brackets for long-range planning.\u00a0<\/p>\n
Key provisions are already in force, with others rolling out through 2029. Some are permanent, others are time-limited, but all demand immediate attention. For global institutions and compliance-centric enterprises, the OBBBA alters the risk calculus\u2014Whether you\u2019re a business owner, investor, family office, or multinational enterprise, the OBBBA redefines how wealth is structured, preserved, and taxed. With changes impacting everything from expensing rules and retirement contributions to cross-border reporting and due diligence thresholds, tax planning is no longer elective\u2014it\u2019s imperative.\u00a0<\/p>\n
Below, we break down key highlights by taxpayer type to help you identify where the most significant opportunities and compliance risks lie.<\/p>\n
Pass-through entities\u2014including LLCs, S-Corps, and partnerships\u2014may continue to claim a 20% deduction on eligible income. However, specified service trades or businesses (SSTBs)\u2014such as law, consulting, and financial services\u2014remain excluded if taxable income exceeds $364,200 for married filing jointly or $182,100 for single filers.<\/p>\n
Under the OBBBA, the phase-in range for the Qualified Business Income (QBI) deduction for specified service trades or businesses (SSTBs) has been expanded to $150,000 for joint filers and $75,000 for single filers\u2014up from the previous $100,000 and $50,000, respectively. While the top income limits for full deduction eligibility remain unchanged, this broader phase-in zone allows more high-income SSTB taxpayers to claim partial QBI deductions\u2014potentially unlocking significant tax savings.<\/p>\n
Businesses may claim 100% bonus depreciation on qualified property placed in service after January 19, 2025\u2014a provision now made permanent under the OBBBA, though many businesses continue to plan around a 2029 horizon for capital investments. Section 179 expensing has also been expanded, now allowing up to $2.5 million in qualifying investments annually, with the phase-out threshold beginning at $4 million.<\/p>\n
These provisions especially benefit sectors like construction, logistics, manufacturing, and commercial real estate. Entities with significant infrastructure or capital expenditure needs should synchronize acquisition planning with audit-readiness and documentation standards\u2014consult your CPA to optimize timing and eligibility.\u00a0<\/p>\n
The OBBBA updates Section 1202 to expand eligibility for capital gains exclusions when selling Qualified Small Business Stock (QSBS). Previously, shareholders had to hold their stock for at least five years to qualify for a 100% capital gains exemption. Under the new rules:<\/p>\n
This reform marks a significant expansion of Section 1202, providing original shareholders of qualified small C corporations a more flexible pathway to achieve partial or full exclusion of capital gains, depending on their holding period.<\/p>\n
The new law also raises the eligibility threshold for corporations issuing QSBS from $50 million to $75 million in aggregate gross assets at the time of issuance. It further increases the per-issuer capital gains exclusion cap from $10 million to $15 million (or 10\u00d7 basis, whichever is greater), indexed annually for inflation starting in 2026. Determining the aggregate gross asset value may involve additional considerations related to asset valuation, timing, and affiliated entities. These revised holding period thresholds and enhanced exclusion caps apply to QSBS acquired after July 4, 2025. For QSBS issued on or before that date, the $50 million threshold remains in effect. This tiered structure reduces the holding period barrier and enhances the attractiveness of C-Corp structures for founders, early employees, and long-term investors planning an eventual equity exit. Financial advisors and deal professionals should reassess exit timelines, entity structures, and investor eligibility to maximize tax-free outcomes under these revised QSBS rules.<\/p>\n
The Employee Retention Credit (ERC) is officially terminated under the OBBBA, effective retroactively as of January 31, 2024. Claims submitted after that date will not be accepted. The IRS has expanded its enforcement toolkit, launching a Voluntary Disclosure Program (VDP) and extending audit authority for previously filed claims.\u00a0\u00a0<\/p>\n
Businesses should conduct thorough compliance reviews of prior ERC filings and maintain clear, audit-ready documentation. This is especially critical for regulated entities\u2014including broker-dealers, publicly traded companies, and any businesses subject to Sarbanes-Oxley (SOX) or SEC oversight. Unsubstantiated or poorly documented ERC positions may trigger enhanced scrutiny.<\/p>\n
Beginning in 2026, eligible businesses may claim a nonrefundable tax credit equal to 50% of up to $1.2 million in annual qualified childcare facility expenditures, capped at $600,000. The credit applies to both facility operation and on-site child care services, with additional incentives for partnerships with licensed third-party providers.<\/p>\n
This provision supports workforce retention, particularly for industries with high turnover or labor shortages. Businesses should assess infrastructure, location compliance, and eligibility requirements when designing qualifying programs.<\/p>\n
Beginning in 2026, the federal lifetime estate and gift tax exemption will increase to $15 million per individual ($30 million for married couples), indexed annually for inflation. Unlike the TCJA temporary increase, the OBBBA makes this expanded exemption permanent.<\/p>\n
High-net-worth individuals should consider:<\/p>\n
The OBBBA locks in the current seven federal income tax brackets, ranging from 10% to 37% on a permanent basis\u2014supporting long-term tax planning strategies, from Roth conversions and charitable contributions to capital gains management. It also facilitates better coordination with multi-year financial and retirement planning models.\u00a0<\/p>\n
The OBBBA makes permanent the AMT exemption amounts established under the TCJA, but it also tightens the phaseout rules. Starting in 2025, the exemption begins to phase out at $626,350 for single filers and $1,252,700 for joint filers. The phaseout rate has been doubled\u2014from 25% to 50%\u2014increasing the likelihood that more high-income earners\u2014even with no significant change in income\u2014will trigger AMT liability.\u00a0<\/p>\n
Projected AMT exposure should be stress-tested across compensation arrangements, incentive stock options, and passive investment structures\u2014particularly for executives in high-growth, deferred-comp structures, or equity-linked compensation.\u00a0<\/p>\n
The State and Local Tax (SALT) deduction cap will rise from $10,000 to $40,000 in 2025, with a 1% annual increase through 2029. A gradual phaseout begins at $250,000 for single filers and $500,000 for married joint filers.<\/p>\n
Taxpayers in high-tax jurisdictions such as California, Connecticut, Hawaii, Illinois, New York, New Jersey, and Vermont, should weigh passthrough entity SALT workaround elections, timing strategies for state tax payments [within the applicable years], and revised withholding protocols in consultation with a tax advisor to optimize exposure.\u00a0<\/p>\n
Families with children born on or after January 1, 2025 may contribute up to $5,000 annually for each eligible child to a new tax-advantaged savings account. These accounts support education and long-term wealth accumulation, with a $1,000 federal match and up to $2,500 in optional employer contributions. The program is authorized through 2028.<\/p>\n
Under the OBBBA, 529 plans can now cover additional educational expenses, including homeschooling, dual-enrollment, and vocational training. Employer-provided student loan repayment assistance (up to $5,250 annually) remains tax-free through 2025 under the CARES Act. Unless reauthorized, this provision sunsets at year-end.<\/p>\n
Provision<\/strong><\/td>\n| Effective Dates<\/strong><\/td>\n | Status<\/strong><\/td>\n | Planning Tip<\/strong><\/td>\n<\/tr>\n | Estate & Gift Exemption<\/td>\n | Starting 2026<\/td>\n | Permanent<\/td>\n | Reevaluate trust structures and gifting strategies under stable limits<\/td>\n<\/tr>\n | QBI Deduction<\/td>\n | Now<\/td>\n | Permanent<\/td>\n | Analyze entity type and income thresholds for full deduction access<\/td>\n<\/tr>\n | Bonus Depreciation<\/td>\n | After Jan 19, 2025<\/td>\n | Permanent<\/td>\n | Time capital expenditures to align with record-keeping and internal audit cycles\u00a0<\/td>\n<\/tr>\n | QSBS Capital Gains Exclusions<\/td>\n | Enhanced in 2025<\/td>\n | Permanent<\/td>\n | Holding periods shortened and eligibility thresholds improved for tax-free exits on C-Corp stock.\u00a0<\/td>\n<\/tr>\n | SALT Cap Raised to $40K<\/td>\n | 2025 \u2013 2029<\/td>\n | Temporary<\/td>\n | Plan for phased cap increase and income-based phaseout<\/td>\n<\/tr>\n | Trump Accounts<\/td>\n | 2025 \u2013 2028<\/td>\n | Temporary<\/td>\n | Use for newborn wealth planning and qualified educational savings<\/td>\n<\/tr>\n | Childcare Credit<\/td>\n | From 2026<\/td>\n | Permanent<\/td>\n | Leverage credit to enhance workforce retention and benefits strategy<\/td>\n<\/tr>\n | AMT Phaseout Tightening<\/td>\n | Now<\/td>\n | Permanent<\/td>\n | Model AMT exposure based on revised phaseout thresholds and rates<\/td>\n<\/tr>\n | ERC Program<\/td>\n | Ended Jan 2024<\/td>\n | Terminated<\/td>\n | Conduct review of prior claims and prepare for compliance verification\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n | Key Questions to Discuss with Your CPA or Tax Advisor<\/h3>\nBefore your next tax planning, consider asking:<\/p>\n |