How will the OBBBA impact taxes and estate planning?

The recent passage of the One Big Beautiful Bill Act, or OBBBA, has ushered in major changes to the US tax code. Notably, the act introduces new incentives while making key provisions of the Tax Cuts and Jobs Act, or TCJA, permanent.

With many of these new tax rules going into effect in 2025 and 2026, now is an important time to revisit your estate, charitable giving and tax strategies.

What is the OBBBA?

The One Big Beautiful Bill Act is a significant update that extends key provisions of the TCJA while introducing new incentives for high-income earners and their families.

The TCJA was originally passed by Congress in 2017. The act, which provided the largest tax overhaul since the Tax Reform Act of 1986, included significant changes to the income tax rules for individuals and businesses, particularly the estate and gift tax landscape.

Without further congressional action, many of these provisions were scheduled to sunset December 31, 2025. To address this and other administrative priorities, Congress passed the OBBBA July 4, 2025, making the 2017 TCJA tax cuts permanent while adding new tax incentives.

How will the new tax rules affect me?

While there are a variety of tax changes introduced in the OBBBA, some of the most noteworthy for individuals include permanent changes to charitable deductions, income tax brackets and the estate tax threshold.

Here's a closer look at some of the changes introduced in 2025.

Many of these deductions—including the standard deduction, SALT deduction and estate tax exemption—will go into effect starting January 1, 2026, and will be adjusted for inflation.

Depending on your unique circumstances, these changes may affect how you approach two key aspects of your financial plan: charitable giving and estate planning.

Charitable giving

The OBBBA's changes to charitable deductions may have a significant impact on when, how and to whom you choose to give. How these changes impact your charitable giving strategy will ultimately depend on your tax bracket and whether you itemize or claim the standard deduction.

If you itemize your deductions

The OBBBA eliminated the Pease limitation on itemized deductions for high-income taxpayers and imposes a new cap on the tax benefit for top earners. Specifically, individuals in the 37% tax bracket will now receive a maximum tax benefit of 35% for all itemized deductions, including charitable contributions. For example, a $10,000 donation would now result in a $3,500 tax benefit instead of the current $3,700. As a result, some may wish to accelerate their charitable gifts in 2025 to lock in a higher deduction.

In addition, itemizers can now only deduct charitable donations that exceed 0.5% of their adjusted gross income, or AGI. For example, the threshold for an individual with an AGI of $250,000 would be $1,250. To overcome this threshold, you could bunch several years of donations into a single tax year. Donor advised funds, or DAFs, and private foundations can be effective vehicles to support this strategy. For corporations, the OBBBA imposes a 1% floor based on taxable income.

If you take the standard deduction

The OBBBA creates a new opportunity for taxpayers who take the standard deduction by permanently allowing a charitable deduction of up to $1,000 for individuals and $2,000 for joint filers. This allows taxpayers who don't itemize to benefit from charitable giving.

Estate tax changes

The OBBBA increases the federal estate tax exemption starting in 2026, preserving a key provision of the TCJA that was set to expire. Prior to the TCJA, the estate tax exemption was $5.49 million per individual. In 2025, it was $13.99 million per individual. Without further action, it was scheduled to revert to pre-TCJA levels after December 31, 2025.

The example below illustrates the difference in estate tax liability under the TCJA versus the OBBBA for a married couple with $50 million net worth—assuming both individuals were to pass away in the year indicated. In this scenario, the OBBBA reduces their estate tax burden by approximately $800,000. This difference can be especially meaningful for estate plans that utilize formula clauses based on the federal estate tax exemption.

Estate tax exemption: 2025 versus 2026

While the OBBBA has increased the estate tax exemption amount in 2026, inflation over the past 5 years may have also significantly increased the value of some assets in your estate, such as real estate or your business. This can create unexpected estate tax liability, making proactive planning essential.

A case study example

Let's say Tom and Cindy are married and have owned a successful logistics company for the past 20 years. With three children and retirement on the horizon, they're beginning to think about selling the business. A valuation of the company a few years ago appraised it for $30 million. Since then, the business has continued to grow—the company is now worth $40 million—and this growth is expected to accelerate.

After meeting with their wealth consultant and estate planning attorney and discussing their goals and priorities in more detail, the couple decides to establish grantor trusts in which they'll gift a portion of their business ownership.

Tom and Cindy use their new $30 million exemption at the start of 2026 to fund two new grantor trusts, with 45% of nonvoting company stock going to each trust and a discounted valued of approximately $30 million. They'll keep 5% stock each and continue to run the company and get paid a salary. This removes the $30 million in company stock—and its appreciation—from their estate.

When they decide to sell the company in a few years—which is valued at $55 million—they'll have effectively removed $49.5 million from their estate, representing a savings of $19.8 million in estate tax. The proceeds will continue to be invested and grow in the trust estate tax-free.

This strategy lets them take advantage of the increased exemption while letting the future growth of these assets grow estate tax-free, which ultimately benefits their heirs—all while maintaining control, flexibility and alignment with the family's financial goals.

Key steps to take in 2025

Considering the sweeping tax changes introduced by the OBBBA—along with inflationary pressures, higher interest rates and broader economic uncertainty—now is a valuable time to revisit your wealth and estate planning strategy.

1Revisit your charitable giving strategy

For many, it will become increasingly important to approach charitable giving with intention. To navigate the new limitations on deductions for charitable giving, consider speaking with your advisor. They can help you develop a strategic charitable giving plan that will help maximize your charitable impact and preserve tax efficiency.

2Monitor the value of your estate

With increased inflation and rising values, it's important to closely monitor the value of your estate in case it exceeds the federal exclusion. State estate taxes may still apply. Your advisor can help you create a strategic plan that addresses any applicable estate taxes.

3Evaluate your gifting strategy

Gifting is a powerful tool—particularly when implemented as part of a strategic, goals-based plan. With the lifetime exemption extended and increased, there's no longer a rush to use it before the end of 2025. This gives you time to take a thoughtful and measured approach to gifting. Evaluate your gifting capacity to ensure your current and future gifts won't affect your long-term financial security. While gifting cash may be the most common approach, these new limits may also apply to other options like forgiving loans to family members or gifting discounted shares in a business.

4Review and update your estate documents

It's also a good time to review your existing estate planning documents to ensure they're updated to reflect your goals. As a best practice, estate documents should be reviewed every 1 to 3 years to ensure they remain aligned with your wishes and reflect any changes in your family or personal situation.

The bottom line

With some changes under the OBBBA taking effect this year, it's a good time to review your tax strategy in 2025. This might mean making gifts, accelerating income or adjusting your charitable giving before the end of the year to determine if updates are needed. Working with your wealth advisor and estate planning team to build a long-term, comprehensive strategy can help you stay in control of your financial future and provide peace of mind that the wealth you've worked hard to build is protected and well-positioned for the future.

Key takeaways

• The One Big Beautiful Bill Act is a significant update that extends key provisions of the TCJA while introducing new incentives for high-income earners and their families.
• The new act increases estate tax exemptions, SALT deductions and the standard deduction.
• Charitable giving rules have been overhauled—impacting how and when high earners can deduct contributions—while new opportunities exist for non-itemizers.
• Now is an important time to revisit your estate, tax planning and charitable giving strategies to ensure they continue to align with your goals and the new tax landscape.