One Big Beautiful Bill – Top 15 Tax Changes

For years, we’ve been helping you plan around the “what-ifs” of the 2025 tax cliff. The temporary provisions from the Tax Cuts and Jobs Act (TCJA) were set to expire, leaving a cloud of uncertainty over everything from income tax rates to your business deductions. Well, the what-ifs are over.

Congress passed a new bill, and on July 4, 2025, the President signed into law, H.R. 1, the “One Big Beautiful Bill Act” (OBBBA), now Public Law 119-21. This is the most significant tax overhaul we’ve seen in years and creates a brand new landscape for tax planning. While the bill is massive and covers a wide array of topics, not all will matter to your bottom line.

That’s where we come in. We’ve spent the time reading the fine print so you don’t have to. This article will cut through the noise and focus on the 15 provisions from the OBBBA that we believe are most important for our clients. Our goal is to move beyond the headlines and give you practical, forward-looking advice to navigate these changes proactively. Let’s dive in.

The 15 Most Important OBBBA Changes for You

1. The New, Higher Standard Deduction is Here to Stay (and Personal Exemptions Aren’t Coming Back)

(Sections 70102 & 70103)

The TCJA fundamentally changed how most Americans calculate taxable income by nearly doubling the standard deduction while eliminating personal exemptions. The OBBBA now makes this framework a permanent feature of the tax code.

• New Law Details: The OBBBA permanently extends the higher standard deduction and gives it another boost. For 2025, the standard deduction increases to $15,750 for single filers and $31,500 for married couples filing jointly. At the same time, the law permanently repeals the personal exemption, which is set to $0. The bill also adds a new, temporary deduction of $6,000 for taxpayers aged 65 or older, which is available from 2025 through 2028. But it phases out for those with modified AGI over $75,000 ($150,000 for joint filers).
• Prior Law (TCJA & Pre-TCJA): The TCJA introduced the higher standard deduction and suspended personal exemptions. However, these changes were temporary and scheduled to revert to pre-TCJA law after 2025. Before the TCJA, the standard deduction was much lower (in 2017, it was $6,350 for singles). In addition, taxpayers could claim a personal exemption of $4,050 for themselves, their spouse, and each dependent.
• Comparison & Impact: This change provides certainty by locking in the new system for calculating taxable income. For high-income professionals, the permanently higher standard deduction raises the threshold that your itemized deductions—like mortgage interest, charitable gifts, and state taxes—must exceed to provide any tax benefit. The permanent loss of personal exemptions is a significant structural change from the pre-2018 tax system, which particularly affects larger families.

What This Means for Your Planning: The Itemization Hurdle is Higher

With the standard deduction now permanently elevated, the decision to itemize requires more strategic planning than ever. For many, the total of their individual deductions may no longer be enough to surpass the standard deduction amount. This makes strategies like “bunching” charitable contributions or medical expenses into a single year even more critical for taxpayers who are on the cusp of being able to itemize. We need to look at your specific situation to determine if itemizing still makes sense or if taking the simpler standard deduction is the better path forward.

2. The SALT Deduction Gets a Major Overhaul

(Section 70120)

If you’re like many of our clients in high-tax states, the $10,000 State and Local Tax (SALT) deduction cap has been a significant pain point since the TCJA was enacted. The OBBBA provides some, albeit complex, and temporary relief. As currently written, the enhanced SALT deduction disappears in 2030.

• New Law Details: Starting in 2025, the OBBBA increases the SALT deduction cap from $10,000 to $40,000 for most filers ($20,000 for MFS). However, this isn’t a simple tax cut for everyone. The bill introduces a new phase-down for higher earners. The $40,000 cap is reduced by 30% of a taxpayer’s Modified Adjusted Gross Income (MAGI) that exceeds $500,000 ($250,000 for MFS). This reduction continues until the cap hits a floor of $10,000. To keep pace with inflation, both the $40,000 cap and the $500,000 income threshold will increase by 1% annually from 2026 through 2029. The offset here is the potential for AMT taxes to rear their ugly head for many more taxpayers. We expect the impact to be muted for many clients with incomes between $400,000 – $500,000, especially those with higher real estate taxes.
• Prior Law (TCJA): The TCJA instituted a strict $10,000 cap ($5,000 for MFS) on the SALT deduction for 2018 through 2025. This was a dramatic change from the pre-TCJA era when the deduction was unlimited for those who itemized. The TCJA cap applied to all income levels with no phase-out.
• Comparison & Impact: For many high-income professionals, this is one of the most significant changes in the bill. A family in a high-tax state paying $50,000 in property and state income taxes was previously limited to a $10,000 deduction. Now, if their MAGI is below $500,000, they could potentially deduct up to $40,000. Thus creating an additional $30,000 deduction and substantial federal tax savings. However, the benefit is explicitly targeted. For example, a taxpayer with a MAGI of $550,000 would see their cap reduced by $15,000 (30% of the $50,000 excess income), resulting in a new cap of $25,000. Once a taxpayer’s MAGI reaches $600,000 in 2025, the cap is fully phased down to the $10,000 floor.

What This Means for Your Planning: The New “SALT Sweet Spot”

The OBBBA creates a “sweet spot” for the SALT deduction, primarily benefiting households with MAGI between $200,000 and $500,000. However, this new benefit doesn’t exist in a vacuum. Its true value is constrained by two other major provisions in the bill. The first being the new overall limitation on itemized deductions (which we’ll cover next). The second being the new restrictions on state-level Pass-Through Entity Tax (PTET) workarounds.

This creates a more complex planning environment than ever before. Under the TCJA, the strategy for many business owners was simple. Use a state PTET to pay state taxes at the entity level, effectively bypassing the individual $10,000 cap. Unfortunately, the OBBBA complicates this by adding rules that limit the effectiveness of these workarounds.

As a result, the planning conversation shifts. It’s no longer just about whether to use a PTET. Now, we must analyze the interplay of three factors:

1. Your individual MAGI and where it falls relative to the $500,000 phase-down threshold.
2. The “haircut” that the new overall itemized deduction limit will take from the value of your SALT deduction if you’re in the top tax bracket.
3. The net benefit of using a now-restricted PTET versus taking the newly expanded, but still limited, individual deduction.

The key takeaway is that optimizing your SALT deduction has become an interactive puzzle. It requires careful, forward-looking projections to manage your income and choose the most tax-efficient path.

3. The “Pease” Limitation is Gone, But a New Cap on Itemized Deductions Takes Its Place

(Section 70111)

For years, high-income taxpayers dealt with a confusing rule called the “Pease” limitation, which reduced itemized deductions. The TCJA temporarily repealed it, and the OBBBA makes that repeal permanent. But it replaces it with something entirely new.

• New Law Details: The OBBBA permanently eliminates the Pease limitation. In its place, it creates a new, direct limitation on the tax benefit of itemized deductions. This new limitation only pertains to taxpayers whose income falls into the top tax bracket (currently 37%). For these individuals, the value of their total itemized deductions is reduced by 2/37 of the lesser of (i) their total itemized deductions or (ii) the amount by which their taxable income exceeds the 37% bracket threshold. In simpler terms, this effectively caps the tax savings from each dollar of deduction at 35 cents ($0.37 – 0.02), rather than 37 cents.
• Prior Law (TCJA & Pre-TCJA): The TCJA suspended the Pease limitation from 2018 through 2025. Before that, Pease was a complex rule. It reduced a taxpayer’s total itemized deductions by 3% of the amount their Adjusted Gross Income (AGI) exceeded a certain threshold. This functioned more like a “stealth surtax” on income rather than a true limit on the value of deductions themselves.
• Comparison & Impact: This new limitation is structurally better than the old Pease rule because it doesn’t penalize you for earning more income. Instead, it directly reduces the value of your deductions. While that may sound like a small distinction, it has a big impact on planning. For a client in the 37% bracket, a $50,000 deduction for mortgage interest is no longer worth $18,500 in tax savings (50,000×37%). It is now worth $17,500 (50,000×35%). This “haircut” applies across the board to charitable contributions, SALT, and other itemized deductions.

What This Means for Your Planning: A Fundamental Shift in Deduction Strategy

This new rule fundamentally changes the calculus for tax-sensitive decisions. The old Pease limitation encouraged planning around income—the goal was to keep your AGI below the threshold. This new limitation shifts the focus squarely onto the timing and strategy of your deductions.

Because the limitation only applies to taxpayers in the top bracket, it functions as a “stealth” tax on upper income individuals.

From a planning perspective, other changes to how charitable contributions work beginning in 2026 will have more impact for clients.

4. Permanent Repeal of Miscellaneous Itemized Deductions

(Section 70110)

A wide range of deductions that were helpful to professionals, such as unreimbursed employee expenses and investment fees, were temporarily suspended by the TCJA. The OBBBA has now made their removal permanent.

• New Law Details: The OBBBA permanently repeals the deduction for miscellaneous itemized expenses that were formerly subject to a 2% of AGI floor. This permanently eliminates deductions for unreimbursed employee business expenses (like home office costs for employees, travel, or professional dues), fees for investment advice, and tax preparation fees.
• Prior Law (TCJA & Pre-TCJA): The TCJA suspended these deductions for tax years 2018 through 2025. Before the TCJA, taxpayers could deduct the total amount of these expenses that exceeded 2% of their AGI. For many high-income professionals with significant job-related or investment management costs, this was a valuable deduction.
• Comparison & Impact: The permanent elimination of these deductions represents a significant and lasting tax increase for many employees and investors. What was once a temporary loss under the TCJA is now a permanent feature of the tax code. This change solidifies the shift away from allowing deductions for many common costs associated with earning a living as an employee or managing personal investments.

What This Means for Your Planning: Shifting Costs to Your Employer

With the door now permanently closed on deducting unreimbursed employee expenses, the planning focus must shift. If you incur significant costs as part of your job, the most effective strategy is to negotiate with your employer for a reimbursement plan or an accountable plan. Expenses that your employer reimburses are not taxable income to you and are deductible for the business. This is now the primary way to get a tax benefit for these costs. Similarly, the inability to deduct investment advisory fees makes it more important to understand how your advisor is compensated. You may want to consider investment vehicles with lower embedded fees.

5. Permanent $750,000 Limit on Mortgage Interest Deduction

(Section 70108)

For homeowners, the mortgage interest deduction has long been one of the most significant tax breaks available. The TCJA placed new limits on this deduction, and the OBBBA has now made those limits permanent.

• New Law Details: The OBBBA permanently limits the mortgage interest deduction to interest paid on the first $750,000 of acquisition indebtedness ($375,000 for MFS). It also permanently disallows any deduction for interest on home equity loans, unless the loan proceeds are used to buy, build, or substantially improve the home securing the loan.
• Prior Law (TCJA & Pre-TCJA): The TCJA created these $750,000 and home equity interest limitations. However, they were scheduled to expire at the end of 2025. If they had expired, the rules would have reverted to the more generous pre-TCJA law. That law allowed a deduction for interest on up to $1 million of acquisition debt, plus interest on an additional $100,000 of home equity debt.
• Comparison & Impact: This change dashes any hopes that the more generous $1 million debt limit would return in 2026. By making the $750,000 cap permanent, the law solidifies a reduced tax benefit for homeowners. This particularly applies to our clients living in high-cost-of-living areas where mortgages frequently exceed this amount.

What This Means for Your Planning: Re-evaluating Home Financing

The permanence of the $750,000 cap on mortgage debt requires a long-term strategic view of home financing. When considering a new home purchase or a refinancing, you must factor this permanent limitation into your calculations of the after-tax cost of your mortgage. For those with mortgages above the threshold, the tax subsidy is capped. This may influence decisions about how much to borrow versus how large of a down payment to make. It also reinforces that using a cash-out refinance or home equity line for non-home-improvement purposes (like paying for college or consolidating debt) is no longer tax-advantaged.

6. A New Floor for the Charitable Contribution Deduction

(Section 70425)

The OBBBA makes a couple of notable changes to the rules for charitable giving. One slightly reduces the benefit for itemizers.

• New Law Details: For individuals who itemize their deductions, charitable contributions are now only deductible to the extent that the total amount given exceeds 0.5% of the taxpayer’s contribution base (which is generally their AGI). On a positive note, the bill makes permanent the higher 60% of AGI limitation for cash gifts to public charities.
• Prior Law (TCJA): Under the TCJA, there was no floor for deducting charitable contributions if you itemized. The TCJA had also temporarily increased the AGI limit for cash gifts from 50% to 60% through 2025.
• Comparison & Impact: This is a relatively minor but important change. The new 0.5% floor means that a portion of every itemizer’s charitable giving will now be non-deductible. For a taxpayer with an AGI of $400,000, the first $2,000 of their donations for the year will not provide any tax benefit. While this won’t deter major philanthropists, it does slightly trim the tax incentive for giving.

What This Means for Your Planning: Reinforcing the “Bunching” Strategy

This new floor, while small, makes the “bunching” strategy for charitable giving even more valuable. Bunching involves consolidating several years’ worth of planned donations into a single year. This helps taxpayers clear two hurdles at once. The first being the high standard deduction (making it worthwhile to itemize). The second being this new 0.5% AGI floor. For clients who make regular but smaller donations, it may be more tax-efficient to contribute to a Donor-Advised Fund (DAF) every few years. This allows them to take a large, consolidated deduction in one year (easily clearing the floor and standard deduction) while still recommending grants to their favorite charities from the DAF annually.

7. A More Generous Child Tax Credit for High-Earners Made Permanent

(Section 70104)

One of the most significant benefits for families in the TCJA was the expanded Child Tax Credit. The OBBBA not only preserves this benefit but enhances it and, most importantly for long-term planning, makes it permanent.

• New Law Details: The OBBBA increases the Child Tax Credit to $2,200 per qualifying child, up from $2,000. This new amount will be indexed for inflation after 2025. Crucially for our clients, the law makes the higher income phase-out thresholds of $200,000 for single filers and $400,000 for joint filers a permanent feature of the tax code. The maximum refundable portion of the credit is also made permanent and is set at $1,700 for 2025.
• Prior Law (TCJA & Pre-TCJA): The TCJA had temporarily increased the credit to $2,000 and established the $200k/$400k income thresholds. However, these provisions were all set to expire after 2025. If they had expired, the credit would have reverted to the pre-TCJA amount of just $1,000 per child, with phase-outs beginning at much lower income levels ($75,000 for single filers, $110,000 for joint filers).
• Comparison & Impact: This is a major victory for high-income families. Under the old law, a family with two children and an AGI of $400,000 would have seen their Child Tax Credit disappear completely in 2026. Under the new law, that same family will be able to claim a $4,400 credit in 2025. And they can plan on a similar inflation-adjusted credit for years to come. This provides significant, long-term tax relief and planning certainty.

What This Means for Your Planning: A Reliable Credit for Families

The permanence of the enhanced Child Tax Credit with high income thresholds means that for most of our clients with children under 17, this is no longer a temporary bonus but a reliable part of your annual tax planning. It provides a direct, dollar-for-dollar reduction of your tax liability. This certainty allows families to better budget and plan for the future, knowing this significant tax benefit will be there to help with the costs of raising children.

8. The Alternative Minimum Tax (AMT) Gets a Tweak

(Section 70107)
The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure high-income individuals pay at least a minimum amount of tax. The TCJA greatly reduced its reach, but the OBBBA makes a key adjustment bringing some taxpayers back into its net.

• New Law Details: The OBBBA makes the higher AMT exemption amounts from the TCJA permanent. However, it resets the income thresholds at which those exemptions begin to phase out to 2018 levels, which are $500,000 for single filers and $1 million for joint filers (these will be indexed for inflation after 2025). Most importantly, the bill doubles the phase-out rate from 25% to 50%. This means for every dollar of income above the threshold, the AMT exemption is reduced by 50 cents.
• Prior Law (TCJA): The TCJA had dramatically reduced the number of people paying AMT by significantly increasing both the exemption amount and the income level at which that exemption starts to phase out (for 2023, the phase-out started at $578,150 for singles and $1,156,300 for joint filers).
• Comparison & Impact: While making the large exemption permanent is good news, the combination of a lower phase-out threshold and a much faster phase-out rate is a significant change. It creates a “clawback” zone that will pull some upper-middle and high-income taxpayers back into the AMT system, particularly those with incomes between $400,000 and $1.2 million.

What This Means for Your Planning: The AMT Is “Back” for Some

The AMT is no longer a concern for the masses. However, it is “back” for a specific slice of the high-income population. The accelerated 50% phase-out rate is a potential trap for the unwary. This change makes it crucial to run AMT projections again. Under the TCJA, this practice that had become less common for many under the TCJA. This is especially true if you:

• Exercise a large number of incentive stock options (ISOs).
• Realize significant long-term capital gains.
• Have high state and local taxes (even with the new cap).

For clients in this income range, we can no longer assume the AMT won’t apply. Proactive planning and modeling are once again essential to avoid an unexpected tax bill.

9. A Permanent, Higher $15 Million Estate and Gift Tax Exemption

(Section 70106)

The estate tax has been a moving target for decades, creating enormous uncertainty for wealth transfer planning. The OBBBA aims to end that uncertainty with a significant and permanent change.

• New Law Details: The OBBBA permanently sets the unified federal estate and gift tax exemption at $15 million per individual, effective for estates of decedents dying and gifts made after December 31, 2025. This new, higher amount will be indexed for inflation beginning in 2027. The Generation-Skipping Transfer (GST) tax exemption is also increased to match this new level. The law also retains the crucial “portability” provision. This allows a surviving spouse to use any unused portion of their deceased spouse’s exemption.
• Prior Law (TCJA): The TCJA had temporarily doubled the exemption from a $5 million base to a $10 million base, which, after inflation adjustments, stood at $13.99 million in 2025. This provision was famously set to “sunset” on January 1, 2026, at which point the exemption was scheduled to be cut in half, reverting to an inflation-adjusted level of around $7 million.
• Comparison & Impact: This is a landmark change that provides long-awaited certainty. It completely eliminates the “use it or lose it” pressure that has dominated estate planning conversations for years. With the new law, a married couple can now confidently plan to pass on at least $30 million to their heirs completely free of federal estate tax. For the vast majority of our clients, the federal estate tax is no longer a primary concern.

What This Means for Your Planning: The End of “Use It or Lose It” and the Rise of Basis Planning

With the threat of federal estate tax largely neutralized for estates under the new, generous $30 million-per-couple threshold, the central focus of wealth transfer planning will undergo a massive shift. The new priority for most families will be minimizing the future income tax liability for their heirs, specifically through the strategic management of cost basis.

Here’s why this is so important. When gifting an appreciated asset (like stock) during your lifetime, the recipient inherits your original, often very low, cost basis. If they later sell that asset, they pay capital gains tax on the entire growth. However, when an asset is inherited at death, the heir receives a “step-up” in basis to the fair market value at the date of death. This step-up completely erases the built-in capital gain, allowing the heir to sell it immediately with little to no tax.

Under the old law, many families made large lifetime gifts to get assets out of their estate and use their high exemption before it disappeared. With the OBBBA, that urgency is gone. For many, the optimal strategy is now the opposite: hold on to highly appreciated assets until death. This allows your heirs to receive the full step-up in basis, saving them a fortune in future capital gains taxes.

The planning conversation is no longer, “How much can we gift away?” It’s now, “Which specific assets should you hold onto to provide the maximum basis step-up for your children?” This makes asset selection—gifting high-basis cash or newly purchased assets while retaining low-basis stocks and real estate—a critical component of modern estate planning.

10. Your 529 Plan Just Got More Flexible

(Sections 70413 & 70414)
For families saving for education, 529 plans are a cornerstone of tax-advantaged planning. The OBBBA makes these popular accounts even more powerful and flexible.

• New Law Details: The OBBBA significantly expands the definition of “qualified higher education expenses” for which tax-free 529 plan distributions can be used. Key additions include costs for curriculum materials, online educational materials, tutoring, and fees for standardized tests. The law also increases the annual limit for K-12 tuition expenses from $10,000 to $20,000. Furthermore, it now allows 529 funds to be used for expenses related to obtaining postsecondary credentials, industry-recognized certifications, and registered apprenticeships.
• Prior Law (TCJA): Before this change, qualified expenses were generally limited to college tuition, fees, books, and room and board. The TCJA introduced the ability to use up to $10,000 per year for K-12 tuition. However, the list of other qualified expenses was much narrower.
• Comparison & Impact: This is a fantastic enhancement for families planning for education costs. Using 529 funds for a wider array of K-12 and post-secondary expenses makes these accounts far more versatile. The doubling of the K-12 tuition limit to $20,000 is a particularly significant benefit for clients with children in private schools, allowing them to fund a larger portion of those costs with tax-advantaged dollars.

What This Means for Your Planning: A Supercharged Education Savings Tool

These changes transform the 529 plan from a college-centric savings vehicle into a comprehensive, lifelong learning fund. You can now use these accounts to pay for a much broader spectrum of educational needs, from private elementary school tuition and after-school tutoring to vocational training and professional development later in life. This increased flexibility makes funding a 529 plan an even smarter strategy for our clients. It’s time to review your education funding plans to see how you can take advantage of these new, expanded uses.

11. The 20% Pass-Through (QBI) Deduction Is Now Permanent and Enhanced

(Section 70105)

The Qualified Business Income (QBI) deduction has been a huge benefit for owners of pass-through businesses. However, its temporary nature always left a question mark over long-term planning. The OBBBA erases that question mark.

• New Law Details: The 20% QBI deduction under Section 199A is now a permanent feature of the tax code. The OBBBA also makes it more generous by increasing the income phase-in range for the wage and property limitations. This range, which determines when the complex limitations start to apply, is increased from $50,000/$100,000 to $75,000/$150,000 (for single/joint filers). The bill also adds a new, inflation-adjusted minimum deduction of $400 for taxpayers who have at least $1,000 of QBI from an active trade or business.
• Prior Law (TCJA): The 20% QBI deduction was created by the TCJA as a temporary measure scheduled to expire after 2025. The deduction was subject to limitations based on the amount of W-2 wages paid by the business and the unadjusted basis of its property. These limitations applied to taxpayers with income above certain thresholds ($191,950/$383,900 for single/joint filers in 2024). Owners of Specified Service Trades or Businesses (SSTBs), like doctors, lawyers, and consultants, were phased out of the deduction entirely above these thresholds.
• Comparison & Impact: Making the QBI deduction permanent is a game-changer for business owners. It provides the certainty needed to make long-term decisions about business structure and investment. The expanded phase-in range is also a significant benefit, providing a larger buffer before the complex limitations on wages and property apply. This is especially helpful for service-based businesses that may have low wages or property basis.

What This Means for Your Planning: QBI as a Cornerstone of Business Strategy

The permanence of the QBI deduction solidifies its role as a central consideration in how you structure and run your business. For years, the S Corp vs. C Corp debate was complicated by the temporary nature of the QBI benefit. Now, it’s a reliable, long-term planning tool.

The expanded phase-in range also provides more breathing room for our clients who own SSTBs. While the deduction still phases out at higher incomes, the wider range means more professionals will get to claim at least a partial deduction. As a result, this makes the pass-through structure more appealing than ever. The strategic advice is clear: it’s time to re-evaluate your entity choice in light of these permanent changes.

12. 100% Bonus Depreciation Is Reinstated and Made Permanent

(Section 70301)

In another major pro-business move, the OBBBA puts an end to the scheduled phase-out of bonus depreciation. This powerful investment incentive is now a permanent part of the tax code.

• New Law Details: The new law reinstates and makes permanent 100% bonus depreciation for qualified property. This allows businesses to deduct the full cost of eligible assets in the year they are placed in service. This provision is effective for property acquired and placed in service on or after January 20, 2025. Qualified property generally includes tangible property with a recovery period of 20 years or less, such as machinery, equipment, furniture, and computer software.
• Prior Law (TCJA): The TCJA had introduced 100% bonus depreciation, but it was designed to be temporary. As a result, it began to phase down, dropping to 80% in 2023 and then to 60% in 2024. It was scheduled to be just 40% in 2025 before disappearing completely after 2026.
• Comparison & Impact: This is a massive incentive for capital investment across all industries, including some portions of real estate investments. Instead of deducting the cost of a new piece of equipment over seven years, a business can now write off the entire expense in year one. Consequently, this significantly lowers the after-tax cost of acquiring productive assets, boosts cash flow, and simplifies depreciation record-keeping. Furthermore, it provides the certainty businesses need to make long-term capital expenditure plans.

What This Means for Your Planning: Supercharging Capital Investment

The return of permanent 100% bonus depreciation creates an incredibly favorable environment for domestic business investment. Notably, the ROI calculation for many capital projects will look much more attractive now. For business owners, this means it’s an ideal time to consider upgrading equipment, investing in new technology, or expanding facilities. The ability to immediately write off the full cost can generate significant tax savings to be reinvested into the business. 

13. Game-Changing Enhancements to Qualified Small Business Stock (QSBS)

(Section 70431)

For founders, early employees, and investors in startups, the Qualified Small Business Stock (QSBS) exclusion is one of the most powerful tax breaks in the entire code. The OBBBA doesn’t just preserve it—it makes it dramatically better.

• New Law Details: For stock acquired after the date of enactment (July 4, 2025), the OBBBA makes three transformative changes to the QSBS rules under Section 1202:

1. 1. Tiered Holding Period: The old five-year-or-nothing rule is gone. Now, there is a phased-in exclusion. 50% of the gain is tax-free if the stock is held for at least three years. 75% is excluded after four years. The full 100% exclusion applies after five years.
   2. Increased Gain Exclusion Cap: The maximum amount of gain you can exclude per issuer is increased from $10 million to $15 million.
   3. Expanded Company Size Limit: The size of a company that can issue QSBS is increased. The “aggregate gross assets” test is raised from $50 million to $75 million.

• Prior Law (TCJA): To qualify for the 100% gain exclusion, an investor had to hold the stock for more than five years. The exclusion was capped at the greater of $10 million or 10 times the stock’s basis. The issuing C Corporation couldn’t have more than $50 million in gross assets at the time the stock was issued.
• Comparison & Impact: These changes are a massive boon for the entire startup ecosystem. The tiered holding period provides valuable flexibility. Founders and investors can have a liquidity event earlier than five years and still receive a substantial tax benefit. In addition, the higher asset limit means more growth-stage companies will qualify. While the higher gain cap means more tax-free returns for successful investors.

What This Means for Your Planning: A New Golden Age for Startup Investing

These enhancements will fundamentally alter strategic planning for founders and investors. The C Corporation will become an even more compelling entity choice for new ventures seeking outside capital, as the potential for tax-free exit is now greater and more flexible. Not to mention, the tiered holding period de-risks early-stage investing by providing an “off-ramp” with partial tax benefits.

A critical planning point: these new, favorable rules only apply to stock acquired after July 4, 2025. Any QSBS you already own is still subject to the old five-year holding period and $10 million cap. Of course, this makes tracking the acquisition date of every stock lot absolutely essential. For anyone involved in the startup world, these changes demand a fresh look at investment strategies, entity selection, and exit planning.

14. Opportunity Zones Are Renewed and Made Permanent

(Section 70421)

The Opportunity Zone (OZ) program, a TCJA creation designed to spur investment in distressed communities, is getting a new lease on life.

• New Law Details: The OBBBA makes the OZ program permanent but overhauls its structure. The current set of 8,764 designated OZs will sunset at the end of 2026. Starting in 2027, a new, smaller set of zones will be designated based on stricter eligibility criteria. In addition, the law also changes the tax benefit. Instead of a fixed deferral period ending in 2026, new investments will have a rolling five-year deferral period for capital gains. Lastly, the bill adds a new incentive: a 30% basis step-up on the deferred gain for qualifying investments made in designated rural OZs.
• Prior Law (TCJA): The OZ program was a temporary incentive allowing investors to defer paying tax on capital gains by reinvesting them into OZ funds. The main long-term benefit was that any new gains on the OZ investment itself would be tax-free if held for at least 10 years. Also, the initial gain deferral was scheduled to end on December 31, 2026.
• Comparison & Impact: This revives and institutionalizes a major place-based investment incentive. The rolling five-year deferral makes the program more flexible and attractive for new capital. Stricter criteria for zone designation and the new rural incentive signal a policy shift to target the benefits more precisely. As has always been the case, strict review of the investment opportunities are necessary, especially due to the decreased zones effective in 2027.

What This Means for Your Planning: A New Map for OZ Investing

This overhaul creates two distinct planning tracks. If you have an existing OZ investment, you need to be acutely aware that the current program and zone designations expire at the end of 2026. For those with new capital gains to invest, the permanent program offers a viable long-term tax deferral and elimination strategy. However, the investment landscape will change dramatically in 2027 when the new zones are announced. The enhanced benefit for rural OZs may create unique, targeted opportunities for investors looking to diversify their portfolios while achieving significant tax advantages.

15. The End of the Clean Vehicle Credit

(Sections 70501, 70502)

In one of the bill’s most definitive policy shifts, the OBBBA puts a firm end date on the federal tax credits for electric vehicles (EVs).

• New Law Details: The OBBBA completely terminates the Clean Vehicle Credit (Section 30D) for any new vehicle acquired after September 30, 2025. In addition, the separate credit for previously-owned (used) clean vehicles (Section 25E) is also terminated on the same date.
• Prior Law: The Inflation Reduction Act of 2022 had significantly revamped and extended the clean vehicle credits through 2032. It offered a credit of up to $7,500 for qualifying new EVs and up to $4,000 for used EVs. These credits were subject to a web of complex rules regarding vehicle price, battery sourcing, and the buyer’s income.
• Comparison & Impact: This is not a phase-out; it is a hard stop. As a result, a major federal incentive for purchasing electric vehicles will disappear overnight. For high-income individuals who were potential buyers of premium EVs that qualified for the credit, this removes a subsidy that could significantly lower the cost of acquisition.

What This Means for Your Planning: A Hard Deadline for EV Purchases

The September 30, 2025, termination date creates a clear, urgent, and actionable planning opportunity. This is not a future “what-if”; it’s a cliff that is now months away.

This incentive will only be available for single taxpayers with AGI up to $150,000 and married couples up to $300,000 AGI. Unfortunately, if your income is above these limitations, the credit would not be available to you.

The advice for our clients is simple and direct. If you are planning to buy a qualifying EV in the next year or two and want to claim the federal tax credit, you should strongly consider accelerating that purchase. To claim the credit, you must acquire the vehicle and place it in service before October 1, 2025. We anticipate this hard deadline will create a surge in demand for eligible vehicles in the months leading up to it, which could impact inventory and pricing. Acting sooner rather than later is the best strategy to ensure you can take advantage of this credit before it’s gone for good.

Conclusion: A New Tax World Requires a New Map

The OBBBA is a landmark piece of legislation that reshapes the tax landscape for years to come. This bill has a dual personality. On one hand, it provides welcome long-term certainty by making many of the most beneficial business provisions of the TCJA permanent—like the QBI deduction and 100% bonus depreciation. In that case, this creates a tax code that strongly rewards domestic business investment and innovation.

On the other hand, it introduces new layers of complexity for high-income individuals, with the new cap on itemized deductions and adjustments to the AMT. It also solidifies many of the individual tax changes from the TCJA, such as the higher standard deduction and the cap on mortgage interest, making them permanent features of our tax system.

Taken together, these changes demand a fresh approach to tax planning. The old rules of thumb no longer apply. The new environment requires nuanced strategies around wealth transfer, entity structure, education savings, and precise timing of income and deductions.

Navigating this new tax world requires a new map. While this guide has covered the major landmarks, your personal journey will be unique, shaped by your specific financial situation, family goals, and business operations. We encourage you to schedule a meeting with us so we can sit down together and chart the most tax-efficient course for you, your family, and your business in 2025 and beyond.