How the One Big Beautiful Bill Act Could Impact Financial Planning

On the Fourth of July, President Donald J. Trump signed the One Big Beautiful Bill Act (OBBBA) into law, ending months of tense Congressional negotiations. The final draft came with fewer major changes than many analysts anticipated. However, several provisions could impact the financial planning process for high-earners.

The most notable result of the OBBBA is cementing tax cuts from Trump’s first term. Not only does this avoid an unpleasant tax hike at the end of the year, but it also allows for more reliable financial planning moving forward. Notably, the OBBBA raised the lifetime estate and gift tax exemption to $15 million. Without new legislation, this exemption was set to fall by nearly half at the end of the year. As a result, wealthy families now face less pressure to accelerate their estate planning strategies to ‘lock in’ the higher exemption.

In this article, we’ll review some of the key changes from the OBBBA for high-net-worth investors to be aware of. While the law is unlikely to require rewriting your financial plan, several adjustments may be worth considering in light of recent updates.

OBBBA Overview: Avoiding Tax Hikes, Cementing Cuts

During Trump’s first term, the Tax Cuts and Jobs Act (TCJA) reduced most individual income tax rates, with the top marginal rate falling by over 2 points. In addition, the TCJA nearly doubled the standard deduction. Without an extension, however, these tax cuts were set to expire at the end of 2025.

The OBBBA not only extended many of the TCJA’s provisions but also made them permanent with annual inflation adjustments. While high-income individuals are unlikely to experience a dramatic tax cut due to the OBBBA, they will avoid the tax hike that would have otherwise occurred. Moreover, cementing these changes reduces planning uncertainty moving forward.

Finally, the OBBBA features several advantages for business owners. The TCJA’s 20% deduction on qualified business income was made permanent, as was the 100% allowance for bonus depreciation. The OBBBA also preserves the pass-through entity tax election, which can help business owners reduce their state tax burdens. Given the detailed nature of these tax deductions, we encourage business owners to contact our office to explore how our advisors, in collaboration with their tax professionals, can help them evaluate potential benefits.

Planning Opportunities and Tax Credit Changes Under the OBBBA

Since the OBBBA is largely focused on extending previous tax cuts, we do not expect the law to cause major planning overhauls. However, several areas of the OBBBA may call for beneficial adjustments for high-income individuals. These include increases to the SALT cap, changes to charitable deductions, and the introduction of a new financial planning tool. The legislation also expands 529 plan benefits and accelerates the sunset of key energy tax credits.

Under the TCJA, individuals were allowed to deduct up to $10,000 in state and local taxes paid (the SALT deduction). The OBBBA increases this cap to $40,000, benefiting individuals with high state and local tax burdens. However, this increased SALT deduction also comes with an aggressive phaseout over $500,000 of taxable income.

This phaseout results in a ‘tax cliff’ between $500,000 and $600,000 in income. Due to the rapid loss of SALT benefits, each dollar earned in this range could be taxed at an artificially high effective rate of about 45%. For individuals near this income level, keeping taxable income below $500,000 will likely be a financial planning priority.

The OBBBA also introduces a new planning tool in the form of ‘Trump Accounts.’ These tax advantaged accounts are designed for childhood savings, allowing up to $5,000 in annual contributions on behalf of a child or legal guardian. Moreover, children born through 2028 may be eligible for an additional $1,000 contribution from the federal government.

Upon turning 18, the account is expected to be treated similarly to a Traditional IRA. As the IRS releases additional guidance, we are reviewing how Trump accounts may fit into the financial planning process, especially compared with alternatives like 529 plans, custodial accounts, and IRAs.

In addition to introducing Trump Accounts, the OBBBA expands the scope of 529 college savings plans. The annual contribution limit for K–12 education expenses has doubled to $20,000 and now includes a broader range of qualified education-related costs. For families with school-age children, this offers enhanced flexibility when planning for private or parochial school expenses.

The OBBBA also introduced noteworthy adjustments to charitable contributions. The act not only reduces the amount of charitable deductions high earners can claim, but it also slightly lowers the tax benefits associated with those deductions. Since both changes take effect next year, accelerating planned giving may help maximize tax benefits. These changes may also make Qualified Charitable Distributions (QCDs) a more attractive option for eligible donors seeking tax-efficient ways to support charitable causes.

Homeowners and environmentally-conscious investors should also be aware of changes to energy-related tax credits. The OBBBA accelerates the expiration of several popular programs. The $7,500 tax credit for new electric vehicles and the $4,000 credit for used EVs will be eliminated for purchases made after September 30, 2025.

Finally, the Energy Efficient Home Improvement Credit (Section 25C) and the Residential Clean Energy Credit (Section 25D) are now set to expire at the end of 2025. Homeowners considering solar panels, energy-efficient windows, or similar upgrades should complete and place projects in service before year-end to qualify for these credits.

Conclusion: Major Stability, Minor Updates

When the OBBBA was first being drafted, President Trump proposed eliminating taxes on tips and overtime. Although versions of these headline-grabbing proposals did end up in the final bill, high-net-worth individuals are unlikely to benefit from them. Not only are qualifying income cutoffs generally too low, but most white-collar professionals are expected to be
excluded from these provisions.

For high-earners, the OBBBA is most consequential not for what it implemented, but for what it avoided. By extending cuts from Trump’s first term, the law averts a significant tax hike at the end of the year. Still, individuals should review their plans in light of changes to SALT rules, charitable giving, estate exemption amounts, and the introduction of Trump accounts.

Although the OBBBA has been signed into law, the IRS and Treasury still need to release additional guidance on how taxpayers can properly abide by the new rules. As this guidance is released and our team continues to review the bill’s key provisions, we are actively evaluating how client financial plans may be impacted.

Should you have any questions about the OBBBA or how The Fiduciary Group implements financial planning, we invite you to reach out to us. Over the next several weeks, we will be reaching out to clients individually who may benefit from planning shifts under the new law.