The One Big Beautiful Bill Act: What High Earners Need to Know
How the One Big Beautiful Bill Act (OBBBA) changes tax planning for high earners. Permanent tax rates, increased estate exemptions, and new strategies for 2025 and beyond.
How the One Big Beautiful Bill Act (OBBBA) changes tax planning for high earners. Permanent tax rates, increased estate exemptions, and new strategies for 2025 and beyond.
The One Big Beautiful Bill Act: What High Earners Need to Know
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, ending years of uncertainty about whether the Tax Cuts and Jobs Act provisions would expire.
The short answer: They're permanent now.
But "permanent" doesn't mean "set and forget." The new law creates both stability and new planning opportunities that high earners need to understand.
Here's what changed and what it means for your financial strategy.
The Big Picture: What OBBBA Did
The OBBBA (Public Law 119-21) made most of the 2017 Tax Cuts and Jobs Act provisions permanent while introducing several new provisions:
| Provision | Previous Status | Under OBBBA |
|---|---|---|
| Top marginal rate (37%) | Expiring 12/31/2025 | Permanent |
| Higher standard deduction | Expiring 12/31/2025 | Permanent |
| Estate tax exemption | Expiring 12/31/2025 | Permanent + Increased |
| QBI deduction (199A) | Expiring 12/31/2025 | Permanent |
| AMT exemption increase | Expiring 12/31/2025 | Permanent |
| SALT cap ($10K) | Expiring 12/31/2025 | Increased to $40K (temporary) |
What's Now Permanent
Individual Tax Rates
The 37% top marginal rate is here to stay. For 2026, the brackets are:
| Tax Rate | Single Filers | Married Filing Jointly |
|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | $12,400 - $50,400 | $24,800 - $100,800 |
| 22% | $50,400 - $105,700 | $100,800 - $211,400 |
| 24% | $105,700 - $201,775 | $211,400 - $403,550 |
| 32% | $201,775 - $256,225 | $403,550 - $512,450 |
| 35% | $256,225 - $640,600 | $512,450 - $768,700 |
| 37% | Over $640,600 | Over $768,700 |
What this means: No more guessing whether rates will jump. You can plan with confidence that today's rate structure is the baseline going forward.
Standard Deduction
The doubled standard deduction is permanent:
| Filing Status | 2025 Amount | 2026 Amount |
|---|---|---|
| Single | $15,750 | $16,100 |
| Married Filing Jointly | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
Most taxpayers continue to take the standard deduction rather than itemizing—including many high earners due to the SALT cap.
Estate and Gift Tax Exemption: The Big Win
This is the headline for wealth transfer planning:
Starting 2026: The federal estate, gift, and generation-skipping transfer (GST) tax exemption permanently increases to $15 million per person ($30 million for married couples with portability).
This exemption will be indexed for inflation starting in 2027.
| Exemption | 2025 | 2026+ (OBBBA) |
|---|---|---|
| Per individual | $13,990,000 | $15,000,000 |
| Married couple | $27,980,000 | $30,000,000 |
What this means: The vast majority of Americans will never owe federal estate tax. For those with substantial wealth, significantly more can pass to heirs tax-free.
QBI Deduction (Section 199A)
The 20% qualified business income deduction for pass-through entities (S-Corps, partnerships, LLCs, sole proprietorships) is now permanent.
Key updates under OBBBA:
- The income thresholds where limitations begin have been expanded
- More business owners qualify for the full 20% deduction
- The wage and basis limitations apply at higher income levels
Example impact:
A business owner with $500,000 in qualified business income receives a $100,000 deduction, saving approximately $37,000 in taxes at the 37% rate—every year, permanently.
New Temporary Provisions (Use Them While They Last)
SALT Cap Increase (2025-2029)
The State and Local Tax deduction cap has been raised from $10,000 to $40,000 for taxpayers earning under $500,000.
| Income Level | SALT Cap |
|---|---|
| Under $500,000 | $40,000 |
| $500,000+ | $10,000 |
Planning note: If you're in a high-tax state (California, New York, New Jersey), this provides meaningful relief—but it's temporary. Plan for the cap to return to $10,000 in 2030.
Senior Deduction (2025-2028)
A new $6,000 deduction for taxpayers over 65, which phases out when AGI exceeds $75,000 ($150,000 for joint filers).
This is an alternative to the various proposals to exempt Social Security from taxation—it's more targeted and limited in scope.
Tips Deduction (2025-2028)
Workers can deduct up to $25,000 in tip income from taxable income. This phases out when AGI exceeds $150,000 ($300,000 for joint filers).
Note: Tips are still subject to payroll taxes and reporting requirements.
What This Means for High Earners
1. Long-Term Planning Is Now Possible
Before OBBBA, financial planning required scenarios for "if TCJA expires" vs. "if extended." That complexity is gone.
You can now make multi-decade decisions about:
- Retirement account contributions and conversions
- Business structure and compensation
- Estate planning and wealth transfer
- Income timing and recognition
2. Estate Planning Window: Still Open, Now Permanent
The $15 million exemption isn't going away, but that doesn't mean you should wait:
Why act now:
- Future legislation could reduce exemptions (it's happened before)
- Assets transferred today grow outside your estate
- Irrevocable trusts established now lock in current law
- Gifting now means appreciation escapes estate tax
3. Roth Conversions Remain Valuable
With tax rates now permanent at current levels, the Roth conversion calculus has changed slightly:
Old thinking: "Convert now before rates go up in 2026"
New thinking: "Convert strategically based on your current vs. retirement bracket"
Roth conversions still make sense when:
- You're in a lower bracket now than you expect in retirement
- You want to reduce future RMDs
- You're managing Social Security taxation
- You have tax-free income sources to cover living expenses during conversion years
4. The QBI Deduction Is a Planning Staple
With Section 199A now permanent, business owners should optimize their structures for the long term:
- Ensure your business qualifies for the deduction
- Manage income to stay within favorable thresholds
- Consider the wage/basis limitations in compensation planning
- Coordinate with retirement contributions for maximum benefit
Tax-Free Income: More Valuable Than Ever
With tax rates permanent rather than increasing, you might think tax-free income is less urgent. Actually, the opposite is true.
Here's why:
The permanence of current rates means you can confidently build tax-free income sources knowing the advantage won't disappear due to rate changes. You're no longer racing against an expiration clock—you're building for long-term efficiency.
Tax-Free Income Sources Comparison
| Income Source | Taxable? | Affects SS Taxation? | RMDs? |
|---|---|---|---|
| Traditional IRA/401(k) | 100% | Yes | Yes |
| Social Security | Up to 85% | N/A | N/A |
| Roth IRA | 0% | No | No |
| Municipal Bonds | 0% (federal) | No | N/A |
| Section 7702 Loans | 0% | No | No |
Section 7702 life insurance strategies remain powerful because they offer:
- No contribution limits (unlike Roth IRAs)
- Tax-free accumulation (like Roth)
- Tax-free distributions via policy loans
- No impact on Social Security taxation
- Death benefit protection for beneficiaries
Learn more about Section 7702 strategies →
Action Items for 2025 and Beyond
Estate Planning
- Review current exemption usage with your estate attorney
- Consider accelerated gifting strategies while exemptions are high
- Update trust documents to reflect OBBBA provisions
- Evaluate life insurance needs for estate liquidity
Business Owners
- Confirm your business structure maximizes QBI deduction
- Review compensation strategies for S-Corp owners
- Plan income recognition to optimize Section 199A benefits
- Consider defined benefit plans for additional tax deferral
Retirement Planning
- Model Roth conversion strategies with permanent rates
- Coordinate retirement income sources for tax efficiency
- Build tax-free income through Roth and Section 7702
- Review beneficiary designations and inherited IRA planning
High-Tax State Residents
- Maximize the $40,000 SALT deduction (2025-2029)
- Plan for return to $10,000 cap in 2030
- Consider state residency planning if applicable
- Evaluate property tax payment timing strategies
The Bottom Line
The One Big Beautiful Bill Act ended the uncertainty—but it didn't eliminate the need for sophisticated tax planning. If anything, permanent rules reward those who plan strategically for the long term.
The high earners who benefit most will be those who:
- Build diversified income sources (taxable, tax-deferred, tax-free)
- Optimize business structures for the QBI deduction
- Execute estate plans while exemptions remain high
- Coordinate all elements into a comprehensive strategy
The rules are set. The question is: how will you play within them?
Ready to optimize your strategy under OBBBA?
Schedule a Tax Strategy Review →
This article reflects the One Big Beautiful Bill Act as signed July 4, 2025. Future legislation or IRS guidance may modify implementation details. Last updated: December 8, 2025
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