On Friday, July 4, 2025, President Donald Trump signed into law the budget reconciliation bill H.R. 1 (the Act), formerly known as the “One Big Beautiful Bill Act.” The legislation extends several expiring provisions of the Tax Cuts and Jobs Act (TCJA) and makes changes to the federal tax code that will impact estate and tax planning strategies for high-net-worth individuals, families, and business owners. Below are five of the key provisions relevant to wealth and tax planning:
Estate, Gift, and Generation-Skipping Transfer Tax Exemptions Increased
The Act eliminates the scheduled sunset of the current $13.99 million federal transfer tax exemption set to expire December 31, 2025. Instead, it permanently raises the federal lifetime exemption to $15 million for single filers (or $30 million combined for a married couple), effective January 1, 2026, and indexed annually for inflation thereafter.
Federal Income Tax Rates Made Permanent
The current personal income tax laws, including lower rates, higher standard deductions, and expanded income brackets, have been made permanent. The top marginal rate will stay at 37% in 2026 instead of reverting to 39%, as previously scheduled under the TCJA.
Qualified Business Income Deduction Extended
The Act makes permanent the 20% federal deduction of qualified business income (QBI) for qualifying business owners of pass-through entities, including S corporations, partnerships, and sole proprietorships, and some trusts. Phase-in thresholds are $75,000 for single filers and $150,000 for joint filers. The Act also introduces a minimum $400 deduction, indexed for inflation, for taxpayers with at least $1,000 in QBI.
Charitable Giving Deduction Changes
For non-itemizing taxpayers, the deduction for qualified charitable donations increases to $1,000 for individuals and $2,000 for those filing jointly. Itemizing taxpayers can deduct donations only to the extent they exceed 0.5% of the filer’s contribution base. Carryovers are only permitted if this 0.5% threshold is met. The deduction limit for cash contributions to qualified charities rises from 50% to 60% of adjusted gross income (AGI).
State and Local Tax (SALT) Deduction Cap Raised Temporarily
The Act raises the SALT deduction limit to $40,000 per household, with a 1% annual increase, for tax years 2025 through 2029. A phase-down applies for individuals with a modified AGI above $500,000, with a minimum deduction of $10,000. Beginning in the 2030 tax year, the cap will revert to $10,000 for all taxpayers.
Take Advantage of Better Certainty for Long-term Planning
These changes create an opportunity to review and update your estate plan to ensure alignment with your long-term goals. For guidance on how the new law may affect your situation, contact a member of Varnum’s Estate Planning Practice Team.
