For high-net-worth individuals and estate planners, the One Big Beautiful Bill Act (OBBBA) includes impactful provisions that will shape planning strategies for years to come.

The OBBBA has officially been signed into law, delivering one of the most comprehensive overhauls to the tax code in recent years. While much of the House framework held, the Senate made key revisions that will affect tax planning. 

 

TCJA RATES AND STANDARD DEDUCTION MADE PERMANENT

The individual income tax brackets introduced under the 2017 Tax Cuts and Jobs Act (TCJA), ranging from 10% to 37%, are now permanent. These brackets will continue to adjust annually for inflation.

In addition, the elevated standard deduction has been permanently extended, starting in 2025 at $15,750 (single), $23,625 (head of household) and $31,500 (married filing jointly), with inflation indexing going forward. These amounts represent an increase from previously projected inflation-adjusted figures for 2025.

GHJ Observation: The permanence of these provisions provides helpful clarity to high-net-worth individuals for long-term forecasting. 

 

SALT DEDUCTION CAP TEMPORARILY EXPANDED WITH INCOME-BASED PHASEOUT

Beginning in 2025 and running through 2029, the federal deduction cap for State and Local Taxes (SALT) increases from $10,000 to $40,000 ($20,000 for married filing separately). The cap will increase slightly each year (indexed at 1% annually after 2025), then revert to $10,000 in 2030.

For high earners, the benefit is limited. Taxpayers with modified adjusted gross income (AGI) above $500,000 will see the expanded deduction phased out at a rate of 30% of the excess income, though never reduced below $10,000.

GHJ Observation: On the surface, this seems like meaningful relief for residents in high-tax states. But for many high-net-worth taxpayers, the phaseout will sharply reduce the benefit. Pairing this provision with Pass-Through Entity Tax (PTET) strategies is essential to maximize deductions.

 

PTET DEDUCTION PRESERVED IN FULL

Throughout the legislative process, there was considerable concern that the PTET workaround would be curtailed, especially for Specified Service Trades or Businesses (SSTBs). The House-passed version of OBBBA included language that would have excluded income from SSTBs and investment activities from qualifying for the PTET deduction starting in 2026.

In a significant shift during reconciliation, the Senate stripped out these limitations entirely. The final law leaves the PTET deduction fully intact at the federal level for all qualifying pass-through entities, including SSTBs, without any restrictions based on income type or source. There were also no changes to the treatment of guaranteed payments, distributive share or active versus passive partner rules within PTET elections.

What changed:

  • The proposed exclusion of SSTB income from PTET eligibility was removed
  • No AGI-based limitations were added

  • The scope of allowable PTET deductions remains unchanged from current practice

     

GHJ Observation: This is a win for pass-through business owners, particularly in high-tax states. The mere possibility of SSTB exclusions had raised major concerns in industries like legal, medical, financial advisory and consulting. Now that those limitations have been dropped, the PTET remains a powerful tool across nearly all business types. 

 

QBI DEDUCTION MAINTAINED, BUT PHASEOUT THRESHOLDS SIGNIFICANTLY EXPANDED

The final version of OBBBA did not adopt the House proposal to increase the qualified business income (QBI) deduction from 20% to 23%. However, it did include a meaningful change by making the QBI deduction permanent and expanding the phase-in thresholds for all taxpayers, including those in SSTBs.

Under prior law, SSTBs were subject to a full phaseout of the QBI deduction beginning at approximately $191,950 (single) and $383,900 (married filing jointly) in 2024. These amounts would have adjusted further for inflation in 2025 had the law not changed. 

The final OBBBA includes major changes starting in 2026:

  • The QBI deduction is made permanent
  • The income phase-in range for the QBI deduction is significantly expanded:
    • For single filers, the phase-in range is expanded from $50,000 to $75,000
    • For married filing jointly, the phase-in range is expanded from $100,000 to $150,000

This means that for SSTBs, the deduction is no longer fully eliminated at the prior lower thresholds. Instead, the calculation is modified, allowing for a QBI deduction at higher income levels, subject to eased wage and qualified property limitations.

Additionally, taxpayers with QBI above the previous full phaseout range are now eligible for a modest floor deduction of $400 (indexed for inflation), provided they have at least $1,000 of qualified income.

GHJ Observation: While the rate remains at 20%, the broader income range breathes new life into QBI planning for SSTBs, especially those in the mid-to-upper six-figure AGI range that were previously phased out. This includes solo practitioners, boutique firm owners and professionals in transition years (e.g., windfalls, exits or reclassifying income streams). From a planning standpoint, this change introduces more flexibility in managing income to fall within the expanded range. High-income taxpayers who were previously excluded from 199A benefits should revisit entity structure, compensation strategy and income characterization to see if they now qualify. This also makes timing decisions around income recognition more valuable than ever.

 

QSBS EXCLUSION INCREASED WITH TIERED EXCLUSION FOR HOLDING PERIOD

Starting Jan. 1, 2026, the Qualified Small Business Stock (QSBS) lifetime capital gain exclusion under IRC Section 1202 increases from $10 million to $15 million per taxpayer (indexed for inflation after 2026) or 10 times basis, whichever is greater, for stock issued after July 4, 2025.

At the same time, a new holding-period-based tiered exclusion structure applies to stock acquired after July 4, 2025:

  • Taxpayers who hold QSBS for at least three years (but less than four years) receive a 50% gain exclusion
  • Taxpayers who hold QSBS for at least four years (but less than five years) receive a 75% gain exclusion
  • Taxpayers who hold QSBS for at least five years receive the full 100% gain exclusion

Additionally, the aggregate gross assets limit for a company to qualify as a QSBS issuer increases from $50 million to $75 million (indexed for inflation).

QSBS acquired on or before July 4, 2025, remains eligible for the full 100% exclusion (up to the $10 million cap) regardless of the new holding period tiers, provided all other requirements (including the five-year holding period) are met.

 

ITEMIZED DEDUCTIONS LIMITED FOR TOP BRACKET TAXPAYERS

The Pease limitation is permanently repealed, but high earners in the 37% bracket will see itemized deductions reduced under a new formula. Specifically, deductions are reduced by 2/37 of the lesser of total deductions or taxable income above the top bracket threshold. Miscellaneous itemized deductions remain suspended, apart from certain educator expenses. Charitable contribution limits remain consistent with TCJA enhancements.

GHJ Observation: High-net-worth individuals will still be able to itemize, but the marginal value of those deductions will shrink. Strategic planning, such as bunching charitable contributions or using donor-advised funds, can help preserve some of the intended impact.

 

ESTATE AND GIFT TAX EXEMPTION MADE PERMANENT

The unified federal estate and gift tax exemption is now permanently set at $15 million per individual ($30 million per married couple) starting in 2026, with annual inflation adjustments.

 

FINAL PLANNING TAKEAWAYS

  • PTET remains fully available, including for SSTBs. It is important to make sure elections are structured and filed timely.
  • SALT relief is meaningful in theory, but many high earners will still be limited by the phaseout.
  • QBI deductions are preserved. Expanded thresholds and modified rules may bring in taxpayers who previously did not qualify.
  • The value of itemized deductions is shrinking. Review giving strategies sooner rather than later.
  • The estate exemption is locked in, but flexibility in planning remains key considering political risk.

GHJ will continue to monitor IRS guidance, PTET implementation at the state level and any emerging changes. Please reach out to a High Net Worth Practice advisor to discuss how this may impact personal or business strategies.