As the season for year-end tax planning is upon us, the focus is on long-term optimization, getting entity structure right and facing a more complicated state and local tax landscape. For individuals bracing for 2026, much of their concerns at the start of 2025 are beginning to fade.
With the enactment of the One Big Beautiful Bill Act (OBBBA), many of the Tax Cuts and Jobs Act provisions that were set to sunset at the end of the year are no longer challenging individuals. Core provisions of the Tax Cuts and Jobs Act, such as the 37% top individual rate, the 20% Section 199A deduction and the increased standard deduction, were all extended or made permanent parts of the Internal Revenue Code.
While federal uncertainty is largely off the table, individuals’ competitive advantage now comes from structure, state specific execution and multi-year income smoothing.
INCOME TIMING: THE ART OF SMOOTHING
With the top federal rate locked at 37%, there is no longer a rush to pull income into 2025 just to “front run” a higher bracket in 2026. The new goal is income smoothing.
Deferring income still matters for two reasons. First, the basic time value of money. Second, the ability to manage exposure to the Net Investment Income Tax and state level surtaxes by keeping spikes in check.
Decisions on Roth conversions, ISO exercises and bonus timing should now be modeled against an expected lifetime earning curve, not fear of a sudden congressional pivot. Uneven income patterns will still cost taxpayers real dollars over time though, even if the headline rate does not change.
GHJ Observation: Think in terms of keeping your marginal rates as consistent as possible. If you expect 2026 to be a particularly high-income year, deferring key deductions into that year may be more valuable than rushing everything into 2025.
BUSINESS OWNERS: THE RETURN OF FULL EXPENSING
For business owners, the permanent treatment of Section 199A is a significant benefit. Similarly, bonus depreciation, another highly powerful tax deduction, was made permanent this year.
The OBBBA reversed the scheduled bonus depreciation phase down and restored 100% bonus for qualified property acquired and placed in service after Jan. 19, 2025. Property placed in service earlier in 2025 is generally set at the prior 40% rate, but there are transitional elections in narrow situations. The key takeaway is simple: new qualifying assets put in service after Jan. 19, 2025 are back to full expensing.
That brings 100% bonus depreciation right back to the center of the conversation for capital improvements, equipment purchases and cost segregation studies.
GHJ Observation: Revisit your capital expenditure budget now, not on Dec. 30. Getting assets placed in service by Dec. 31, 2025 can yield a full write off for federal purposes. If you were waiting to do a cost segregation study because of the scheduled phase down, this is the year to revisit that decision.
ESTATE PLANNING: FREEZING OVER FLEEING
The potential reduction of the federal estate exemption was among the largest concerns for many high-net-worth families. The OBBBA resolved that by permanently setting the basic gift, estate and generation-skipping transfer tax exemption at $15 million per individual starting Jan. 1, 2026, indexed going forward, or $30 million per married couple before layering on state level regimes.
The pressure to “give it away or lose the exemption” has eased. However, with interest rates settling, strategies like Grantor Retained Annuity Trusts (GRATs), sales to intentionally defective grantor trusts and intra family loans remain very powerful.
The priority has shifted from fleeing a falling exemption to freezing value. The objective is to push future appreciation out of a taxable estate while the exemption is high and current valuations still make sense.
GHJ Observation: The exemption is no longer a concern, but asset appreciation is. If you expect meaningful growth in a business, concentrated equity position or private investments, getting them into a trust structure sooner rather than later can still create significant long-term tax efficiency, even without a “use it or lose it” cliff.
INVESTMENT STRATEGY, LOSS HARVESTING AND REPORTING
With individual rates stabilized and no automatic capital gains hike on the calendar, investment decisions should go back to the basics. Individuals can buy and sell based on their underlying investment thesis. As a result, taxes should be a constraint, not the driver.
Tax loss harvesting remains a core year-end tool. Taxpayers should still use losses to offset realized gains and organize their portfolio where it makes sense.
At the same time, the reporting environment is tightening, particularly for digital assets. New broker reporting rules, Form 1099-DA for 2025 transactions, and a growing web of guidance mean that execution and recordkeeping matter far more than they used to, even though the formal wash sale rules themselves still apply (mainly to stock and securities and not to most digital assets).
GHJ Observation: Harvest losses where this improves overall tax efficiency, but do not sell expected winners purely for tax reasons. For cryptocurrency and other digital assets, assume the IRS will have better data and take your reporting seriously.
STATE TAX: THE $40,000 CAP VS. PTET
While federal rules have quieted down, state and local taxes (SALT) are very much alive.
The OBBBA provides real relief by raising the federal SALT cap from $10,000 to $40,000 starting in 2025, with small annual increases. However, high income taxpayers need to know that the higher cap is subject to phase downs once income crosses certain thresholds and is scheduled to revert back to $10,000 in 2030 if Congress takes no action on it.
For business owners, the Pass-Through Entity Tax (PTET) election is still the star of the show. The OBBBA did not shut down PTET regimes. Electing PTET allows the entity to deduct state income taxes without being constrained by the individual SALT cap at all. That can be a meaningful permanent benefit for owners of profitable S Corporations and partnerships in high tax states.
GHJ Observation: A $40,000 SALT cap is helpful, and an uncapped PTET deduction at the entity level is better. Continue to evaluate PTET annually for your S Corps and partnerships, and do not walk away from the election just because the individual cap looks more generous on paper.
CLOSING THOUGHTS
Year-end 2025 offers something rare in tax planning: clarity. The questions are no longer “What if TCJA sunsets?” or “What if Congress does something next year?” The question is “What are we going to do with the stability we have?”
Strong results in this environment will not come from guessing what happens in Washington. They will come from using the rules we know we have to:
- Smooth income over time
- Optimize entity structure and PTET elections
- Use 100% bonus and cost segregation intelligently
- Lock in estate value freezes while the $15 million exemption is in place
Now is the time to sit down with your tax, legal and wealth advisors and update the models. The urgency has shifted and is now focused on making smart, intentional moves with the certainty we finally have. To talk to GHJ’s High Net Worth Practice about your tax strategy, contact the team here.
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