President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025, after the Senate passed it on July 1 and the House approved the identical text on July 3. Enacted as Public Law 119-21, the measure ends the uncertainty over the expiring 2017 tax cuts. For high earners and affluent families, it sets a planning baseline with no scheduled sunset on the core rates, paired with several new limits aimed at the top bracket.
What changed
The provisions that matter most to households with incomes above $200,000, drawn from the IRS overview, the Tax Foundation and law-firm analyses:
- Rates and brackets. The seven brackets from the 2017 law become permanent, and the top rate stays at 37% instead of reverting to 39.6%. For 2026, the 37% bracket begins at $640,600 of taxable income for single filers and $768,700 for joint filers, per Rev. Proc. 2025-32.
- Standard deduction. $31,500 for joint filers in 2025, indexed thereafter.
- SALT cap. The state and local tax deduction limit rises to $40,000 for 2025 and grows 1% a year through 2029. It phases back down toward $10,000 for incomes between $500,000 and $600,000, and returns to $10,000 for everyone in 2030.
- Itemized deduction limit. Starting in 2026, filers in the 37% bracket effectively receive no more than 35 cents of benefit per dollar of itemized deductions.
- Charitable giving. From 2026, itemizers may deduct gifts only above 0.5% of AGI; the 60% of AGI limit for cash gifts becomes permanent; non-itemizers get a deduction of up to $1,000, or $2,000 for couples.
- Estate and gift tax. The exemption rises to $15 million per person in 2026, or $30 million for a couple, indexed from 2027, with the top rate unchanged at 40%.
- Alternative minimum tax. The higher exemption stays. Phase-out thresholds reset to $500,000 for single filers and $1 million for joint filers in 2026, but the exemption now phases out at 50 cents per dollar instead of 25.
- Business owners. The 20% Section 199A pass-through deduction becomes permanent.
- QSBS. For stock acquired after July 4, 2025, the Section 1202 exclusion cap rises to $15 million, partial exclusions begin after three years and the company asset ceiling rises to $75 million, as Arnold & Porter details.
Who is affected
Families in high-tax states benefit from the larger SALT cap only if their income sits below the phase-down range; above $600,000 the cap is back at $10,000. The same top-bracket households face the new charitable floor and the 35-cent ceiling on itemized deductions. Retirees 65 and older get a $6,000 deduction through 2028, but it phases out above $75,000 of income for single filers and $150,000 for couples. Families with estates between about $7 million and $15 million per person, who faced a halving of the exemption in 2026, no longer do.
The after-tax math
Example one: a married couple with $1.5 million of taxable income and $100,000 of itemized deductions in 2026. Under the new rule, deductions are reduced by 2/37, about 5.41%, of the lesser of total itemized deductions or income above the 37% threshold, as Goodwin explains. That trims $5,410 of deductions and adds about $2,000 of tax at 37%, the same result as valuing each deducted dollar at 35 cents.
Example two: a couple pays $45,000 a year in state income and property taxes.
| 2025 MAGI | SALT deduction allowed | Increase over old $10,000 cap |
|---|---|---|
| $400,000 | $40,000 | $30,000 |
| $550,000 | About $25,000 | About $15,000 |
| $650,000 | $10,000 | $0 |
At an illustrative 24% marginal rate, the extra $30,000 of deductions for the $400,000 couple is worth $7,200 a year, assuming they itemize. For the $650,000 couple, the new law changes nothing on this line.
Moves to discuss with your advisor
Households often revisit several decisions in light of a permanent framework: whether to accelerate charitable gifts into 2025, before the 0.5% floor and the 35-cent cap apply; how pass-through owners in high-tax states manage income around the SALT phase-down range; whether large estates still benefit from lifetime gifts without a sunset deadline; and whether founders structure new ventures to capture the expanded QSBS rules. Each turns on individual facts and is worth modeling with a CPA or financial planner.
What to watch
Permanent means no expiration date, not immunity from future Congresses. Several provisions still expire, including the $40,000 SALT cap after 2029 and the senior deduction after 2028. Treasury and IRS guidance on the itemized deduction limit, the charitable floor and the QSBS transition rules will determine how these provisions work in practice.
Sources
- First reported One, Big, Beautiful Bill provisions — IRS
- One Big Beautiful Bill Act tax changes: FAQ — Tax Foundation
- Rev. Proc. 2025-32 — IRS
- OBBBA Solidifies High Estate Tax Exemptions and Charitable Giving Changes — Goodwin
- Increases to the Federal Estate and Gift Tax Exemption Under the OBBBA — Arnold & Porter
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
