The One Big Beautiful Bill Act (OBBBA) was signed into law, somewhat symbolically, on July 4, 2025, following passage by the House and Senate. This rather flamboyantly named legislation, in broad terms, preserved or made permanent many of the provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which was passed during President Trump’s first administration. A prime example—of particular interest to persons with larger estates—is the more generous estate tax exemption that was part of TCJA but set to expire in 2025. These have now been made permanent; OBBBA provides for a permanent $15 million (for individuals) / $30 million (for couples) unified federal estate and gift tax exclusion, which will be indexed for inflation in future years. Absent the provisions of OBBBA, this exclusion would have reverted to approximately $7 million for individuals and $14 million for couples.
In addition to the preservation of higher tax exemptions on generational wealth transfers, however, OBBBA makes several other changes that many investors will want to take into consideration as they prepare to file their returns for the 2025 tax year. Here are some highlights:
- Higher standard deductions: $15,750 for single filers, $31,500 for married couples filing jointly (up from $14,600 and $29,000, respectively;
- Higher SALT deductions: OBBBA raises the available deduction for state and local taxes from $10,000 to $40,000. The higher deduction only applies to those with less than $500,000 in adjusted gross income (AGI), however; above that level, the prior deduction, capped at $10,000, still applies.
- Child tax credit, child and dependent care expense deduction: The new legislation increases the child tax credit to $2,200 per qualifying child (must have a Social Security number prior to tax filing) and also raises the percentage of deductible child or dependent care expenses to 50% (was 35%). The new higher amounts apply to single parents with $200,000 or less in annual income and to married couples with $400,000 or less. Additionally, the bill allows business owners who offer childcare to employees to deduct 40% of such expenses (was 25%), up to a limit of $500,000 (was $150,000).
- “Trump Accounts”: Parents of children born from 2025 to 2028 can receive a tax-advantaged account with the child as beneficiary, to be “seeded” with $1,000, courtesy of the federal government. The accounts, which function similarly to IRAs, can accumulate tax-free until the child reaches age 18, at which time non-taxable distributions can be taken from after-tax contributions. Parents with dependent children born prior to 2025 can also open these accounts for their children, but they do not qualify for the initial $1,000 deposit from the government. Subsequent deposits to the accounts cannot exceed $5,000 per year.
- Full write-off for cost of equipment, R&D: Business owners are now able to write off the full cost of equipment purchases and research and development expenses in the year they are incurred.
Investors may wish to take some specific actions in order to take maximum advantage of the benefits offered by OBBBA.
- Reconsider itemizing deductions vs. using the standard deduction. While the new, higher standard deduction may make itemization less practical for many, some may benefit from “bunching” several years’ worth of deductions into a single year. The higher cap on SALT deductions may also make itemization more attractive for some.
- Parents of dependent children should review their eligibility for the Child Tax Credit and Child and Dependent Care Tax Credit and understand the steps necessary to claim on their tax return. They may also wish to consider the advantages of a “Trump account” for children who qualify.
- Review W4 withholding and estimated taxes. With dramatic changes to standard exemption rates and available tax credits, it may be important to re-examine withholding and estimated tax rates to avoid either under- or overpayment at tax return time.
- Those with significant estates may wish to revisit planning documents and strategies. The higher threshold for estate and gift taxes creates room for greater annual gifting, and the more generous—and permanent—lifetime exclusion offers relief to many. However, estate taxation laws are always subject to change, and it is important to stay updated.
Rothschild Wealth Partners recognizes that each client’s situation is unique, including the precise effects of this new legislation. If you would like more detailed information tailored to your particular needs, please contact us to arrange an appointment.
For informational purposes only—not investment, legal, or tax advice.
