Whenever a major new piece of tax legislation is passed, it’s often met with a mix of anticipation and anxiety. New rules mean new questions: What does this mean for my family? For my business? For my retirement? The recently passed “One Big Beautiful Bill Act” (OBB-BA) is no exception. This sweeping law creates clear opportunities for certain groups but also weaves a new layer of complexity into our financial lives.
While the political debates will continue, our focus is on understanding the practical implications. Let's explore some of the key groups who might benefit from these changes and, just as importantly, highlight the new complexities that everyone should be aware of.
High-Income Households and Estate Planning
One of the most significant headlines from the OBB-BA is the stability it provides at the higher end of the income and wealth spectrum. The top federal income tax bracket will remain at 37%, removing the uncertainty of a potential increase.
Furthermore, for those focused on legacy planning, the individual lifetime estate tax exemption is set to lock in at $15 million starting in 2026. This provides a clearer runway for structuring trusts and gifting strategies.
However, the new law is also filled with what one tax expert called “gimmicks” and “booby traps.” Think of it like a freshly paved road that has a few hidden potholes. For example, some deductions are now subject to new limitations and aggressive income phase-outs. A financial move, like a large Roth conversion, could inadvertently push you into an income range where you lose thousands of dollars in deductions, effectively raising your tax rate.
A Boost for Business Owners 📈
The OBB-BA contains several pro-growth provisions aimed at encouraging investment and supporting entrepreneurs. Three areas, in particular, stand out:
Qualified Business Income (QBI) Deduction: The popular 20% QBI deduction for pass-through businesses has been made “permanent,” providing more certainty for long-term business planning.
Expanded Depreciation: The law enhances tax breaks for depreciation, which may incentivize business owners to accelerate investments in new equipment and other assets.
Qualified Small Business Stock (QSBS): The benefits for holding QSBS have been enhanced, a key consideration for founders and early-stage investors that could even influence the choice of business entity.
Navigating these provisions requires careful coordination. While a financial advisor’s role isn’t to replace your CPA, it is to help you spot these potential opportunities so you can have a more strategic conversation with your entire professional team.
Expanded Support for Families
The new law also introduces significant changes designed to benefit families with children.
The Child Tax Credit has been increased to $2,200 per child and, importantly, will now be adjusted for inflation. The income level to qualify has also been expanded, making the credit available to more households.
Perhaps one of the most practical upgrades is to 529 education savings plans. These plans are now far more flexible. The annual limit for K-12 expenses has been doubled to $20,000. Even more, the definition of qualified expenses has been broadened to include things like SAT prep courses and post-college professional credentialing classes (for certifications like the CPA or CFP®). This change helps remove the common fear of overfunding a 529, as the funds can now be used for a much wider range of career-building pursuits.
The New Normal: Complexity
If there is one overarching takeaway from the OBB-BA, it’s that our tax code is becoming more complex, not less. While this legislation creates clear winners, it also underscores the danger of making financial decisions based on simple assumptions.
In this environment, “back-of-the-envelope” calculations are riskier than ever. A successful long-term financial strategy is built on understanding how these intricate new rules—and their hidden “booby traps”—interact with one another.