Comprehensive Guide to the One Big Beautiful Bill Act (OBBBA)

On July 4, 2025, President Donald Trump enacted the One Big Beautiful Bill Act (OBBBA), marking a pivotal shift in the U.S. tax landscape. This legislation not only extends many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) but also introduces new benefits for both individuals and businesses. Let’s delve into the key features of the OBBBA and its implications for taxpayers.

Key Provisions of the One Big Beautiful Bill Act

1. Estate, Gift, and GST Tax Exemption

The OBBBA significantly increases the federal estate and gift tax exemption for individuals. Effective January 1, 2026, the exemption will be raised to $15 million per person and adjusted for inflation in subsequent years. This change provides a much-needed respite for estate planning, allowing married couples to transfer up to $30 million free from estate tax.

• Long-term Estate Planning: High-net-worth individuals now have more leeway in making monetary gifts without incurring gift taxes due to the higher exemption thresholds.

• Strategic Gifting Opportunities: With the new cap, it’s an opportune time to make strategic gifts, especially of assets expected to appreciate in value.

2. Individual and Trust Tax Rates

Another attractive aspect of the OBBBA is that it makes the reduced income tax rates from the TCJA permanent.

• Current Individual Tax Rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37% (compared to the old rates of up to 39.6%).
• Trust and Estate Tax Rates: The new rates are 10%, 24%, 35%, and 37%, simplifying the tax structures for trusts and estates.

3. Standard Deduction Increase

Beginning in 2026, the standard deduction amounts will increase significantly.

• New Standard Deduction Amounts:
  • Joint Filers: From $24,000 to $31,500
  • Heads of Household: From $18,000 to $23,625
  • Single Filers/Married Filing Separately: From $12,000 to $15,750

4. Child Tax Credit Enhancements

The OBBBA retains and enhances the Child Tax Credit, raising the nonrefundable credit to $2,200 per child, indexed for inflation, and boosting the refundable portion to $1,400.

5. 529 Accounts Changes

The legislation broadens the uses of 529 savings accounts:

• Eligible expenses now encompass tuition, books, online materials, and even fees for standardized exams.
• The annual distribution limit for K-12 expenses has increased from $10,000 to $20,000.

6. Trump Accounts Introduction

New tax-deferred Trump accounts for children allow annual contributions of up to $5,000, with a pilot program contributing $1,000 for new citizens born between January 1, 2025, and December 31, 2028.

7. Charitable Deductions Updates

• New Rules for Charitable Contributions: For taxpayers, the deduction for charitable contributions will now be reduced by 0.5% of their adjusted gross income (AGI).

7.1 For Non-itemizers

• Limited deductions: Non-itemizers can claim a deduction of up to $1,000 ($2,000 for joint filers).

8. Qualified Small Business Stock (QSBS)

Enhancements to QSBS tax benefits encourage investment in small businesses, with increased exclusion percentages for gains.

9. Qualified Business Income (QBI) Deduction Changes

• The OBBBA introduces a minimum deduction requirement, raising thresholds for single filers to $75,000 and for joint filers to $150,000, effective for tax years beginning after 2026.

What the OBBBA Means for You

The OBBBA offers a comprehensive overhaul of the U.S. tax system, providing both stability and clarity, especially for businesses and high-net-worth individuals. By solidifying many TCJA provisions, the bill allows for effective long-term financial planning.

Tips for Financial Strategy

As the OBBBA takes effect, it’s crucial for taxpayers to reassess their financial strategies. Here are some recommendations:

• Reevaluate Estate Plans: Adjust your estate plan to maximize the benefits of the increased exemption.
• Gifting Strategies: Consider utilizing irrevocable trusts to take advantage of the higher gift tax exemptions.
• Tax Planning for Charitable Donations: Keep updated with new rules to make the most of your charitable contributions.

Conclusion

The One Big Beautiful Bill Act signifies a major leap in tax legislation that provides enduring advantages for taxpayers. Individuals and families stand to gain significantly by staying proactive in their financial planning.

Contact Us

For personalized insights on how the OBBBA can impact your financial future, reach out to our experts at Husch Blackwell Private Wealth. We are here to help strategize and align these changes with your financial goals.

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