July 4, 2025, President Donald Trump signed the “One Big Beautiful Bill” (OBBBA), a big reconciliation bill that made some tax changes to the Tax Cuts and Jobs Act (TCJA). While most of the bill extends existing tax provisions, there are some important updates – especially for businesses and high income earners. Below we break down the changes and what they mean for you.

As always, our team of transaction and business tax attorneys is here to help you navigate these changes and plan accordingly. Reach out with questions or concerns.

1. State and Local Tax (SALT) Deductions

State and Local Taxes (SALT) deductions can now be claimed on Federal income tax returns. This includes any State income tax and local property taxes paid by the taxpayer. Each taxpayer can take up-to $40,000.00 in SALT deductions provided the taxpayer has less than $500,000 of taxable income. Currently, the changes to the SALT deductions will sunset at the end of 2029. 

There are various planning opportunities for wealthy families to maximize the use of SALT deductions, which could significantly reduce their Federal income tax liabilities. For example, several trusts could be established which, if drafted and implemented appropriately, could each take separate SALT deductions of up to $40,000, which could significantly reduce the amount of Federal income taxes paid each year. In order for this planning to be successful, the trusts created would have to be considered “non-grantor” trusts that are separately taxable. Care will need to be taken though in the administration of these trusts, as non-grantor trust tax rates are typically much higher than personal income tax rates. However, if the net income of the Trust is distributed to the beneficiaries, after taking the SALT deductions, this potentially adverse income tax consequence can be avoided. 

The planning opportunity available is most pronounced for families who hold several real properties, as the property tax expenses can be claimed as part of the SALT deductions. In California in particular, using several non-grantor trusts to take the SALT deductions can be employed in conjunction with both property tax reassessment planning and estate and gift tax planning.  

For this type of tax planning, it is essential that competent counsel is engaged to draft these trusts and to oversee the administration and implementation of the Trusts in order to ensure the SALT Deductions are applied correctly and unintended adverse tax consequences are avoided.  

2. Individual Income Tax Rates and Deductions

The 2017 tax rate schedule (10% to 37%) is now permanent and indexed for inflation. But there are some changes to be aware of:

• The new limitation on itemized deductions for taxpayers in the 37% bracket will reduce the value of those deductions to 35% benefit.
• A $6,000 above the line deduction for individuals 65 and older, phased out at higher income levels.
• A new $1,700 tax credit for donations to approved private school scholarship organizations.

Most individuals won’t see big changes to their rate structure, but high income earners will see reduced benefits from itemized deductions. On the other hand, those eligible for the age based deduction or education related credit may see some savings.

3. Charitable Gift Deductions

Charitable gift deductions are only applicable to gifts above 0.5% of the taxpayer’s adjusted gross income (AGI).  Those who take the standard deduction can now deduct $1,000 for single filers and $2,000 for joint filers.

If you’re planning charitable donations soon, keep in mind the new floor for deducting gifts. This may open up new strategies for tax efficient charitable giving, especially if you combine donations in low income years.

4. Qualified Small Business Stock (QSBS)

The new law increases the gross asset limit for Qualified Small Business Stock (QSBS) to $75 million. Beginning in 2027, the gross asset limit for QSBS will be indexed for inflation. 

In addition, the capital gain exclusion percentages have been increased for those who hold the stock for at least three years:

• 50% exclusion for stock held for ≥3 years
• 75% exclusion for stock held for ≥4 years
• 100% exclusion for stock held for ≥5 years

Entrepreneurs and investors may benefit from expanded QSBS provisions, especially if they convert LLCs into C-corporations. Similar to the SALT deduction planning described above, there are planning opportunities to maximize the benefit of these new laws, by establishing multiple trusts, so each trust would have its own gross asset limit for QSBS.

5. Qualified Opportunity Zones (OZ)

The current OZ deferral period ends December 31, 2026, but a new round of OZ designations will begin in 2027. Investments made after 2026 and held for at least five years will get a 10% basis step-up. All deferred gains must be recognized by December 31, 2033.

The new OZ cycle opens up new tax deferral opportunities. If you’re considering OZ investments, timing and geographic eligibility will be key to optimizing tax benefits.

6. Qualified Business Income (QBI) Deduction for Pass-Throughs

The 20% QBI deduction under Section 199A for pass-through entities is now permanent. Income thresholds for specified service trades or businesses have been adjusted slightly.

This provides long term clarity for owners of pass-through entities. Those in specified service trades should continue to monitor their eligibility for this valuable deduction which can reduce overall taxable income.

7. Estate, Gift, and Generation-Skipping Transfer (GST) Tax

The basic exclusion amount for estate and gift taxes increases to $15 million per person ($30 million for married couples) in 2026 and will be indexed for inflation. Stepped-up basis at death is preserved.

Individuals with estates approaching these thresholds should consider tax efficient wealth transfer strategies. Now is the time to review lifetime gifting and charitable planning as new opportunities arise in anticipation of 2026 changes.

8. Other Business-Tax Provisions

Several business tax provisions are permanent, including 100% bonus depreciation for qualified assets and full expensing for domestic R&D costs. Businesses under $31 million in receipts can retroactively apply these benefits for 2022-2024 expenses.

High growth businesses will benefit from immediate expensing and simplified compliance. If your company has incurred significant expenses, you may want to review prior years to take advantage of potential refunds.

9. Clean-Energy Tax Credits

Wind and solar credits will phase down beginning in 2026 and will be 0% in 2028. Clean vehicle credits expire September 30, 2025 and home charging equipment credits expire June 30, 2026.

If you’re considering clean energy investments, act now to take advantage of expiring credits. Delaying investments could reduce the financial incentives available to you.

Contact KJMLaw Today to See What’s Next for You

The “One Big Beautiful Bill” Act brings many opportunities and challenges for taxpayers, business owners and investors. You need to understand what this means for you. We highly recommend you reach out to a tax advisor to discuss how this affects you and what you should do next.

For help understanding and implementing these changes contact us today. You may reach us at 626-568-9300.