The recent passage of the One Big, Beautiful Bill (OBBBA) introduces a wide array of tax changes that have significant implications for high-net-worth individuals (HNWIs). In this Insight, we explore the thirteen most relevant provisions for HNWIs and explain how they differ from previous law. Because these policy changes have created a host of planning opportunities, they merit discussion with your Cerity Partners advisor. We have included references to the applicable law sections and policy context to facilitate a thorough, guided review. 

Provisions Concerning Individuals

1. PERMANENT EXTENSION OF LOWER INDIVIDUAL TAX RATES

Previous Law: The lower individual tax rates from the Tax Cuts and Jobs Act (TCJA) were set to expire at the end of 2025, reverting to higher pre-2018 rates. 

New Law: OBBBA makes these lower rates permanent for tax years after 2025, removing the sunset provision. This ensures that HNWIs continue to benefit from lower marginal rates on ordinary income, capital gains, and qualified dividends. 

2. STATE AND LOCAL TAX (SALT) DEDUCTION CAP INCREASE

Previous Law: The SALT deduction was capped at $10,000, or $5,000 for Married Filing Separately (MFS), through 2025. 

New Law: The cap is increased to $40,000 ($20,000 MFS) for 2025, indexed for inflation, with a phase-down for high incomes and a minimum $10,000 deduction, then reverting to $10,000 max after 2029. This is a benefit for HNWIs in high-tax states, as it allows a larger deduction for state and local taxes paid. The new law preserves the ability to use pass-through entity workarounds to the SALT limitations. 

3. ALTERNATIVE MINIMUM TAX (AMT) EXEMPTION

Previous Law: The increased AMT exemption and phaseout thresholds were set to expire at the end of 2025. 

New Law: The higher thresholds are made permanent, reducing the likelihood that HNWIs, including those with incentive stock options, will be subject to the AMT. 

4. CHARITABLE DEDUCTION CHANGES 

Previous Law: Charitable contributions were only deductible for taxpayers who itemized their deductions. There was no minimum threshold (or “floor”) required to claim these deductions when itemizing. 

New Law: Above-the-Line Charitable Deduction: Increased to $1,000 ($2,000 joint) and is now permanent. Itemized Deduction Floor: Only charitable contributions exceeding 0.5% of the contribution base are deductible for individuals, and only those exceeding 1% of taxable income for corporations, with carryforward rules. This deduction floor, along with the Pease limitation, a previous provision that phased out the itemized deductions higher-income taxpayers could claim, may limit the total contribution deduction for clients. 

5. ESTATE AND GIFT TAX EXEMPTION 

Previous Law: The exemption was temporarily doubled to about $14 million through 2025, but was scheduled to decrease to approximately $7 million in 2026. 

New Law: The exemption is permanently increased to $15 million (indexed for inflation after 2026) for gifts made and estates administered after 2025. This preserves the ability to transfer historically high levels of wealth free of federal estate and gift tax. 

Provisions Concerning Businesses

6. QUALIFIED SMALL BUSINESS STOCK (QSBS) EXCLUSION (§1202)

Previous Law: 100% of the capital gain, up to a maximum of $10 million or 10x basis (whichever was greater), was excluded from tax, provided the stock was held for at least five years. To qualify, it had to be C-corporation stock, and the company’s gross assets could not exceed $50 million at the time of stock issuance. 

New Law: Implements a phased exclusion of capital gain: 50% exclusion at three years, 75% exclusion at four years, 100% exclusion at five years for new stock. The per-issuer gain exclusion limit increased from $10 million to $15 million, indexed for inflation. The maximum allowable gross assets at the time of issuance also increased to $75 million, indexed for inflation. This expands the tax benefits available from QSBS and increases the maximum asset limit to qualify as QSBS, providing a significant benefit for HNWIs investing in startups and small businesses. 

7. FULL EXPENSING FOR BUSINESS PROPERTY AND RESEARCH & DEVELOPMENT

Previous Law: Business Property: Allowed 80% bonus depreciation for qualified property placed into service in 2023, phasing down by 20% each year until it sunsetted after 2026. R&D: R&D had to be amortized over five years (domestic R&D) or 15 years (foreign R&D). 

New Law: Business Property: 100% bonus depreciation for qualified business property is made permanent, allowing immediate expense of capital investments. Applies to property placed in service after January 19, 2025. R&D: Domestic R&D expenses can be fully expensed immediately; foreign R&D remains amortized over 15 years. This is especially valuable for HNWIs with substantial business interests. Additionally, some small businesses can benefit from retroactive R&D deductions. 

8. OPPORTUNITY ZONES (OZ)

Previous Law: The OZ program operated over a 10-year window and provided investors with three tax benefits for investing their unrealized capital gains into eligible distressed communities: 

  1. A temporary deferral on taxes for capital gains rolled over from a non-OZ investment into a qualified opportunity fund (QOF) to be invested into an OZ. The taxes are not realized until 2026 or when the asset is sold/disposed of, whichever comes first.
  2. A step-up in basis on their previously earned capital gains that were invested in a QOF. Investments held for five years receive a 10% step-up in basis and investments held for seven years receive an additional 5% step-up in basis (for a total of 15%).
  3. For investments held for at least 10 years, taxpayers receive a permanent exclusion of taxable income on the gains resulting from the original investment in the QOF.

The initial OZ round is set to expire after December 31, 2026.

New Law: Establishes a permanent OZ policy, creating a rolling 10-year OZ designation beginning in 2027. After five years, the original rollover gain receives a 10% basis step-up. After 10 years, 100% of the gain from the OZ investment is excludable when the investment is sold. There are also enhanced tax benefits for rural zone OZ investments.

9. ENHANCEMENT OF THE QUALIFIED BUSINESS INCOME (QBI) DEDUCTION (§199A)

Previous Law: The QBI deduction allowed a 20% deduction for qualified passthrough business income, with phase-in thresholds of $50,000 ($100,000 joint).

New Law: The phase-in threshold is increased to $75,000 ($150,000 joint), and a $400 minimum deduction is established for active business income, with inflation adjustments. The retention of this modified provision is valuable for HNWIs with significant passthrough business income, as it reduces their effective tax rate on such income from 37% to 29.6%.

Miscellaneous Provisions

10. EXCISE TAX ON INVESTMENT INCOME OF PRIVATE COLLEGES AND UNIVERSITIES

New Law: Creates a tiered tax regime dependent on an institution’s “student-adjusted endowment” for private colleges and universities that have at least 3,000 tuition-paying students and at least $500,000 in their student-adjusted endowments. The rates are as follows:

  • 1.4% for student-adjusted endowments of at least $500,000 but less than $750,000
  • 4% for student-adjusted endowments of at least $750,000 but less than $2 million
  • 8% for student-adjusted endowments of at least $2 million

The final bill, as enacted, deleted many provisions found in earlier versions of the legislation that would have more aggressively affected tax-exempt organizations. In particular, the final bill eliminated provisions that would have increased the net investment income tax on private foundations under IRC §4940, modified several unrelated business taxable income rules, and dramatically increased the tax on colleges and universities while also limiting their ability to count international students in determining their per-student endowment size.

11. INTERNATIONAL TAX PROVISIONS

New Law: Foreign Tax Credit and Global Intangible Low-Taxed Income (GILTI): The law increases the deemed paid foreign tax credit percentage and modifies the deduction for foreign-derived, deduction-eligible income and net CFC-tested income, favoring U.S. multinationals and their high-income owners.

12. DISTRIBUTIONAL IMPACT

New Law: JCT and Policy Analysis: The OBBBA is more generous to HNWIs than the TCJA. In 2027, 59% of the tax cuts will be to those making over $200,000, compared to 49% under the TCJA. The bill provides higher percentage and dollar tax cuts to those earning $200,000 and above, with the largest benefits accruing to those in the $500,000+ and $1 million+ income groups.

13. OTHER NOTABLE PROVISIONS/OMISSIONS

No Tax on Tips and Overtime: Temporary deductions for tips and overtime pay are limited and unlikely to affect most HNWIs directly but may be relevant for those with significant service industry income.

Limitations on Itemized Deductions: A new formula reduces itemized deductions by 2/37 of the lesser of deductions or income above the 37% bracket threshold, which may limit the benefit of itemized deductions for the highest earners.

Auto Loan Interest Deduction: This provision temporarily allows for the deduction of auto loan interest for certain vehicles and phases out at $100,000 MFS and $200,000 Married Filing Jointly (MFJ).

Carried Interest: The initial proposed bills curtailed the tax benefits afforded by taxpayers with carried interest. The law that was signed deleted these provisions, so the favorable tax treatment of carried interest remains intact.

The OBBBA offers tremendous opportunities for HNWIs to reduce personal, business, and estate tax liabilities. However, there are even greater opportunities for preserving, growing, and transferring wealth when these tax considerations are integrated into a comprehensive wealth management plan. Cerity Partners has pioneered a comprehensive and coordinated approach to financial guidance with a unified team of specialists who collaborate on nearly every aspect of a client’s financial life. For individuals and families, the firm’s service model covers investment management, retirement planning, estate and gift planning, tax planning and preparation, and insurance and risk management.

Please get in touch with your Cerity Partners advisor to discuss how these recent tax changes may impact your overall financial plan. If you are not yet a client, we invite you to request an introduction with our concierge to explore your objectives and be matched to the right financial advisor for your unique needs.       

Please read important disclosures here.