Planning Opportunities to Explore with Introduction of DBS 2026 Projection Tax Guide

The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, combines permanent extension of many 2017 Tax Cut and Jobs Act (TCJA) provisions with new tax rules that will impact many taxpayers. Three groups of taxpayers poised to benefit the most from the tax law changes are age 65+ seniors, individuals with high income/net worth, and business owners. The changes provide opportunities for taxpayers, especially in these three groups, to decrease their tax burden increasing cash flow that financial advisors can use to help clients achieve financial security.

Seniors Age 65+

For taxpayers age 65 or older with moderate income Christmas came early this year. The higher standard deduction amounts established in TCJA have been made permanent and increased for 2025, including the “extra standard deduction” for those 65 and older, which rose by $50 per individual. Drawing more attention is the new temporary $6,000 additional deduction for taxpayers 65+, available for tax years 2025-2028.

For example: A married couple, both over 65 filing jointly, could deduct as much as $46,700 ($31,500 Standard Deduction + $3,200 extra age-65 de­duction + $12,000 new temporary deduction) from their taxable income in 2025 as long as their modified adjusted gross income does not exceed $150,000 for taxpayers married filing jointly. The income threshold for all other filers is $75,000. The new senior deduction starts to phase out at those income thresholds disappearing entirely for in­comes above $175,000 for single ($250,000 joint.

For taxpayers age 70½ or older, IRA qualified charitable distributions (QCDs) remain a powerful tool — allowing an IRA owner to donate up to $108,000 directly to charity in 2025 (projected to be $111,000 for 2026) without gen­erating taxable income.

These enhanced deductions create opportunities for stra­tegic tax and retirement planning, such as:

• Executing Roth conversions.
• Harvesting gains in taxable investment ac­counts.
• Managing Medicare Income-Related Monthly Adjustment Amount (IRMAA) brackets.

Individuals with High Income/Net Worth

High-income earners benefited from OBBBA, which per­manently extended TCJA’s lower tax brackets—preventing the higher rates originally set to return in 2026.

For homeowners in high-tax states and cities, the $10,000 cap on the state and local tax (SALT) deduction has been temporarily increased to $40,000 for both married cou­ples and individuals for tax years 2025–2029, reverting to the lower cap in 2030.

With the increase in the SALT deduction, taxpayers should be mindful that the $40,000 cap is reduced by 30% of modified adjusted gross income above $500,000 (single/ married filing jointly) or $250,000 (married filing sepa­rately), but not less than $10,000. Both the deduction and phaseout income thresholds will increase by 1% annually through 2029.

Taxpayers who are charitably inclined should be aware that 2025 is the final year to deduct cash or appreciated asset gifts to qualified charities as an itemized deduction under the current rules before new deduction floors arrive in 2026. For modest gifts, OBBBA permits taxpayers who do not elect to itemize an above-the-line deduction for charitable contributions of up to $1,000 for single filers ($2,000 joint filers).

Finally, OBBBA permanently increases the amount of wealth that can be transferred to the next generation without incurring gift or estate taxes. In 2025, individu­als can transfer up to $13.99 million ($27.98 million for married couples) without incurring gift or estate taxes. Effective January 1, 2026, the exclusion amount increases to $15 million ($30 million for married couples), adjusted annually for inflation beginning in 2027.

With permanent lower income tax rates, increased de­ductions, and continuation of high estate exemption, in­dividuals with high income/net worth have room to build and protect wealth using tax-smart strategies such as:

• Maximizing contributions to tax-deferred retirement plans.
• Timing charitable gifts to take advantage of floors and AGI limits.
• Reassess existing trusts and gifting strategies for the expanded exemption.
• Implementing estate plans using taxeffective strategies such as ILITs, SLATs, GRATs, CRT/CLTs.

Business Owners

The TCJA reshaped business taxation by cutting corpo­rate rates, creating the Qualified Business Income (QBI) deduction for small business pass-through owners, and introducing immediate expensing through bonus de­preciation. But many of its business provisions were set to expire after 2025. With the passage of OBBBA, key business deductions are made permanent. The shift from temporary to permanent rules makes 2025 and 2026 defining years for shaping business investment and tax strategies to improve cash flow, accelerate growth, and plan for succession more effectively.

For owners of pass-through business entities such as S corporations, partnerships, LLCs, and sole proprietor­ships, OBBBA makes permanent the 20% QBI deduction, raises income thresholds and expands eligibility. This low­ers the effective tax rate for many small business owners, allowing for more predictable cash, which may be rein­vested to help business growth and continuity plans.

Likewise, OBBBA included provisions that should be of interest to your clients who are owners of C corporations. One provision which your C corporate owners should pay attention to is the expanded application of qualified small business stock (QSBA). OBBBA expanded the availability by increasing gross asset ceiling from $50 million to $75 million and moving from a single five-year stock holding period for full exclusion to a tiered structure which en­ables business owners to benefit from partial capital gain exclusion for sales of business interest in years three and four. It also increased the maximum capital gain exclusion from $10 million to $15 million. The enhancements to QSBS adds considerable value to growth-stage companies with their investors.

In addition to the above, provisions which benefit specif­ic business entities, OBBBA included provisions that are applicable to all business forms. Specifically,

Under the 2017 TCJA, bonus depreciation was scheduled to fully expire after 2026. OBBBA permanently reversed this phase-out, meaning businesses can continue to write off the full cost of eligible business equipment, machinery, and assets in the year purchased, rather than spreading the deduction over several years.

OBBBA also permanently expands section 179 expense deduction by raising the deduction cap. to $2.5 million and broadening the types of property that qualify. With section 179 small and mid-sized businesses can deduct the cost of equipment and certain improvements upfront rather than spreading the deduction over many years.

Finally, research and development costs for domestic activities can now be deducted immediately, rather than spread over five years. Furthermore, small businesses with annual gross receipts under $31 million can amend past returns with R&D expenses from 2022 – 2024 that were previously amortized and accelerate the deduction.

To maximize OBBRA benefits business owners should:

• Owners of pass-through business entities should review their business structure to determine if it should be maintained or changed – specifically examine income levels to optimize pass-through QBI deduction.
• Assess business continuity plans possibly incorporating QSBS strategy for owners of C corporations.
• Accelerate major capital improvements to immediately utilize bonus depreciation or section 179 expensing.
• Amend prior tax returns, where applicable, for R & D deductions to capture retroactive benefits.

The One Big Beautiful Bill Act offers broad tax and planning opportunities for individuals, business owners and investors. The changes create a fertile environment for advisors to revisit and redesign estate, investment, and business plans with newfound certainty.