đź“‹ Legislative Overview

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA)—the most significant tax reform legislation since the Tax Cuts and Jobs Act of 2017. This comprehensive 900-page budget reconciliation bill fundamentally reshapes business taxation, estate planning, and wealth transfer strategies.

Key Provisions:

  • Permanent 100% bonus depreciation restoration
  • Enhanced Section 179 expensing ($2.5M)
  • QBI deduction made permanent with improvements
  • Estate tax exemption modifications
  • Energy credit expansions
  • International tax provisions

Author’s brief (Overline): We’ve been briefing HNW families and owner‑operators on OBBBA—action lists here reflect what’s implementable now under current law and common state conformity limits.

Major Tax Provisions of the OBBBA

1. Permanent 100% Bonus Depreciation

Effective: Property placed in service after January 19, 2025

Impact: Businesses can immediately deduct 100% of qualifying equipment and certain building improvements

Qualification: Tangible personal property with recovery period 20 years or less

Benefit: Massive first-year deductions for equipment-intensive businesses

2. Enhanced Section 179 Expensing

Previous Limit: $1.25 million
New Limit: $2.5 million (100% increase)

Phase-out Threshold: Increased to $4 million

Impact: Small and medium businesses can expense significantly more equipment immediately

3. QBI Deduction Enhancements

Made Permanent: 20% qualified business income deduction no longer temporary

Expanded Eligibility:

  • Phase-in threshold increased 50% (Single: $75K, Joint: $150K)
  • Minimum deduction: $400 (if $1,000+ QBI)
  • Inflation adjustments built-in

Impact: More business owners qualify for full 20% deduction

4. Estate Tax Provisions

Current Exemption: $13.99 million per individual (2025, indexed)

OBBBA Impact:

  • Maintains current exemption levels
  • Inflation indexing continues
  • Planning strategies remain viable

Estate Planning Note: While exemption maintained, future uncertainty remains for post-2025 periods

Strategic Implications for Wealth Transfer

Immediate Actions for High-Net-Worth Families

1. Maximize Current Exemptions

  • Use $13.99M lifetime gift exemption while available
  • No guarantee of continued high exemptions beyond current law
  • Implement GRATs, SLATs, and dynasty trusts now

2. Business Succession Planning

  • Leverage permanent bonus depreciation for business purchases
  • ESOP strategies for tax-free wealth transfer
  • Installment sales to younger generation

3. Real Estate Portfolio Optimization

  • Cost segregation studies for maximum depreciation
  • 1031 exchanges for continued deferral
  • Consider REP status or STR strategies

Income Tax Bracket Implications

Current Structure Maintained:

  • Top marginal rate: 37%
  • Capital gains: 20% (plus 3.8% NIIT)
  • QBI effective rate: 29.6% for business owners

Planning Opportunity: Income shifting strategies become more valuable with permanent rate structure

Business Structure Optimization

Pass-Through Entities (Now More Attractive)

With permanent QBI deduction:

  • S-Corporations: SE tax savings + 20% QBI
  • Partnerships: Flexibility + QBI benefits
  • LLCs: Simple structure + QBI optimization

Effective Top Rate: 29.6% (vs. 37% for W-2 income)

C-Corporation Considerations

Flat 21% rate maintained

When to Consider:

  • QSBS exclusion planning ($10M+ exit)
  • Significant fringe benefit needs
  • International operations
  • Planned IPO or acquisition

Energy and Environmental Provisions

Clean Energy Investment Credits

Enhanced Credits:

  • Solar: 30% investment credit
  • Wind: Production credits
  • Battery storage: Qualifying property
  • EV charging: Infrastructure credits

Business Application: Immediate credits + bonus depreciation on qualifying property

179D Energy-Efficient Building Deduction

Enhanced Benefits:

  • Up to $5.65 per square foot
  • Permanent provision
  • Immediate deduction

Qualifying Systems: Efficient HVAC, lighting, building envelope

International Tax Provisions

FDII (Foreign-Derived Intangible Income)

Benefit: 13.125% effective tax rate on export income

Application: Export services, IP licensing, foreign sales

Planning: Structure to maximize FDII benefits

GILTI (Global Intangible Low-Taxed Income)

Modifications: Minor adjustments to calculation

Impact: Continued tax on foreign subsidiary income above thresholds

Planning: High-tax exception and foreign tax credit optimization

State Tax Considerations

State Conformity Issues

Not all states conform to federal changes:

  • California: Partial conformity
  • New York: Selective adoption
  • Texas: No state income tax (not applicable)

Planning: Understand state-specific treatment of federal provisions

PTE/PTET Elections

SALT Cap Workaround:

  • Pass-through entity elective tax
  • Bypass $10,000 federal SALT limitation
  • Available in 30+ states

OBBBA Impact: Made this workaround more valuable by making QBI permanent

Strategic Planning Timeline

Immediate (2025)

  • Maximize equipment purchases with 100% bonus
  • Implement cost segregation studies
  • Review business entity structures
  • Plan gift and estate strategies

Short-Term (2025-2027)

  • Multi-year income and deduction planning
  • Roth conversion strategies
  • Business succession implementation
  • Real estate portfolio optimization

Long-Term (2027+)

  • Monitor legislative developments
  • Adjust strategies based on any changes
  • Continue leveraging permanent provisions
  • Build wealth within stable tax framework

Frequently Asked Questions

Q: Are these tax provisions truly permanent?

A: The OBBBA made several provisions permanent, including 100% bonus depreciation and QBI deduction. However, Congress can always change tax law in the future.

Q: How does this affect estate planning strategies?

A: Current estate exemptions maintained. Continue using available strategies (GRATs, SLATs, dynasty trusts) while exemptions remain high.

Q: Should I accelerate business equipment purchases?

A: Yes! 100% bonus depreciation provides immediate deductions. Coordinate with business needs and cash flow, but tax benefits are substantial.

Q: Do these provisions affect individuals or just businesses?

A: Both! Individuals benefit from maintained capital gains rates, estate provisions, and energy credits. Business owners benefit from depreciation and QBI enhancements.

Q: What's the single most important action to take?

A: For businesses: Implement cost segregation and maximize depreciation benefits. For high-net-worth: Use estate planning strategies while current exemptions remain.

For a quick cost segregation estimate, try Modern CFO's free calculator. For the One Big Beautiful Bill Act's impact on cost segregation, see Modern CFO's complete OBBBA guide.

The One Big Beautiful Bill Act creates significant planning opportunities. Work with qualified tax and legal professionals to implement strategies appropriate for your situation.

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