To do in 2025 and 2026
THE ONE BIG Beautiful Bill Act (OBBBA), passed in 2025, is one of the most wide-ranging tax laws in years. For relatively high earners, the law creates planning opportunities, introduces new limits, and changes the value of certain deductions you may be used to taking. Perhaps most importantly, the tax changes do not all take effect at the same time. Some begin in 2025, while several bigger shifts start on January 1, 2026. That opens the opportunity to save but you need to plan ahead for the full effect.
What Changes in 2025
The 2025 tax year is the first full year affected by the OBBBA, and a few important updates start immediately.
Higher Standard Deduction (Now Permanent)
OBBBA permanently raises the standard deduction beginning in 2025. Although many high-income taxpayers itemize, the larger standard deduction is now big enough that it’s worth comparing the two options instead of assuming itemizing is best. In some cases, especially for married filers with relatively modest deductible expenses, the standard deduction may simplify things and lower your tax bill.
Planning move: Run a 2025 projection comparing itemizing versus taking the standard deduction. With 2026 bringing limits on how valuable itemized deductions can be for those in the top bracket, it’s smart to understand your baseline now.
Much Higher 2025 SALT Cap (With Phaseouts)
State and local taxes (SALT) have been a major pain point since the $10,000 limit went into effect years ago. For 2025, OBBBA boosts that cap to $40,000, which can offer meaningful relief to homeowners and high-income taxpayers. However, there is a catch: high-income households see a phaseout of this benefit based on modified adjusted gross income.
Planning move: Estimate your 2025 property taxes and state income taxes to see how much of the higher cap you can actually use. If you are near a phaseout threshold, adjusting income timing—such as deferring bonuses— might preserve some of the SALT benefit.
New Senior Deduction (If You’re 65+) Starting in 2025, taxpayers age 65 or older may claim a new $6,000 deduction, subject to income phaseouts that many high-income households should review carefully.
Planning move: If you or your spouse is 65 or older, incorporate this deduction into your estimated tax payments for 2025.
Charitable Giving: Consider Front-Loading in 2025
Because OBBBA changes how itemized deductions work in 2026 (especially for top-bracket taxpayers), some households may get more value from contributions made in 2025 than in later years.
Planning move: If you make large charitable gifts, talk to your advisor about “bunching” charitable contributions into 2025. It might be to your benefit to setup a DonorAdvised Fund this year and get it funded. This may help you maximize the deduction before 2026’s new limits reduce its impact.
Get Ready for Bigger Estate and Gift Changes in 2026 While the estate tax exemption doesn’t increase until 2026, 2025 is the year to plan. The exemption will jump to $15 million per person, giving wealthy households more room to transfer assets tax-free.
Planning move: Use 2025 to update trusts, gifting plans, and coordinated strategies among family members.
Check Your AMT Exposure
Alternative Minimum Tax rules remain taxpayer-friendly in 2025 but grow tougher in 2026. Knowing ahead of time whether you’re approaching AMT territory can help you manage timing of capital gains, deductions, and business income.
Prepare for 199A Deduction Expansion (Starts in 2026)
If you own a pass-through business (like an LLC or S-Corp) or receive qualified business income, note that the deduction increases from 20% to 23% in 2026.
Planning move: Use 2025 to model how your business income should be structured— salary distributions, guaranteed payments, or capital allocations—so you’re positioned to capture the expanded deduction.
What Changes in 2026
The biggest transformation arrives in 2026. These shifts can reduce the long-term value of deductions, change the rules around business income, and reshape charitable giving strategies.
Estate and Gift Tax Exemption Increases Sharply
Beginning January 1, 2026, the lifetime exemption for estate and gift taxes rises to $15 million per person, indexed for inflation. This allows high-net-worth taxpayers to transfer larger pools of wealth during their lifetimes or at death without incurring federal estate tax.
Planning move: If you’ve been waiting for a favorable estate-planning window, 2026 anticipates significant changes. Consider large lifetime gifts, spousal trusts, or family wealth transfer structures.
New Caps on Itemized Deductions for High-Income Taxpayers
Starting in 2026, taxpayers in the top tax bracket face a new limit: itemized deductions can reduce tax only down to the equivalent of the 35% bracket. This means high-income filers may not get full value from certain deductions they’re used to.
Additionally:
- Charitable contributions only count above 0.5% of AGI.
- The 60% of AGI limit on charitable cash gifts becomes permanent.
Planning move: Re-evaluate your itemizing strategy. Some deductions, even sizable ones, may have less impact in 2026.
New Above-the-Line Charitable Deduction
For tax years starting in 2026, even taxpayers who do not itemize may deduct up to:
- $1,000 if single
- $2,000 if married filing jointly
This does not replace larger charitable strategies, but it offers a modest benefit to households using the standard deduction.
199A Deduction Becomes More Generous
In addition to the increase to 23%, the definition of qualifying income expands, and the income thresholds at which limits kick in are raised. This helps some high-income passthrough business owners capture more of the deduction.
Planning move: If you have business income, review your compensation structure to optimize your deduction for 2026 and beyond.
Mortgage Insurance Premiums Become Deductible
Beginning in 2026, mortgage insurance premiums count as qualified residence interest. For high-income households with large mortgages or recent refinances, this may slightly shift the balance between itemizing and taking the standard deduction.
QSBS (Qualified Small Business Stock) Becomes More Attractive
For stock issued after July 4, 2025, the capital-gains exclusion rises to $15 million and the required holding period shortens to three years. Investing in startups can lead to potential opportunities in your portfolio.
AMT Thresholds Shrink
2026’s AMT rules hit high-income households more easily. If you have substantial deductions or capital gains, AMT planning becomes more important.
Putting It All Together
The takeaway:
2025 is a year for positioning, while 2026 is a year for applying the new rules.
For high-income households, timing really matters. Strategic decisions about charitable giving, deductions, business income, estate planning, and mortgage structure can significantly change your tax outcome over the next two years. Working with a CPA or advisor to model 2025 and 2026 side-by-side is one of the smartest moves you can make.