By: Jake Gensemer
On Independence Day, July 4th, 2025, the United States Congress passed the One Big Beautiful Bill Act (OBBBA): a sweeping piece of legislation that lives up to its name in size (it’s Big). This comprehensive law touches nearly every corner of domestic policy, from reshaping income tax brackets and adjusting the child tax credit, to dramatically shortening clean energy incentives that were previously expanded under the Inflation Reduction Act. These extensive and convoluted alterations have tax implications for many people in the United States. This blog post breaks down some of the biggest changes that could have an impact on your taxes in the upcoming years.
Deduction Changes
Deductible expenses are expenses that meet specific criteria outlined by the IRS such as State and Local Taxes, Home Mortgage Interest, and Charitable Contributions. These expenses can be subtracted from your adjusted gross income to reduce your taxable income.
If the sum of your itemized expenses is less than the standard deduction, you can elect to take the standard deduction amount from your adjusted gross income to get your taxable income. This standard deduction that taxpayers can elect to take has increased slightly for most taxpayers.
If you itemize, there are several noticeable changes that should be considered. Most noticeably, the changes to the State and Local Tax (SALT) deduction cap, which increased in 2025 to $40,000 from $10,000, with a phaseout back down to a $10,000 cap between $500k – $600k in adjusted gross income. The $40,000 cap is set to increase by 1% from 2026-2029 and will revert to $10,000 in 2030. This could have a large impact on tax bills in high tax states, such as California and New York.
For example, let’s look at Jessie, a 43-year-old single filer in California with under $300k in income. She pays over $40k in state and local taxes (including her California income and property taxes). Last year she decided not to itemize, because the $10k cap on the SALT deduction was less than the standard deduction. This year, with the OBBBA, she could deduct the full $40k from her adjusted gross income because the SALT deduction of $40k added up to more than the $15,750 standard deduction. Jessie will decide to itemize this year and will have greater tax savings with these new changes.
Estate and Gift Tax Exemption
For inheritors like our clients, the most impactful change is likely the increase in the Estate/Gift tax exemption. Before the OBBBA, this number was almost $14 million per US citizen and was set to decrease substantially in 2026. Now, under federal law, estates under $15 million will not be taxable, or $15 million can be gifted in a lifetime without incurring a gift tax. In addition to the $15 million gift or estate exemption, anyone may give up to $19,000 per person per year without touching their lifetime cap. For families, this can be a simple way to pass on financial capital gradually, while staying tax efficient.
Consider Robert’s situation. Robert was a successful lawyer who built his own $5 million estate. Recently, he inherited an additional $10 million from his parents. Under last year’s rules, his $15 million estate would have exceeded the ~$14 million federal estate tax exemption in 2024. This meant filing the complex federal estate tax return and facing nearly $400,000 in tax liability. After the One Big Beautiful Bill, however, Robert’s estate falls just under the new $15 million exemption. While he would still be required to file an estate tax return, his estate would owe no federal estate tax. This allows him to pass on his wealth to his children, estate-tax free. Robert’s experience highlights just how impactful these new rules can be for inheritors. Tax law is constantly changing, so being aware of the most current regulations would prevent unnecessary surprises when it comes to tax time.
Now may be a good time to evaluate your estate plan, gifting strategy, and investment approach to ensure your financial resources are protected and continue to grow for future generations. At The Wealth Conservancy, your Boulder wealth-management firm, we work with your CPA in helping inheritors navigate complex tax laws so that your wealth is preserved and your legacy protected. Contact us today to discuss how these updates may affect your plan.
Disclaimer: The events and characters in this article are based on real people and occurrences, but certain details have been altered or fictionalized to protect privacy and maintain confidentiality. Any resemblance to actual persons or events is unintentional and purely coincidental.