New tax law presents major individual planning opportunities

The new spending and tax law known as the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, keeps individual tax rates and important deductions in place, with significant tweaks. Here are new areas of long-term certainty for individual taxpayers to plan around.

New era of certainty for estate planning

Beginning in 2026, the federal estate and gift tax exemption will rise to $15 million per individual ($30 million for joint filers), indexed for inflation and—critically—without a sunset provision. This permanence provides a rare window of planning certainty.

Alternative minimum tax

The TCJA’s higher alternative minimum tax (AMT) exemptions were made permanent in the new law, at 2018 levels indexed for inflation. (The 2025 exemptions are $88,100 for individuals, $137,000 for joint filers and $68,500 for married filing separately.)

However, the exemption phaseout thresholds will be re-set in 2026 to 2018’s levels of $500,000 for individuals and $1 million for joint filers (from 2025’s $626,350 and $1,252,700, respectively) and then indexed for inflation in future years. In addition, the exemption will phase out twice as quickly as it did previously, increasing from 25% to 50% of the amount by which a taxpayer’s income exceeds the phaseout threshold.

Section 199A

One of the most significant outcomes of the law was making the Section 199A qualified business income deduction (QBI) permanent. The deduction stays at 20%, though there’s some increased benefit at the income floor for claiming the deduction. The limitation phase-in will increase in 2026 to $75,000 for individuals and $150,000 for joint filers.

Increased qualified small business stock exclusion

The OBBBA also expands the qualified small business stock capital gains exclusion from a base limitation of $10 million to $15 million, with inflation indexing after 2026. Additionally, the law makes modifications to the holding period requirements.

Trump campaign promises and TCJA extension: individual tax rates and deductions 

OBBBA makes current tax rates permanent, with modest adjustments to the 10% and 12% brackets. Several new above-the-line deductions aim to support seniors and working-class taxpayers. The law includes versions of several new individual policies, aimed at fulfilling promises President Trump made during his presidential campaign — no taxes on tips, overtime, Social Security payments, or car loan interest.

• Senior deduction: $6,000 per individual (65+), phased out beginning at $75,000 of modified adjusted income for single filers and $150,000 for joint filers.
• Tip income deduction: Up to $25,000, phased out at $150,000 MAGI for single filers, $300,000 MAGI for joint filers.
• Overtime deduction: Up to $12,500 for single filers, $25,000 for joint filers, phased out at $150,000 MAGI for single filers and $300,000 for joint filers MAGI.
• The auto loan interest deduction is capped at $10,000 and begins phasing out at $100,000 adjusted gross income in both cases, with full phaseout at $150,000 for single filers ($250,000 for joint filers). 

Deduction limitations

The OBBBA permanently repeals most below-the-line itemized deductions, with an exception for educator expenses.

For taxpayers in the top income bracket, the "Pease" limitation is permanently repealed but replaced with new overall limitation on the tax benefit of itemized deductions. Starting in 2026, the value of each dollar of otherwise allowable itemized deductions is capped at 35 cents for individuals paying a 37% marginal income tax rate.

The mortgage interest deduction cap was set permanently at interest payments on up to $750,000 of mortgage debt (excluding home equity lines of credit (HELOCs)) for debt incurred after Dec. 15, 2017. The grandfathering of more interest eligible under the pre-TCJA, larger cap ($1 million) still applies for debt incurred prior to that date. 

The charitable deduction loses value for some taxpayers under the OBBBA starting in 2026. For those who itemize the deduction, instead of taking the now-permanently increased standard deduction, there is a 0.5% adjusted gross income floor before charitable contributions can be deducted. For itemizers the cash contribution limit of 60% of AGI is also made permanent, up from 50% pre-TCJA. A permanent above-the-line charitable contribution deduction for non-itemizers is set at $1,000 for single filers and $2,000 for joint filers.  

Childcare and savings

The law creates a new type of IRA specifically for children, with a pilot program seeding accounts with $1,000 for U.S. citizens born between Jan. 1, 2025, and Dec. 31, 2028. Contributions from most taxable entities are capped at $5,000 per year, while employers of the child’s parents can contribute up to $2,500 per year towards that cap. (Both limits are indexed for inflation beginning in 2027.) The funds will be placed into a bank-managed account and must be invested in qualified index tracking funds until the beneficiary is 18, when the funds can first be withdrawn.

The child tax credit was also permanently increased to $2,200 per child, with a phaseout beginning at an increased income threshold of $200,000 for single filers and $400,000 for joint filers; and a $500 nonrefundable credit is granted for each dependent other than a qualifying child of 17 or under. Under the child tax credit, up to $1,700 is refundable beginning in 2025.

In addition, multiple tax advantages for employer-related care benefits were enhanced by the law:

• Paid family and medical leave (FML) credit – For taxable years beginning after Dec. 31, 2025, the credit is expanded to be based on an applicable percentage of wages paid to employees on FML or total premiums paid by the employer for insurance related to providing paid FML.
• Employer-provided childcare credit – For taxable years beginning after Dec. 31, 2025, the new law increases the percentage of qualified childcare expenditures eligible for the credit to 40% (50% for eligible small businesses) and the annual maximum credit amount to $500,000 ($600,000 for eligible small businesses), with further inflation adjusted increases.
• Dependent care assistance programs – Beginning in 2026, the OBBBA increases the annual amount excludible from income under an employer-provided dependent care assistance program from $5,000 to $7,500 (or $3,750 when married filing separately).

State and local taxes (SALT)

In a fiercely negotiated deal for its members from high-tax districts, congressional Republicans agreed to increase the SALT deduction cap from the TCJA’s $10,000 to $40,000 in 2025 ($20,000 for married filing separately), with a 1% increase in the cap on an annual basis through 2029. In 2030, the cap will revert to $10,000, with no inflation adjustment or income phasedown. This temporary expansion occurred despite most Republicans opposing the expansion, if not the SALT deduction itself, but needed every possible vote from their narrow majorities in the House and Senate.

A phasedown of the deduction will begin at a modified adjusted gross income (MAGI) of $500,000 for single and joint filers, with a full phaseout to a $10,000 floor in effect at MAGI of $600,000 ($250,000 to $300,000 for married filing separately). 

Qualified opportunity zones renewed, with greater emphasis for rural areas

Capital gains benefits for investments in designated opportunity zones (OZs), a program created in the TCJA, will be continued, with some modifications.

In addition to the previous capital gains benefits from the TCJA, starting Jan. 1, 2027, investors in OZ projects will have a 10% step-up in basis for investments held in an OZ fund for at least five years, with a 30% step-up in basis for investments into rural OZs. States can designate new OZs beginning July 1, 2026.

Like many previously temporary items originally set within the TCJA, the program was also extended on a permanent basis. 

Energy credits

The tax credits for personal and commercial electric vehicles are terminated on Sept. 30, 2025, by the OBBBA. However, the 30C alternative fuel vehicle refueling property credit, which applies to EV vehicle chargers, will continue for property placed into service before July 1, 2026.

Home improvement-related energy efficiency credits (25C & 25D) will now terminate at the end of this year, instead of the early 2030s (prior expiration dates varied).

Tax on remittances

The OBBBA created a new 1% on certain remittance transfers. Beginning in calendar year 2026, all remittances using cash, money order, cashier’s check or similar financial instrument will be subject to the tax. Transfers from U.S. bank accounts or using U.S. credit or debit cards are exempt.