The new spending and tax law known as the One Big Beautiful Bill Act (OBBBA) extends and makes permanent some important tax provisions impacting family offices and their stakeholders. The law also provides more certainty for tax planning, with no scheduled sunsets on the horizon.
Permanency for much of current law
At the heart of the OBBBA — and the true driver of the legislation promised by President Donald Trump and crafted by congressional Republicans — is maintaining the tax rate cuts for individuals that were implemented in 2017’s Tax Cuts and Jobs Act (TCJA) and set to expire at the end of this year.
The new law makes permanent the current individual tax rates and brackets, a higher standard deduction, and an enhanced child tax credit. Although President Donald Trump proposed during the legislative process that the pre-TCJA top rate of 39.6% be revived for individuals earning more than $2.5 million or joint filers earning more than $5 million, congressional GOP leaders and tax writers rebuffed this idea, and the top rate remains 37%.
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 reset 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.
Modifications for itemizers
Under the TCJA, the itemized deduction allowed for qualified cash charitable contributions was generally increased from 50% of AGI to 60%, and the OBBBA permanently maintains that level. However, beginning in 2026, the charitable giving itemized deduction will be subject to a floor of 0.5% of AGI. Disallowed contributions under the floor can be carried forward for up to five years, but only from years in which the taxpayer exceeds the charitable contribution limitation.
Both the allowance for miscellaneous itemized deductions (with exceptions for educators’ expenses) and the "Pease" limitation have been permanently repealed, but the latter has been replaced by a new overall limitation on the tax benefit of itemized deductions, which caps the value of each dollar of otherwise allowable itemized deductions at 35 cents for individuals in the 37% tax bracket.
Grant Thornton Insight:
Many family offices are disproportionately impacted by the repeal of miscellaneous itemized deductions. Family offices should revisit how they are handling investment expenses and the impact of the OBBBA. Also, consideration should be given to stacking charitable deductions in a single year to exceed the applicable AGI limitation so that the 0.5% floor amount can be carried forward with the excess amount.
A mixed bag for the state and local tax deduction
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. Beginning in 2030, though, the cap is set to fall back to $10,000, with no annual inflation adjustment.
For tax years 2025–2029, 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 at $600,000 for most taxpayers ($250,000 to $300,000 for married filing separately). These levels also are subject to a 1% annual increase during those years.
While both the original House-passed version of the OBBBA and the initial Senate proposal would have substantially limited the utility of state-enacted pass-through entity tax (PTET) regimes — by subjecting them to SALT cap rules in broad and incredibly complicated ways — the final bill dropped all such provisions. This includes a proposal that would have restricted the SALT deduction for certain specified service trades or businesses (SSTBs), and no changes were made to the use of state workarounds.
Grant Thornton Insight:
The increase in the SALT deduction, its corresponding income limit, and the continued allowance of state PTET regimes may be reason for family offices to revisit their operating structure to ensure they are able to take advantage of state PTET regimes where they are available and the SALT deduction would otherwise be limited for the ultimate owners.
Benefits for passthrough entities and small business investors
One of the most significant outcomes of the OBBBA was making permanent the 20% Section 199A qualified business income (QBI) deduction, introduced in the TCJA for certain passthrough entities.
The OBBBA also expands the qualified small business stock (QSBS) capital gains exclusion under Section 1202, which has historically provided significant benefits to owners of small businesses. For qualified stock issued after July 4, 2025, taxpayers may exclude up to 50% of the gain from the sale of QSBS held for longer than three years, 75% of the gain from holdings longer than four years, and 100% of the gain from holdings longer than five years.
These requirements are a change from previous holding period requirements, which were based on the date of stock issuance. Additionally, the new law increases the base limitation from $10 million to $15 million, and this amount will be indexed for inflation in tax years after 2026.
Grant Thornton Insight:
Given the increased limit on the QSBS exclusion and modified holding requirements, it is more critical than ever for family offices to analyze the qualification of their investments for Section 1202 treatment. In addition, family offices should revisit the Section 199A deduction taken by their stakeholders and look for opportunities to maximize the allowable deduction.
Qualified opportunity zones renewed, with greater emphasis on rural areas
Capital gains benefits for investments in designated opportunity zones (OZs), a relatively new program created in the TCJA — will be made permanent, with some modifications. In addition to the previous benefits, 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 in rural OZs. States can begin to designate new OZs beginning July 1, 2026.
Grant Thornton Insight:
With the extension and expansion of the qualified OZ tax provision, family offices now have another permanent option in their toolkit for deferring capital gains tax and should consider this planning strategy around significant liquidity events.
Broader business provisions may be relevant
The so-called “big three” business provisions from TCJA that have been the focus of advocacy efforts for several years were all included in some form in the final bill and made permanent. This includes a restoration of full expensing, or 100% bonus depreciation, for eligible property acquired after Jan. 19, 2025; a return to expensing for domestic research and experimentation expenditures; and a revival of the use of EBITDA for calculating the limitation of business interest expense under Section 163(j).
The law also includes a new full expensing allowance for qualified production property, which includes certain nonresidential real property. Further details on these provisions and others more broadly applicable to businesses can be found in our July 8 Tax Legislative Update or by reaching out to your Grant Thornton tax advisor.
Grant Thornton Insight:
The business provisions in the OBBBA are generating significant and immediate tax savings for taxpayers, and family offices with ownership and control of active ongoing businesses have the best opportunities to take advantage of these provisions.
New era of certainty for estate planning
Beginning in 2026, the federal estate and gift tax exemption will rise to $15 million per individual and $30 million for joint filers, indexed for inflation and without a sunset provision. This permanence provides increased planning certainty.
Grant Thornton Insight:
Increased certainty of the higher threshold enables more strategic, and especially long-term, planning. With no year-end estate tax exemption cliff, the focus for many will expand to optimizing the federal and state income tax aspects of an overall estate plan. Strategies that predominately focus on federal income tax planning should consider ancillary consequences such as transfer taxes, anti-avoidance laws and potential state law variations.
For more than 100 years, Grant Thornton has provided tax, audit and advisory services to family offices, their owners and the businesses they operate. Our team has the skills, experience and resources to be a strategic partner to family offices, wherever they are in their lifecycle.
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