On July 4, 2025, the 2025 Tax Act (formerly known as the One Big Beautiful Bill) was signed into law and will become effective as of January 1, 2026. The 2025 Tax Act has a significant impact on all taxpayers regardless of income or assets.
Estate, Gift and Generation Skipping Transfer Tax
The estate, gift and Generation Skipping Transfer (“GST”) tax exemptions were all increased to $15m ($30m for a married couple) indexed for inflation. This new exemption provides clarity for taxpayers concerned about the upcoming sunset of the temporarily historically high exemption amounts provided by the 2017 Tax Cuts and Jobs Act (“TCJA”).
For clients who previously used their full exemption amounts, this new law provides opportunities for future gifting as the exemptions are indexed for inflation and will continue to increase each year.
Income Tax
Although the 2025 Tax Act creates many changes beyond those listed below, we have highlighted the following changes which may be of greater interest to clients.
- Lower Tax Rates. The 2025 Tax Act makes the lower tax rates introduced in the TCJA permanent (tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% for individuals) and all tax brackets will be indexed for inflation.
- Increased standard deduction. Taxpayers will be able to use a higher standard deduction: $31,500 for married couples filing jointly ($15,750 for single filers) indexed for inflation.
- Increased child tax credit. Taxpayers will be entitled to $2,200/child credit phased out when a married couple’s modified gross income (“MAGI”) exceeds $400,000 ($200,000 for single filers).
- Increased income tax deduction for charitable contributions. Taxpayers who do not itemize their deductions and take the standard deduction will be able to deduct $2,000 for married couples ($1,000 for single filers) for cash contributions to charitable organizations.
- Increased amount for Dependent Care Flexible Spending Accounts (FSAs). The amount of pre-taxed income taxpayers can elect to contribute to a Dependent Care FSA increased to $7,500.
- Increased State and Local Tax (“SALT”) deduction cap. The SALT deduction cap is temporarily increased from $10,000 to $40,000 increased annually by 1% from 2025-2029. This increased deduction will be gradually reduced once a married couple’s MAGI exceed $500,000 to $10,000 when the couple’s MAGI exceed $600,000. The deduction cap is not permanent and returns to $10,000 in 2030.
- Trump Accounts. Trump Accounts are introduced as a new child savings accounts. Taxpayers can contribute post-tax dollars (limit of $5,000/year) to the accounts and the growth on the accounts would be income tax-deferred. These accounts are intended to be used by the children for whom they are created after age 18. Children born between 2025 – 2028 will be automatically enrolled and the Treasury will provide $1,000 to each child’s account.
- Clean Energy Credits Phased Out. Many tax credits that were available under the prior laws are accelerated to expire at the end of 2025. For example, taxpayers will no longer be able to use clean energy credits for electric vehicles acquired after September 30, 2025 and solar panels/heat pumps installed after December 31, 2025.
- Permanent benefit of Qualified Opportunity Zones. Taxpayers can defer recognition of capital gains by investing in Qualified Opportunity Zones (“QOZs”) which are identified as low income or distressed areas. This planning opportunity was set to expire at the end of 2026.
Small Business Owners
- Qualified Small Business Stock (Section 1202) gain exclusion increased. Taxpayers who own and then sell qualified small business stock (“QSBS”) will be able to exclude a higher amount of gain ($15m per taxpayer). The definition of small business also increased to a company with gross assets under $75m indexed for inflation. Additionally, the 2025 Tax Act introduces a new tiered gain exclusion percentage concept based on the taxpayer’s holding period of the QSBS: 50% for 3 years, 75% for 4 years, and 100% for 5 years.
The attorneys at Wilchins Cosentino & Novins are happy to answer specific questions regarding how the 2025 Tax Act may affect you, your existing estate plan, and what new opportunities the Act may present for you, your family and your business.
Learn more about Attorney John Donahue and our Private Client Services practice.