The One Big Beautiful Bill Act: Key Planning Opportunities for Your Business and Family

As part of our commitment to keeping you informed, we want to share an important update on the "One Big Beautiful Bill Act" (OBBBA), which was recently signed into law on July 4, 2025. This new legislation replaces the tax rules that were set to expire and introduces significant changes that will impact financial planning for years to come.

Quick Summary for Business Owners & Self-Employed Professionals:

For our business owner clients, the new law is overwhelmingly positive. Key tax advantages like the 20% Qualified Business Income (QBI) deduction have been made permanent, and the ability to bypass the individual SALT cap through programs like New Jersey's PTE/BAIT has been preserved. Additionally, the law brings back and enhances powerful deductions, including 100% bonus depreciation and significantly higher limits for Section 179 expensing.

Quick Summary for Individuals and Families:

For personal financial planning, this law provides more long-term certainty. The lower individual income tax rates are now permanent, and the federal estate and gift tax exemption has been permanently increased to $15 million per person ($30 million for a married couple). The cap on the State and Local Tax (SALT) deduction is also temporarily increased to $40,000. Finally, the law introduces new savings tools like "Trump Accounts" for children and makes 529 plans more flexible, but also introduces significant new borrowing limits for future federal student loans.

The Deeper Dive:

OBBA is a huge piece of legislation at 870 pages long. Earlier this month, I attended a two hour presentation on the changes and that still wasn’t enough time to cover just the most important updates. Below is a summary tailored to the areas of greatest interest to our clients. Each Fall, we hold an in-depth tax planning meeting for all of our Wrought Roadmap clients where we’ll have a personalized discussion about how the bill affects their finances and our recommendations.

Key Changes for Business Owners & Self-Employed Professionals

This new law brings significant and permanent updates for pass-through businesses (like S-corps, partnerships, and sole proprietorships).

• Qualified Business Income (QBI) Deduction Made Permanent: The 20% QBI deduction (also known as the Section 199A deduction) has been made permanent. Additionally, the income phase-out ranges have been increased, meaning more business owners may be able to take the full deduction.
• State and Local Tax (SALT) Deduction for Pass-Through Entities: In a major development, the final version of the law does not include any restrictions on programs like New Jersey’s Pass-Through Business Alternative Income Tax (PTE/BAIT). This allows business owners to continue to effectively bypass the individual SALT deduction cap by paying state taxes at the entity level, a significant advantage we can continue to plan for.
• Full Expensing for U.S. Research Expenses: The law permanently allows for the 100% expensing of research and experimental (R&E) costs incurred for research in the U.S.. Businesses can even retroactively elect this treatment for expenditures from 2021-2024.
• Enhanced Small Business (Sec. 179) Expensing: The maximum amount a business can expense for qualifying equipment under Section 179 has been significantly increased to $2.5 million, with the phase-out threshold increased to $4 million.
• 100% Bonus Depreciation Permanently Restored: The ability for businesses to take 100% bonus depreciation on qualifying property has been permanently restored for property placed in service after January 19, 2025. This is a powerful deduction when combined with Sec 179 expensing.

Key Changes for Individuals and Families

Here are some of the most significant changes that will affect your personal financial planning:

• Income Tax Rates Made Permanent: The lower individual income tax rates that were set to expire after 2025 have been made permanent. The seven tax brackets of 10%, 12%, 22%, 24%, 32%, 35%, and 37% will remain and continue to be adjusted for inflation.
• Increased SALT Cap (Temporary): The cap on the State and Local Tax (SALT) deduction has been temporarily increased from $10,000 to $40,000 starting in 2025 and will revert to $10,000 in 2030. This deduction is phased out for those with modified adjusted gross income (MAGI) between $500,000 and $600,000. This effectively creates a nearly 45% marginal tax rate on income earned between $500,000 to $600,000. Tax planning for this issue will be especially important.
• Estate and Gift Tax Exemption Increased to $15 Million: The federal estate and gift tax exemption has been increased to $15 million per person ($30 million for a married couple) and made permanent, with inflation adjustments starting in 2026. This is a crucial development for long-term family wealth transfer planning.
• New "Trump Accounts" for Children: The law establishes a new type of tax-preferred savings account for individuals under 18, which can be opened without an earned income requirement. A pilot program will also provide a one-time $1,000 government credit into an account for eligible children born between 2025 and 2027. More information will be released by the government over the coming year
• Expanded Use of 529 Plans: The definition of qualified expenses for 529 plans has been expanded to include costs for K-12 curriculum materials and postsecondary credentialing programs (like exams and continuing education for professional credentials).
• New Deduction for Seniors Age 65+ (Temporary): A temporary deduction of $6,000 per person ($12,000 for a married couple) has been added for individuals age 65 and older from 2025 through 2028 though the deduction will phase out starting at $150,000 of joint income.
• Significant Changes to Federal Student Loans: 
  • For current borrowers: There are significant changes to income driven repayment plans, for Parent Plus borrowers there is a significant July 2026 deadline to begin an income-driven repayment plan, public service loan forgiveness remains as is for now
  • For future borrowers: The new law introduces significant reductions in the amount of federal student loans that can be borrowed.
    • Parent PLUS Loans: Capped at $20,000 per child per year and a $65,000 lifetime cap per child
    • Graduate Students: An annual limit of $20,500 and a lifetime cap of $100,000.
    • Professional Students: (e.g., law, medical): an annual limit of $50,000 and a lifetime cap of $200,000
• The Federal Government is dramatically reducing its role in financing college education, and private borrowing is likely to fill the gap.

What This Means for Your Planning

This new legislation creates a more complex but opportunity-rich environment for tax planning. The permanence of many provisions gives us more certainty for long-term strategies, while the new deductions and rules for business owners provide significant avenues to optimize your financial picture.

We will be reviewing all of our client’s specific situations in light of these new laws and will be prepared to discuss potential adjustments and strategies at our Fall meeting.

As always, if you have any immediate questions, please do not hesitate to reach out.

_{This information is not a solicitation for or offering of any investment, product, or service to any person in any jurisdiction or country in which such solicitation or offering would be unlawful. This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular by Wrought Financial Planning LLC. Only an investor and their financial professional know enough about their circumstances to make an investment decision. This material is strictly for illustrative, educational, or informational purposes and is subject to change.}