OBBBA Planning Tips for High Earners

The One Big Beautiful Bill Act (OBBBA): Navigating the New Tax Landscape for High Earners

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The One Big Beautiful Bill Act (OBBBA), passed in 2025, has introduced significant tax changes. If you’re a high earner, understanding these changes is crucial for effective financial planning.

Key Changes

Tax Brackets Remain Stable

The tax brackets have been set at 10% to 37% permanently. This stability provides a clearer picture for financial planning.

Increased Standard Deduction

The standard deduction has risen to $31,500 for married couples in 2025. This increase can lead to significant tax savings.

SALT Cap Adjustment

The State and Local Tax (SALT) cap has increased to $40,000. However, this cap phases out for very high incomes, so planning is essential.

Expanded Estate and Gift Exemption

Starting in 2026, the estate and gift exemption will expand to $15 million per person. This change allows for more substantial wealth transfers.

Changes in Charitable Giving Rules

New rules may reduce deductions for top earners. It's essential to strategize your charitable contributions to maximize benefits.

Extended Business Benefits

The act has made 100% bonus depreciation and more generous interest deductions permanent. This extension can significantly impact business planning.

Smart Moves for High Earners

Maximize Deductions

Consider prepaying state and local taxes. Additionally, think about increasing your charitable contributions now to take advantage of current rules.

Plan Wealth Transfers

With the larger exemption, now is the time to gift or set up trusts before 2026. This proactive approach can help secure your legacy.

Review Your Business Strategy

Make capital investments to capture full depreciation benefits. Rethink your financing strategies with the new interest deductions in mind.

Adjust Charitable Giving Approaches

Explore donor-advised funds or trusts. These options can help you make the most of the current charitable giving rules.

Prepare for Future Changes

The built-in flexibility provisions are temporary. Ensure you have a plan in place to adapt if laws change again.

The Importance of Financial Clarity

In today's complex financial landscape, achieving clarity is vital. The OBBBA locks in stability but also sets new limits. By acting early, you can preserve wealth, reduce taxes, and prepare for the future under these updated rules.

Conclusion

Navigating the changes brought by the OBBBA requires strategic planning. By understanding the new tax landscape, you can make informed decisions that align with your financial goals. Remember, the key to success lies in proactive planning and adaptability.