The One Big Beautiful Bill Act: 5 key items for individual taxpayers

2. State and local tax (SALT) cap and pass-through entity tax (PTET) election

The TCJA imposed a $10,000 cap ($5,000 married filing separately) on the deduction for SALT for individuals, including property and income taxes, expiring after 2025. In response, many states introduced PTET regimes allowing pass-through entities to pay state taxes at the entity level, effectively bypassing the SALT cap for owners.

The OBBBA increases the SALT deduction cap to $40,000 ($20,000 married filing separately), indexed for inflation through tax year 2029, after which the limitation would revert to $10,000 ($5,000 married filing separately).

The limitation is phased down for taxpayers with modified gross income over $500,000—under this phasedown, the $40,000 limitation is reduced by 30% of the excess modified adjusted gross income over the threshold amount, not to be reduced below $10,000.

Crucially, the final legislation preserves the full PTET deductibility for all pass-through entities, including specified service trades or businesses (SSTBs), such as law, health care, accounting, and investment management firms. This marks a departure from a preliminary proposal approved by the House of Representatives that would have excluded SSTBs from PTET benefits.

3. Itemized deductions and charitable contributions

Under the TCJA, many individuals stopped itemizing deductions due to the increased standard deduction and new limitations on SALT and mortgage interest deductions. The TCJA also suspended miscellaneous itemized deductions and raised the adjusted gross income (AGI) limit for charitable contributions of cash from 50% to 60%. Those provisions were set to expire after 2025.

The OBBBA makes several permanent changes to itemized deductions and charitable contribution rules, building on and modifying provisions introduced under the TCJA.

The bill permanently increases the standard deduction, setting it at $15,750 for single filers, $23,625 for heads of household, and $31,500 for joint filers, with inflation adjustments beginning in 2026.

Additionally, the OBBBA:

• Permanently eliminates miscellaneous itemized deductions, except for expansion of itemized deductions for educator expenses
• Simplifies the overall limitation on itemized deductions for high earners
• Reinstates a partial charitable deduction for non-itemizers of up to $1,000 (or $2,000 for married couples filing jointly) starting in 2026
• Limits charitable deductions for itemizers to the extent they exceed 0.5% of AGI, with carryforwards allowed only if the taxpayer has charitable carryforwards from the same year
• Makes permanent the 60% AGI limitation for cash contributions to public charities
• Permanently eliminates personal exemptions.
• Introduces a temporary $6,000 senior deduction for qualified individuals over age 65, with phaseouts beginning at $75,000 modified AGI ($150,000 for joint filers).

4. Qualified small business stock (QSBS) section 1202 expansion

The QSBS exclusion under the status quo allowed eligible investors to exclude up to 100% of capital gains on the sale of certain stock held for more than five years, subject to limits, such as the $10 million per-issuer cap and a $50 million gross asset test. The TCJA made no changes to the QSBS exclusion.

The OBBBA however, introduces significant enhancements to the QSBS exclusion, mainly the following three changes expanding the benefit and scope of section 1202, applicable to QSBS issued after July 4, 2025:

• Provides a tiered exclusion: Allows taxpayers that have held stock in a qualified company a reduced benefit for holding periods as short as three years a 50% exclusion, a 75% exclusion for shares held more than four years, and a 100% exclusion for shares held more than five years.
• Increases per-issuer limitation: Raises the per-issuer gain exclusion cap from $10 million to $15 million (indexed for inflation) while still leaving available the 10 times basis limit if greater.
• Increases gross asset threshold for qualification: Increases the gross asset threshold from $50 million to $75 million (also indexed for inflation). 

5. Qualified opportunity zones (QOZ) reboot

The TCJA created the QOZ program to encourage investment in economically distressed communities. Investors could defer capital gains by reinvesting them into qualified opportunity funds (QOFs), with the potential for partial exclusion—and full exclusion of post-investment appreciation if held for at least 10 years. The original program was scheduled to sunset at the end of 2026.

The OBBBA permanently extends and modifies the QOZ program, including modified definitions, criteria, investment incentives and reporting requirements.

Changes include:

• Introduces rolling 10-year QOZ designations beginning Jan. 1, 2027
• Updates the definition of low-income communities (LIC)
• Eliminates the ability for contiguous non-LIC tracts as QOZs
• Allows investors to defer gain recognition on the amount invested in the QOF for up to five years, then receive a basis increase after a five-year hold
• Creates special rules for investments in qualified rural opportunity funds. 

Other items of note

Estate and gift tax exemption: The OBBBA permanently increases the estate and gift tax exemption to $15 million per individual starting in 2026, with annual adjustments for inflation. This provides long-term certainty for high-net-worth individuals engaged in estate planning and wealth transfers.

Even with this certainty, it will be important for individuals to continue evaluating whether their current plan fits their needs and whether anything needs to be done to limit their estate tax exposure.

Excess business loss (EBL) limitation: Both the House and Senate initially proposed to make the EBL limitation permanent and require that disallowed losses remain subject to the limitation in future years, rather than converting to net operating losses (NOLs). The Senate proposals went further by extending the EBL rules to estates and trusts, and by applying attribute reduction rules—such as those triggered by debt discharge or bankruptcy—to EBL carryovers. This would add complexity and potential limitations for affected taxpayers.

However, the final version of the OBBBA makes permanent the existing EBL limitation rules. Disallowed losses will continue to carryforward as NOLs.

The road ahead for the tax planning

With the OBBBA now law, individuals face a transformed tax landscape—one that blends long-awaited certainty with new layers of complexity. Provisions like the permanent QBI deduction and expanded QSBS benefits offer clarity, while evolving rules around SALT, charitable giving, and pass-through taxation demand renewed attention.

Now is the time to revisit your strategy, recalibrate your approach, and stay ahead of the curve. In this new era of tax reform, informed and intentional planning will be key to unlocking opportunities.