The “One Big Beautiful Bill”: A Deep Dive for High Earners

Even if you weren’t down with OBBB, the “One Big Beautiful Bill”, which was signed into law on July 4, 2025, marks a significant moment for the U.S. tax code. While much of the public discourse focuses on its broad impact, for high-net-worth individuals and families, the OBBB brings a nuanced set of changes that demand careful consideration and proactive planning. This legislation isn’t just about extending existing provisions; it’s about cementing certain realities and introducing new complexities that will shape financial strategies and tax planning, including philanthropic endeavors, for years to come.

Here’s a breakdown of how the OBBB specifically impacts high earners:

1. Permanent Tax Rates and Brackets: Stability, But No Further Cuts

One of the most impactful provisions of the OBBB is the permanent extension of the current individual income tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%). This means the lower marginal rates introduced by the 2017 Tax Cuts and Jobs Act (TCJA) are here to stay, as are the corresponding income brackets.

What this means for high earners: While this offers welcome stability, it also means that the prospect of further broad-based tax rate reductions is off the table for the foreseeable future. High earners can plan with confidence that their top marginal rate will remain at 37%, subject to inflation adjustments to the lower brackets. This places an even greater emphasis on income deferral strategies, tax-efficient investing, and leveraging deductions where available. When considering charitable giving, the 37% top rate still makes a deduction valuable, but the subsequent changes below will influence its ultimate impact.

2. The SALT Cap: A Temporary Respite with a Future Sunset

The highly contentious State and Local Tax (SALT) deduction cap has seen a notable, though temporary, adjustment. The OBBB increases the SALT cap from $10,000 to $40,000 for married individuals filing jointly (and $20,000 for married filing separately) through 2029. This cap will also see a 1% annual increase for inflation. However, it’s crucial to note that this increased cap begins to phase out for those with a modified Adjusted Gross Income (AGI) above $500,000, gradually decreasing until it reverts to the original $10,000 limit. Crucially, the cap reverts back to $10,000 for all taxpayers in 2030.

What this means for high earners: If you reside in a high-tax state (like Minnesota, New York, California, or Illinois), this temporary increase provides some relief, allowing you to deduct more of your state and local taxes. However, the income-based phase-out means that ultra-high earners may see little to no benefit from the increased cap. The temporary nature of this relief also necessitates strategic planning: enjoy the increased deduction while it lasts, but prepare for the return to the $10,000 cap in 2030. This could involve exploring state-level Pass-Through Entity Tax (PTET) workarounds, which are not directly impacted by this federal cap on individual SALT deductions. For those who still itemize due to high property or state income taxes, the SALT cap’s impact will continue to shape the overall value of itemized deductions, including charitable contributions.

3. Itemized Deductions & Charitable Giving: New Limitations and Floors

While the standard deduction is permanently increased and indexed for inflation, high earners typically rely on itemizing. The OBBB introduces new nuances that directly impact the value of these deductions, especially for charitable contributions:

• Valuation Cap on Deductions: For those in the top 37% bracket, the value of their itemized deductions (including charitable contributions) will be effectively capped at 35% of the deduction amount. This subtle change means that for every dollar of deduction, the tax savings are slightly less than the taxpayer’s top marginal rate. For a $10,000 charitable donation, this means $3,500 in tax savings, not $3,700.
• Charitable Contribution AGI Floor: Beginning in 2026, individuals claiming itemized deductions will only be allowed to deduct charitable contributions to the extent the aggregate of such contributions exceeds 0.5% of the individual’s Adjusted Gross Income (AGI). For a high earner with an AGI of $1,000,000, the first $5,000 in charitable contributions would not be deductible.
• Permanent 60% AGI Limit for Cash Gifts: The OBBB does make permanent the 60% of AGI limitation for cash contributions to public charities. This means significant cash donations can still be largely deductible, provided the new 0.5% AGI floor is met.
• Miscellaneous Itemized Deductions: The OBBB permanently disallows miscellaneous itemized deductions (e.g., investment management fees, unreimbursed employee expenses), further reducing the universe of deductions for high earners.

What this means for high earners and charitable giving: These changes significantly impact the tax efficiency of philanthropic efforts for high earners. The effective cap on deduction value means that the real dollar savings from itemizing may be slightly less than anticipated. More notably, the 0.5% AGI floor introduces a new hurdle. This might encourage “bunching” strategies – consolidating several years of planned giving into a single year, perhaps through a Donor-Advised Fund (DAF), to clear the AGI floor and maximize the deductible amount. For those making regular, smaller donations, the tax incentive is diminished unless they strategically plan larger gifts.

4. Estate and Gift Tax Exemption: A Permanent Boost for Wealth Transfer and Legacy Giving

A key area of clarity and benefit for ultra-high-net-worth individuals is the permanent increase of the federal estate and gift tax exemption to $15 million per individual (or $30 million for married couples) beginning in 2026, with annual inflation adjustments. This removes the “sunset” provision that would have seen the exemption revert to much lower levels at the end of 2025.

What this means for high earners: This is a significant win for long-term wealth transfer planning and legacy philanthropy. It provides certainty and ample opportunity to transfer substantial assets tax-free, either during life or at death. Strategies such as leveraging irrevocable trusts, family partnerships, and charitable bequests become even more potent and stable in this environment. The pressure to make large gifts before the end of 2025 to “lock in” higher exemptions is now removed, though timely planning remains prudent for maximizing these substantial exclusions.

5. Business Provisions: Continued Advantages for Pass-Throughs and Investments

For high earners with significant business interests, several key provisions are now permanent:

• Qualified Business Income (QBI) Deduction: The 20% QBI deduction for eligible pass-through entities (e.g., S-corporations, partnerships, LLCs) is made permanent at the 20% rate.
• Immediate Expensing (Bonus Depreciation): The ability to immediately expense (100% bonus depreciation) qualified business property acquired and placed in service after January 19, 2025, is permanently reinstated. This is a powerful incentive for capital investment.
• R&D Expensing: Full expensing of domestic research and development expenditures is permanently reinstated.
• Corporate Charitable Deduction Floor: For corporations, the OBBB introduces a 1% floor for charitable deductions. Corporations will only be able to deduct contributions exceeding 1% of their taxable income.

What this means for high earners: These provisions provide long-term tax certainty and incentives for business investment and growth. For entrepreneurs and owners of pass-through entities, the permanent QBI deduction is a significant benefit. The ability to immediately write off substantial capital expenditures encourages reinvestment in business operations, potentially lowering taxable income. For high earners involved in corporate philanthropy, the new 1% floor means that corporate giving strategies will need to be reviewed to ensure the tax benefit is realized.

Navigating the New Landscape

The OBBB, while labeled “beautiful” by some, presents a complex tapestry of permanence and temporary shifts for high earners. The key takeaways are:

• Stability in Rates: The income tax rates are largely fixed, allowing for more predictable long-term income tax planning.
• SALT Cap Nuance: Enjoy the temporary SALT cap increase, but plan for its sunset and consider alternative state-level workarounds.
• Deduction Limits: Be aware of the new effective limits and floors on itemized deductions, especially for charitable contributions, necessitating strategic timing and structuring of gifts.
• Estate Planning Certainty: The permanently increased estate exemption offers clear opportunities for significant wealth transfer and legacy giving strategies.
• Business Investment Incentives: Leverage the permanent expensing and QBI deduction to optimize business tax liabilities, while also noting the new corporate giving floor.

Ultimately, the OBBB doesn’t simplify the high-earner’s tax landscape; it recalibrates it. Successful navigation demands proactive and sophisticated tax planning, particularly when integrating philanthropic goals. High earners should immediately collaborate with their financial advisors and tax professionals to analyze the precise impact of these changes on their unique financial profile, including their charitable intentions. Remember, with any sweeping legislation, detailed interpretations and further guidance will emerge. Therefore, patience and persistent engagement with your trusted tax professional will be key to developing and refining a well-crafted plan for the years ahead.

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To health and wealth!

Mark Struthers, CFA, CFP®, CRC®, RMA®

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This commentary is provided for general information purposes only, should not be construed as investment, tax, or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed.