The One Big Beautiful Bill brings significant changes to the income and estate tax landscape. Here’s what to know.
Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) introduces sweeping legislative changes across tax, estate, and investment planning. The bill introduced new provisions that may present significant planning opportunities. Bob Petix, Senior Wealth Strategist, Wealth & Investment Management, Wells Fargo Bank, N.A., offers insights into how individuals and families can navigate and potentially benefit from the new provisions.
Tax policy continuity and expansion
OBBBA solidifies several key elements of the Tax Cuts and Jobs Act (TCJA) of 2017. Among the most impactful changes are the permanent reduction of the top marginal income tax rate from 39.6% to 37%, the continuation of the 20% qualified business income deduction for certain pass-through entities, and the permanent cap of $750,000 on mortgage interest deductions.
“These tax savings can be redirected toward other financial priorities — such as business investments, family gifting, charitable contributions, or portfolio growth potential,” explains Petix.
The legislation also expands the state and local tax (SALT) deduction cap from $10,000 to $40,000. This change can be especially beneficial for residents of high-tax states. “Individuals may want to reassess their residency and real estate holdings, as SALT deductions can significantly impact federal tax liability,” Petix advises.
Estate and gift tax exclusion increased
Starting in 2026, the federal estate and gift tax exclusion increases to $15 million per individual and $30 million per married couple — up from $13.99 million. The generation-skipping transfer (GST) tax exemption also rises to $15 million. These thresholds will be indexed for inflation, allowing for more strategic wealth transfers without triggering federal taxes.
“With these higher exclusions, families may be able to more effectively utilize advanced planning strategies such as irrevocable trusts and family partnerships,” says Petix. “It’s an ideal time to revisit estate plans and seek to maximize tax-efficient transfers to heirs.”
Charitable giving adjustments
OBBBA introduces above-the-line charitable deductions for 2026 — taxpayers who don’t itemize their deductions can deduct up to $1,000 ($2,000 if married filing jointly) for charitable contributions made during the year, excluding donor-advised fund contributions. Beginning in 2026, itemized charitable deductions will require a minimum of 0.5% of adjusted gross income (AGI). For those in the highest income bracket, the value of itemized deductions, including charitable contributions, will be capped at 35%.
“This slightly reduces the tax benefit for high-income donors,” notes Petix. However, the permanent extension of the 60% AGI limit for cash gifts to public charities — originally enacted under the TCJA — is “great news for philanthropic planning.”
Additional planning opportunities
The bill also enhances gain exclusions and investment flexibility for Qualified Opportunity Zones (QOZs) beginning in 2026, and for Qualified Small Business Stock (QSBS), effective immediately. Taxpayers should act swiftly to consider leveraging green energy credits, which expire after 2025.
Petix cautions that some provisions phase out at higher income levels and may vary by state, underscoring the importance of personalized planning.
Tailor your strategy
Given the breadth of changes, it’s essential to revisit estate, financial, and tax strategies with trusted advisors. “This isn’t a one-size-fits-all scenario,” Petix emphasizes. “Tailored guidance is key.” While the current provisions offer a rare window for optimization, they remain subject to future legislative changes — making timely action critical.
Wells Fargo Wealth & Investment Management (WIM) offers financial products and services through affiliates of Wells Fargo & Company.
Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.
Trust services are available through Wells Fargo Bank, N.A. and Wells Fargo Delaware Trust Company, N.A.
Donor Advised Fund donations are irrevocable charitable gifts. The sponsoring organizations maintaining the fund have ultimate control over how the assets in the fund accounts are invested and distributed. Donor Advised Funds donors do not receive investment returns. The amount ultimately available to the Donor to make grant recommendations may be more or less than the Donor contributions to the Donor Advised Fund. While annual giving is encouraged, the Donor Advised Fund should be viewed as a long-term philanthropic program. Tax benefits depend upon your individual circumstances. You should consult your Tax Advisor. While the operations of the Donor Advised Fund and Pooled Income Funds are regulated by the Internal Revenue Service, they are not guaranteed or insured by the United States or any of its agencies or instrumentalities. Contributions are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Donor Advised Funds are not registered under federal securities laws, pursuant to exemptions for charitable organizations.
