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11/26/2025

How the OBBBA Could Change Tax and Estate Planning in 2026

By Frazer Rice

The One Big Beautiful Bill Act (OBBBA) introduced sweeping tax changes. Most of these changes go into effect in 2026, so now’s the time to update your tax and estate planning documents to make them as tax-efficient as possible.

Developing a personalized tax and estate plan is essential. If you don’t know what to adjust, these are a few OBBBA changes to keep in mind.

Changes to Income Tax and Investment Structuring

The OBBBA is ushering in several changes to individual and business taxes. Depending on your situation, one or more of the following might prompt you to change your tax and estate planning for 2026:

Individual Tax Rates Have Been Permanently Extended

The Tax Cuts and Jobs Act (TCJA) lowered personal income taxes at nearly all levels. Crucially, it lowered the highest marginal tax rate from 39.7% to 37%. These changes were originally set to expire at the end of 2025, but the OBBBA made them permanent.

State and Local Tax (SALT) Deduction Expansion and Pass-Through Entity Tax (PTET)

The expanded SALT deduction allows you to deduct more state and local taxes from your federal income taxes. From 2025 to 2029, SALT caps increased to $20,000 for single filers and $40,000 for married couples.

This increase has limited usefulness for high earners. If your modified adjusted gross income (MAGI) is over $500,000, the deduction phases out at a rate of 30% of your excess income. The cap won’t go below $10,000.

Fortunately, the bill hasn’t changed or eliminated the pass-through entity tax (PTET) workaround, a key tax strategy for owners of eligible businesses. With the workaround, the business pays state income taxes as an entity, and the payments aren’t subject to a deduction cap.

If you have a family office, your tax and estate planning should include a strategic evaluation of your state taxes and PTET elections to maximize benefits.

Enhanced Pass-Through Deduction

The OBBBA has made the current 20% qualified pass-through deduction (found in Section 199A of the Internal Revenue Code) permanent. It also includes several enhancements:

  • Phase-in income threshold starts at $75,000 ($150,000 for married couples).
  • Owners who actively participate in the business have a new $400 deduction floor. 

Many healthcare practices, law offices, accounting and consulting firms, and other companies based around the business owner’s skill or reputation are classified as pass-through entities. If you own a pass-through entity, these tax changes create substantial savings opportunities.

Enhanced Qualified Small Business Stock (QSBS) Advantages

The OBBBA significantly increases QSBS tax advantages:

  • 100% capital gains tax exclusion on stock held for five or more years
  • New 75% exclusion on stock held for four or more years
  • New 50% exclusion on stock held for three or more years
  • Gains exclusion cap is the greater of $15 million or 10 times the taxpayer’s aggregated adjusted basis

These new enhancements incentivize investing in new companies with major growth potential. For example, “stacking” allows you to multiply your capital gains exclusions. When you gift QSBS or transfer it into a trust, the recipient qualifies for their own QSBS capital gains tax exclusion.

Opportunity Zones (OZs) Have Been Enhanced and Expanded 

The OBBBA creates increased tax savings opportunities for those who invest in rural or developing areas. The existing Opportunity Zone program has been permanently expanded with recurring 10-year designations. These designations are set to begin in 2026.

If you hold an investment for five years or more, you qualify for enhanced basis step-ups:

  • 10% for standard
  • 30% for rural opportunity funds

If you have deferred gains from the original Opportunity Zone program, they must be recognized by the end of 2026. Consider tax-loss harvesting, bonus depreciation strategies, charitable remainder trusts, and other tax mitigation strategies to limit tax liability.

Restored 100% Bonus Depreciation

The OBBBA has brought back 100% bonus depreciation. This means you can immediately deduct the full value of qualifying business investments (like equipment, software, land improvements, and vehicles) from your taxes.

Enhanced Interest Expense Deduction

The new bill has also raised the cap on how much business interest can be deducted. The calculation is based on earnings before interest, taxes, depreciation, and amortization (EBITDA) instead of earnings before interest and taxes (EBIT), so more can be deducted up front.

This change is particularly beneficial for real estate, private equity, and other investment structures that rely on borrowed funds.

Immediate Research and Development (R&D) Expense Deduction

Beginning in 2025, a business’s domestic R&D expenditures are immediately deductible. Small businesses (defined as those with less than $31 million in gross receipts) may claim retroactive deductions from 2022 to 2024. If your family office invests in innovation-driven sectors, strategically leveraging this provision may lead to greater returns.

Limitation on Excess Business Losses (EBLs)

The OBBBA makes the limitation on EBLs permanent. Business losses may not exceed $313,000 ($626,000 for married couples). Keep in mind that in most cases, the limit works as a one-year deferral. Disallowed losses also convert to net operating losses (NOLs). 

As NOLs are carried forward indefinitely, they could offset up to 80% of future taxable income. With strategic tax and estate planning, you can optimize your utilization of these losses.

Preserving Favorable Tax Treatment

The new bill maintains favorable tax treatment for the following:

  • Private placement life insurance (PPLI) 
  • Carried interest
  • Private foundations
  • Private placement variable annuities (PPVA)

Notably, the highly controversial Section 899 surtax that was originally included was ultimately omitted. It would have increased taxes on foreign investors from countries with tax policies going against U.S. interests.

Because it simplifies international tax and estate planning, the omission is a victory for multinational investors and global family offices.

Intergenerational Planning

The OBBBA permanently sets the unified federal estate and gift tax exemption to $15 million ($30 million for married couples), with annual inflation adjustments.

If you’re concerned that the value of your estate may exceed the exemption, take advantage of the annual exclusion ($19,000 for both 2025 and 2026) as well as medical and educational exclusions.

As an example of how state-level estate taxes can differ, keep in mind that New York’s estate tax has a much lower exemption than the federal level. For 2025, the basic exclusion amount is $7.16 million. However, if the value of your estate exceeds a certain threshold, you’ll be taxed on its entire value, not just the amount over the exemption.

Here’s a brief overview of how New York’s estate tax applies depending on the value of the estate:

  • $7.16 million or less: No estate tax is due.
  • Over $7.16 million and under $7.518 million: Only the portion exceeding the exemption is taxed.
  • Over $7.518 million: The entire value of the estate is subject to tax.

Without careful tax and estate planning, a significant portion of your estate may be lost to taxes. I’ve helped countless clients develop personalized plans to minimize tax liability and preserve as much wealth as possible.

Looking for Help With Tax and Estate Planning?

For ultra-high-net-worth individuals and families, tax and estate planning can be especially complex. Next Vantage is here to help you find clarity and control. If you’re looking to adapt your current financial plan or need to start tax and estate planning for the first time, get in touch today. 

Schedule a conversation or referral introduction by calling (212) 433-1108 or emailing frice@nextcapitalmgmt.com. We look forward to speaking with you!

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn.


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