Introduction

On July 4, 2025, the One Big Beautiful Bill (OBBB) was signed into law, permanently altering the federal tax landscape. Many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were scheduled to expire at the end of 2025 are now permanent. Other elements were revised or extended temporarily. For high-net-worth families, these changes create both opportunities and challenges.

Tax-efficient investing is no longer about anticipating sunsets. It is about planning with a new baseline that is more predictable, while also recognizing that some temporary provisions will require monitoring. If you have not yet reviewed your portfolio and estate plan in light of OBBB, this is the time to consider whether your current approach reflects today’s rules.

A New Tax Landscape

The OBBB permanently extended the individual income tax brackets and rates originally introduced under the TCJA.[1] The higher standard deduction, which has simplified filing for many households, is also permanent.[2] These changes provide long-term clarity for income tax planning and eliminate uncertainty about potential reversion to pre-2017 levels.

For high-net-worth families, one of the most significant changes is the increase of the federal estate, gift, and generation-skipping transfer (GST) tax exemptions. Beginning in 2026, the exemption is set at $15 million per individual, or $30 million for married couples, with annual indexing for inflation.[3] Prior to OBBB, the exemption was scheduled to fall by nearly half. With this higher threshold now made permanent, families have expanded room for tax-efficient wealth transfers.

The OBBB also increased the state and local tax (SALT) deduction cap. Taxpayers may now deduct up to $40,000 in state and local taxes ($20,000 for married filing separately) from 2025 through 2029.[4] This is a temporary provision, scheduled for review at the end of that period. While not permanent, the expanded deduction offers relief for taxpayers in high-tax states.

Other provisions introduced new, targeted deductions. For example, deductions for qualified overtime pay and tips are available through 2028, subject to income phaseouts.[5] These changes may not affect high-net-worth investors directly, but they demonstrate the bill’s mixed structure of permanent and temporary rules.

Tax-Deferral and Conversion Strategies

With tax brackets stabilized, strategies such as Roth conversions become more predictable. Investors can model the long-term cost of conversion against known marginal rates. Converting traditional retirement accounts to Roth allows for future tax-free growth and provides heirs with assets that are not subject to required minimum distributions (RMDs).[6]

Capital gains harvesting remains a valuable tool. The capital gains structure was not changed by OBBB and continues at 0 percent, 15 percent, or 20 percent depending on taxable income, with an additional 3.8 percent Net Investment Income Tax (NIIT) for higher earners.[7] Investors with fluctuating income may benefit from realizing gains during lower-income years to lock in favorable tax treatment.

Tax-deferred accounts such as IRAs, 401(k)s, and deferred compensation plans continue to play a central role. Because OBBB provides clarity on income tax brackets, the value of deferral can now be evaluated with greater confidence over the long term. Reviewing how your assets are positioned across taxable, tax-deferred, and tax-free accounts is an important step in adapting to this new environment.

Charitable Planning Under OBBB

The OBBB introduced new rules for charitable contribution deductions. Individuals may only deduct charitable contributions once they exceed 0.5 percent of adjusted gross income (AGI). Corporations must exceed a floor of 1 percent of AGI before deductions apply.[8] For high-net-worth families who already contribute above these thresholds, the impact may be limited, but it changes the calculus for smaller annual gifts.

The overall limit of 60 percent of AGI for cash contributions to public charities remains unchanged.[9] Donor-advised funds (DAFs) continue to offer the ability to take an immediate deduction while granting funds to charities over time. Charitable remainder trusts (CRTs) remain an effective way to balance current income needs with future charitable impact.

Qualified charitable distributions (QCDs) from IRAs are unchanged. Individuals aged 70½ or older can donate up to $105,000 annually directly from an IRA to charity.[10] These distributions satisfy RMD obligations but do not increase taxable income, making them a tax-efficient way to support philanthropy. Families considering major charitable gifts should evaluate whether consolidating contributions into a single year or using a DAF may increase their tax benefits under the new rules.

Estate and Legacy Planning

The new $15 million estate and gift exemption per individual dramatically reshapes estate planning for high-net-worth families. With the exemption indexed for inflation, families can make larger lifetime gifts and transfers without incurring federal estate tax.[3]

Traditional tools such as irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), and family limited partnerships continue to be relevant. The higher exemption amounts provide greater flexibility in using these structures to shift appreciation out of an estate.

Even with expanded federal exemptions, state-level estate and inheritance taxes remain an issue. Several states continue to impose their own thresholds and rates, which can be significantly lower than federal levels.[11] Multi-state families must remain attentive to residency planning and state law differences. Reviewing your estate plan now can help ensure that both federal and state considerations are addressed.

Integrating Investment and Tax Planning

Investment management and tax planning should not occur in isolation. Asset location decisions remain important. Tax-inefficient investments such as bonds or real estate income funds are best held in taxdeferred accounts, while tax-efficient vehicles like index funds may be more appropriate in taxable accounts.[12]

Withdrawal sequencing is also critical. Drawing from taxable accounts first, followed by tax-deferred accounts, and then Roth accounts may help manage taxable income across retirement. With tax brackets now permanent under OBBB, sequencing strategies can be applied with greater certainty.

Stress-testing financial plans remains essential. While OBBB provides stability on many provisions, some items, such as the expanded SALT deduction, are temporary. Families should model different scenarios to account for possible future adjustments, inflation, and market volatility.[13] If you have not run a recent stress test on your retirement income plan, now is an ideal time to do so.

Conclusion

The One Big Beautiful Bill has created a new foundation for tax and estate planning in the United States. Permanent individual tax brackets and deductions, higher estate and gift exemptions, and targeted changes to charitable and SALT deductions all demand a fresh look at financial strategies.

For high-net-worth families, this is a moment to revisit investment portfolios, gifting plans, charitable structures, and withdrawal strategies. Aligning these areas can reduce tax drag and strengthen long-term outcomes. If you would like to explore how these changes may apply to your family’s situation, visit www.pfswealthgroup.com or email info@pfswealthgroup.com to begin a conversation.

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Insurance products are offered through the insurance business PFS Wealth Management Group. PFS Wealth Management Group is also an

Investment Advisory practice that offers products and services through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by PFS Wealth Management Group are not subject to Investment Advisor requirements.

Investing involves risk, including the potential loss of principal. Any references to protection, safety or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier. This radio show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA

PFS Wealth Management Group is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by PFS Wealth Management Group. A PR firm was paid to assist with media placement. 3326645-10/25

References:

1. https://www.irs.gov/filing/federal-income-tax-rates-and-brackets
2. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025
3. https://kpmg.com/xx/en/our-insights/gms-flash-alert/flash-alert-2024-216.html
4. https://www.nixonpeabody.com/insights/alerts/2025/07/18/one-big-beautiful-bill-impact-on-high-net-worth-individuals-andfamilies
5. https://www.rsmus.com/insights/services/business-tax/family-offices-and-the-one-big-beautiful-bill-act-implications-of-taxchanges.html
6. https://www.irs.gov/retirement-plans/roth-iras
7. https://www.irs.gov/taxtopics/tc409
8. https://www.taftlaw.com/news-events/law-bulletins/tax-exempt-organizations-impacted-by-the-one-big-beautifulbill/?utm_source=chatgpt.com
9. https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
10. https://www.irs.gov/publications/p590b
11. https://taxfoundation.org/data/all/federal/2025-tax-brackets/?utm_source=chatgpt.com
12. https://advisors.vanguard.com/wealth-management/tax-efficient-investing
13. https://www.carterwealth.com/insights/tax-efficient-investing-strategies-for-high-net-worth-individuals/?utm_source=chatgpt.com