The One Big Beautiful Bill Act—Navigating the New Landscape for High-Income Earners and High Net-Worth Individuals

The recently enacted "One Big Beautiful Bill Act" (OBBBA) ushers in significant changes to the U.S. tax and spending landscape, impacting everything from individual income tax rates to estate planning. While the bill contains provisions aimed at various segments of the population, its permanent extension of certain tax cuts and adjustments to deductions will have particular ramifications for high-income earners and high net-worth individuals, presenting both challenges and strategic opportunities.

Key Provisions and Their Immediate Impact

At its core, the OBBBA makes permanent many of the individual tax cuts originally introduced by the 2017 Tax Cuts and Jobs Act (TCJA). This includes the continuation of the current individual income tax rates, preventing a scheduled sunset that would have led to higher rates for many. Additionally, the bill introduces new provisions such as the elimination of taxes on tips and overtime pay, and an increased cap on the State and Local Tax (SALT) deduction.

Impacts on High-Income Earners

For high-income earners, the OBBBA offers a mixed bag of continued benefits and nuanced considerations:

• Permanent Income Tax Rates: The most direct benefit is the permanent extension of the current, lower individual income tax rates. This provides certainty and prevents a default increase in tax liabilities that would have occurred if the TCJA provisions had expired.
• SALT Deduction Cap Adjustment (and limitations): The bill temporarily raises the SALT deduction cap from $10,000 to $40,000 until 2030. While this may seem like a significant win for taxpayers in high-tax states, it's crucial to note that this benefit phases down for individuals with a modified adjusted gross income (AGI) exceeding $500,000. For the highest earners, the practical benefit may be limited due to this phase-out and other caps on itemized deductions.
• Limitations on Itemized Deductions: The OBBBA maintains some of the TCJA's limits on itemized deductions, such as mortgage interest, and introduces a new limitation that effectively caps the benefit of an itemized deduction at 35% for top-bracket taxpayers, even if their marginal income tax rate is higher. This emphasizes the importance of timing income recognition and deductions strategically.
• Qualified Business Income (QBI) Deduction: The 20% QBI deduction for eligible pass-through entities is made permanent, offering continued tax relief for many business owners. However, income phase-outs still apply, potentially limiting the deduction's impact for very high earners in certain service industries.
• Alternative Minimum Tax (AMT): The bill makes higher AMT exemptions and phase-out thresholds permanent, meaning fewer high-income individuals are likely to be subject to the AMT.

Impacts on High Net-Worth Individuals

High net-worth individuals will find the OBBBA particularly impactful concerning wealth transfer and estate planning:

• Increased Gift and Estate Tax Exemption: One of the most significant changes is the permanent increase in the federal gift, estate, and generation-skipping transfer (GST) tax exemption amounts. Effective January 1, 2026, the exemption is set at $15 million per individual (and $30 million for a married couple), indexed annually for inflation. This prevents the "sunset" of the elevated exemptions that was anticipated at the end of 2025, offering substantial clarity and opportunity for tax-free wealth transfer.
• Qualified Small Business Stock (QSBS) Benefits: The Act enhances the tax exclusion under Section 1202 for QSBS. For stocks acquired after July 4, 2025, it introduces a tiered gain exclusion (50% for 3+ years, 75% for 4+ years, 100% for 5+ years) and increases the per-issuer dollar cap and corporate-level gross assets ceiling. This provides greater incentives for investment in qualifying small businesses.
• Charitable Giving: While the OBBBA introduces a new charitable deduction for non-itemizers, it also caps the tax benefit of itemized deductions for top earners, including charitable gifts, at 35%. This may lead some ultra-wealthy individuals to re-evaluate the timing and structure of their philanthropic efforts.

Tax and Estate Planning Opportunities

The OBBBA creates a fertile ground for strategic tax and estate planning:

For Income Tax Planning:

• Income Acceleration/Deferral: With the permanent individual tax rates, high-income earners have more certainty in planning for income acceleration or deferral strategies to manage their tax liabilities. This could involve accelerating income into current years if future rate increases are anticipated (though the bill makes current rates permanent) or deferring income if it helps manage AGI-based limitations.
• Roth IRA Conversions: The extension of current tax rates may make Roth IRA conversions more attractive for some high-income earners, locking in a known tax rate on converted funds for future tax-free withdrawals. However, be mindful of the SALT Deduction income phaseout if considering Roth Conversions as well.
• SALT Deduction Optimization: Despite the phase-outs, individuals in high-tax states should still work with their advisors to maximize the increased SALT deduction, particularly for the next five years. Exploring state-level "pass-through entity tax" workarounds, which the OBBBA does not prohibit, remains a viable strategy to mitigate the SALT cap. Additionally, the use of certain types of non-grantor/ING trusts may be useful tools.
• Business Structure Review: For business owners, the permanent QBI deduction makes it opportune to re-evaluate their business structure to ensure they are optimizing their eligibility for this deduction.

For Estate Planning:

• Maximized Lifetime Gifting: The permanent and increased gift and estate tax exemption provides a significant window for high-net-worth individuals to transfer substantial wealth to heirs free of federal gift tax. This eliminates the "use it or lose it" urgency previously associated with the TCJA's expiring provisions.
• Review Existing Estate Plans: Families with existing estate plans, especially those that leveraged the prior, lower exemption amounts, should review and potentially update their strategies to fully capitalize on the new, higher exemption. This could involve establishing new trusts or modifying existing ones.
• Grantor Retained Annuity Trusts (GRATs) and Other Techniques: Traditional wealth transfer strategies like GRATs, charitable lead trusts, and intrafamily loans remain highly effective tools for leveraging the increased exemption and minimizing estate taxes, particularly when combined with thoughtful valuation strategies.
• Charitable Giving Strategies: While the itemized deduction cap affects charitable gifts for top earners, strategies like donor-advised funds or charitable remainder trusts can still be effective for philanthropic goals while potentially offering other tax advantages. The new non-itemizer deduction for cash gifts may also influence broader charitable giving patterns.
• QSBS Planning: For entrepreneurs and investors in small businesses, understanding and utilizing the enhanced QSBS exclusion provisions can lead to significant tax savings on capital gains. Proactive planning for QSBS eligibility is crucial.

Conclusion

The One Big Beautiful Bill Act represents a shift in tax policy, solidifying many of the changes from the TCJA and introducing new elements. For high-income earners and high net-worth individuals, it underscores the critical need for proactive and sophisticated tax and estate planning. While the permanence of certain tax cuts offers welcome stability, the nuances of deduction limitations and the expanded wealth transfer opportunities demand careful consideration and the guidance of experienced financial and legal advisors to navigate this new landscape effectively. Reach out to your Synovus Wealth Strategist if you have questions.

Andrea N. Vaioli, CTFA, AIF®, BFA™
Psychology of Financial Planning Specialist™
Vice President, Senior Relationship Manager
Synovus Wealth Management & Trust Services
Office: 813-496-6137
andreavaioli@synovus.com

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