As of mid‑2025, several sweeping tax reforms—primarily consolidated under the One Big Beautiful Bill Act (OBBBA)—have reshaped the U.S. tax code. These changes introduce both permanent updates and temporary incentives, creating new strategic opportunities as well as compliance complexities for financial professionals advising clients. This article outlines the most consequential elements and recommends ways to help clients adapt, while emphasizing the importance of individualized analysis and professional judgment.
1. Permanent Retention of 2017 Tax Rates
- The OBBBA makes the seven-tier individual income tax rates introduced by the Tax Cuts and Jobs Act (10%, 12%, 22%, 24%, 32%, 35%, 37%) permanent, removing prior sunset provisions. Source: Investopedia
- Financial professionals should revisit clients’ long-term tax projections, as this permanence alters timing strategies for income recognition, Roth IRAs, and other tax-sensitive planning tools.
2. Expanded Deductions: Tips, Overtime, Seniors, and SALT
-
Tip and overtime income: Starting in 2025, individuals can deduct up to $12,500 (single) or $25,000 (married filing jointly) of qualifying overtime and tip income — capped to expire in 2028. Source: Wikipedia
-
Seniors receive a new bonus deduction of $6,000, though phased out at higher income levels. Source: Wall Street Journal
-
SALT deduction cap: Raised significantly—temporarily—to as much as $40,000, though higher earners may still see phased-out benefits. Source: Washington Post
-
Advisors should assess client-specific applicability, especially for those in high-tax states or those earning sizable tip or overtime income.
3. Enhanced Estate and Gift Tax Exemptions
-
Starting in 2026, the federal estate and gift tax exemption will rise to $15 million per individual and $30 million per couple, and will then be indexed for inflation.
-
This presents a rare opportunity to update estate planning documents and consider transfers under more favorable thresholds—although potential future reversals warrant flexible planning. Source: Kiplinger
4. Depreciation and Business Incentives
- Permanent 100% bonus depreciation under Section 179 is now allowed for qualified production property acquired after January 19, 2025. Source: Wikipedia
- Full expensing of domestic R&D costs is permitted for tax years beginning in 2025, with option to amortize over five years. Source: Wikipedia
- These provisions can significantly reduce taxable income for businesses—prompting time-sensitive planning for major purchases or R&D investments.
5. Reporting and Transfer Tax Changes
- The Form 1099-K threshold increases to transactions totaling at least $20,000 and 200 in number; meanwhile, 1099-MISC/NEC thresholds rise from $600 to $2,000 beginning in 2026.
- A 1% excise tax on certain remittance transfers starts in January 2026, with notable exceptions for remittances through regulated financial institutions or U.S. citizens providing ID, according to Wikipedia.
- Financial professionals serving gig workers or clients sending remittances should update compliance guidance accordingly.
6. Broader Tax & Client Strategy Implications
-
The combined impact of these reforms potentially adds trillions to the national deficit. While middle-class taxpayers may benefit, critics argue that benefits skew toward higher-income households and may exacerbate income inequality. Source: Investopedia
-
Increased compliance obligations, particularly regarding digital reporting and IRS power expansions, necessitate stronger documentation practices. Source: The Washington Post
-
Financial professionals should adjust client strategies—including withholding, Roth conversion decisions, and estate planning—to account for both temporary and permanent measures. Source: Kiplinger
Action Steps for Financial Professionals
-
Review withholding and projections in light of permanent rates and temporary deductions.
-
Update estate planning documents promptly to leverage enhanced exemptions.
-
Advise businesses to accelerate deductible expenses (e.g. equipment, R&D) before window closes.
-
Educate clients about new reporting thresholds for gig income and remittances.
-
Monitor state-level impacts, as alignment with federal changes varies significantly.
-
Stay alert to IRS guidance and legislative shifts, as many provisions remain politically vulnerable.
The evolving tax landscape creates both opportunities and challenges. Financial professionals must stay informed, evaluate individual client situations, and act quickly to optimize outcomes. Given the complexity and potential policy shifts, it is always advisable to encourage clients to verify details and seek tailored tax counsel.
Disclaimer: This article is intended for informational purposes only and does not constitute tax, legal, or financial advice. Financial professionals and clients should conduct their own research and consult qualified advisors to address their specific circumstances.
