On Friday, July 4, President Donald Trump signed into law a comprehensive tax and spending package, delivering on several major campaign promises and extending key provisions from the 2017 tax legislation. After intensive negotiations, both the House and Senate passed the bill ahead of the administration’s self-imposed Independence Day deadline. The legislation introduces significant changes for individuals, families and businesses.

Key provisions:

• Estate, Gift and Generation-Skipping Transfer Tax Exemption: Beginning in 2026, the federal exemption will increase to $15 million per individual (up from $13.99 million), or $30 million for married couples. The change is permanent, and the exemption amount will be indexed for inflation going forward. This provides enhanced, long-term opportunities for tax-efficient wealth transfer.
• Individual Income Tax Rates: All individual tax rate reductions, previously set to expire after 2025, are now permanent. The top marginal income tax rate for high earners remains at 37%.
• SALT Deduction Cap: Starting in 2025, the State and Local Tax (SALT) deduction cap temporarily increases from $10,000 to $40,000 for both single and joint filers. The cap phases down for those with modified adjusted gross income (MAGI) above $500,000 but will not fall below $10,000. The cap will increase by 1% annually before reverting to $10,000 after 2029. Unlike the House bill, the final law does not restrict Pass-Through Entity Tax (PTET) workarounds for certain business owners.
• Itemized Deduction Limitation: Beginning next year, taxpayers in the 37% income tax bracket will see the benefit of all itemized deductions capped at an effective income tax rate of 35%. For those who do not itemize, the standard deduction has now increased to $31,500 for joint filers and $15,750 for all other filers, with ongoing inflation adjustments.
• Charitable Contributions: The 60% AGI limitation for cash contributions to public charities is now permanent. Starting in 2026, individuals who take the standard deduction may claim a $1,000 charitable deduction ($2,000 for joint filers). Additionally, for those who itemize deductions, a 0.5% floor will apply to charitable contributions, with unused amounts eligible for carryforward.
• Tax Relief for Workers and Seniors: From 2025 to 2028, deductions are available for up to $25,000 in qualified tips and $12,500 in overtime pay, subject to phaseouts above MAGI thresholds ($150,000 for singles, $300,000 for joint filers). Auto loan interest of up to $10,000 (for U.S.-manufactured vehicles) is deductible, with phaseouts above $100,000/$200,000 (single/joint). Seniors age 65+ benefit from an increased deduction of $6,000 (phasing out above $75,000/$150,000 MAGI), which is intended to offset the taxation of Social Security benefits.
• Small Business Provisions: The Section 199A deduction for qualified business income (QBI) is permanently set at 20%. In addition, the law relaxes the limitations for Specified Service Trades or Businesses and pass-through entities subject to the wage and investment threshold, enabling more business owners to take advantage of the deduction.
• Qualified Small Business Stock (QSBS) Exclusion Expansion: For shares acquired after the date of enactment, the exclusion increases to $15 million (up from $10 million), and the corporate asset limit rises to $75 million (up from $50 million), both indexed for inflation from 2027. Additionally, there is a new tiered gain exclusion for such shares: 50% after three years, 75% after four years and 100% after five years.
• Child Tax Credit: The credit becomes permanent, increasing from $2,000 to $2,200 per child (effective 2025), indexed for inflation. Existing phaseout thresholds remain ($200,000 single/$400,000 joint), with phaseouts of $50 for every $1,000 above these limits.
• “Trump Account”: A new tax-advantaged savings account for children, seeded with a $1,000 federal contribution for those born between 2025 – 2028, allows annual private contributions up to $5,000 (and employer contributions up to $2,500). Funds grow tax-deferred, with qualified withdrawals taxed at ordinary income rates, and are accessible starting at age 18. 
• University Endowment Tax: Beginning next year, the excise tax on net investment income will increase from 1.4% up to 8%, based on endowment size and student population. Institutions with fewer than 3,000 tuition-paying students will be exempt. Proposed excise taxes on foundations were not adopted, leaving their rate at 1.39%.
• No Changes to Certain Provisions: The law preserves the current treatment of carried-interest income, retains the top income tax rate, and does not repeal the estate tax.

These sweeping changes present new opportunities and considerations for tax planning. We are actively monitoring regulatory developments and will continue to provide updates. Please contact us to discuss how these provisions may affect your personal or business situation.