For higher-income taxpayers and those engaged in serious estate planning, the One Big Beautiful Bill Act represents the most consequential tax legislation since 2017. Several provisions take effect in 2026 that warrant immediate attention from advisors and their clients, and the planning calculus has shifted in ways that may invalidate strategies built around the prior sunset cliff.
The estate and lifetime gift tax exclusion has been permanently extended. Effective in 2026, the exclusion amount will be an inflation-adjusted $15 million per individual. This removes the cliff that had been scheduled to drop the exclusion roughly in half at the end of 2025 — a deadline that drove substantial gift planning activity over the past two years. With the exclusion now permanent at the higher level, the urgency to use the exemption before year-end 2025 is gone for many families, and some clients who accelerated gifts in anticipation of the sunset may want to revisit whether those decisions still align with their longer-term objectives. Generation-skipping transfer tax exemption planning, dynasty trust funding, and lifetime gifting cadence all need to be reconsidered under the permanent regime.
Capital gains rates remain permanently in place at the current structure. The capital gains rate structure is permanently retained, with the 15% rate kicking in at $49,451 for individual single taxpayers ($98,901 for married couples filing jointly) and the 20% rate kicking in at $545,500 for individual single taxpayers ($613,700 for married couples filing jointly). The Net Investment Income Tax of 3.8% continues to apply above its thresholds. Long-term portfolio planning can proceed without anticipating rate increases, though state-level capital gains treatment varies and remains an area for client-specific modeling.
The AMT exemption amounts and phase-out thresholds established by the TCJA were made permanent. For tax year 2026, the exemption amount for unmarried individuals is $90,100 and begins to phase out at $500,000 ($140,200 for married couples filing jointly for whom the exemption begins to phase out at $1,000,000). This continues the meaningfully reduced AMT exposure that high-income earners have enjoyed since 2018. AMT is no longer the trap for upper-middle-income families that it was pre-TCJA, though it still requires modeling for clients with significant incentive stock option exercises, private activity bond interest, or unusual state and local tax positions.
One critical new restriction takes effect in 2026: the value of itemized deductions is capped at 35%, creating a 2% tax on itemized deductions for those in the top bracket. The mechanism is subtle but consequential — for taxpayers in the 37% bracket, each dollar of itemized deduction now yields only 35 cents of federal tax savings rather than 37 cents. The practical effect is a roughly 2% surcharge on itemized deductions for the highest earners, with the largest impact on charitably-inclined high-income taxpayers and those with significant SALT, mortgage interest, or medical deductions.
Charitable planning specifically requires fresh attention. The combination of the new 0.5% AGI floor for itemized charitable deductions, the 35% cap for top-bracket itemizers, and the permanence of the 60% AGI cash contribution ceiling means that timing, vehicle selection (donor-advised funds, qualified charitable distributions, charitable remainder trusts), and bunching strategies all need to be re-evaluated under the post-OBBBA framework.
These provisions interact in ways that materially affect both annual planning and multi-generational wealth transfer strategies. Working with advisors who can model the combined impact across estate, income, and investment planning — including specialists like Watter CPA — has become more valuable, not less, under the new regime.
