Addicus Observations: What We Know and Anticipate as TCJA Sunsets Approach
The One Big Beautiful Bill (OBB) reflects a deliberate shift in U.S. tax policy — extending key incentives while imposing new limitations. Bonus Depreciation, Section 179 Expensing, Opportunity Zones, and Estate Tax Exemption provide powerful tools for entrepreneurial planning. At the same time, new constraints on business loss deductions (Section 461(l)) and evolving SALT rules demand greater sophistication.
The passed bill cements these changes into law. Addicus continues to help clients stay ahead of the curve — ensuring they are ready to act on the opportunities and challenges the new legislation presents.
WHAT’S CHANGING — KEY PROVISIONS IN THE PASSED TAX LEGISLATION
OBB reflects a deliberate shift in U.S. tax policy — extending critical incentives while introducing new limitations that will impact planning and investment decisions for entrepreneurial wealth creators. Below is a summary of key provisions and their potential impact.
For Individuals
Individual Income Tax Rates — §1(j). The top marginal tax rate for individuals, which was temporarily reduced to 37% under TCJA, is now made permanent.
Standard Deduction — §63(c). Beginning in 2025, the standard deduction is permanently increased to $31,500 for married individuals filing jointly, $23,625 for 'head of household' filers, and $15,750 for all others — then adjusted annually for inflation thereafter.
State and Local Tax Deduction (SALT) — §164(b)(6). The maximum deduction for state and local income taxes is temporarily increased from $10,000 to $40,000 beginning in 2025 through 2029 for taxpayers with up to $500,000 of modified adjusted gross income. The deduction is reduced by 30% of the amount of modified adjusted gross income above $500,000, but not below $10,000. The phaseout threshold increases 1% annually beginning in 2026 until the deduction reverts back to $10,000 for tax years beginning in 2030.
Estate Tax Exemption — §2010(c). The unified estate and lifetime gift tax exemption is increased from $10 million to $15 million beginning in 2026 and made permanent with annual updates for inflation thereafter. The generation- skipping transfer tax exemption is also made permanent.
Qualified Small Business Stock (QSBS) — §1202. The rules excluding gain recognition on the sale of qualified small business stock (QSBS) are expanded and made permanent. The required holding period for stock acquired beginning on or after July 4, 2025 is reduced from 5 years to 3 years, with 50% of the benefit phasing in after a three-year holding period, increasing to 75% after a four-year holding period and 100% after a five-year holding period. The new law increases the amount of gain exclusion from $10 million to $15 million, as well as increases the permitted gross asset limitation from $50 million to $75 million.
Itemized Deductions Limitation for Top Bracket — §68. Beginning in 2026, a new limitation on itemized deductions applies to taxpayers with income in the 37% top marginal bracket that requires total itemized deductions to be reduced by the lesser of 1) 2/37 of the total amount of itemized deductions, or 2) 2/37 of the amount of taxable income that exceeds the dollar amount at which the 37% rate bracket begins. SALT is reduced by 5/37.
Charitable Contributions: Reduced by 0.5 Percent of the Contribution Base — §170(b). Beginning in 2026, a new rule requires deductions for charitable contributions to be reduced by 0.5 percent of the taxpayer's contribution base. Excess Business Loss Limitation — §461(l). The rules limiting the deductibility of excess business losses for individuals, which were set to expire next year, are now made permanent.
Excess Business Loss Limitation — §461(l). The rules limiting the deductibility of excess business losses for individuals, which were set to expire next year, are now made permanent.
Mortgage Interest Deduction — Extension and modification of limitation — §163(h)(3)(F). The mortgage interest deduction limitation threshold under TCJA, capped at $750,000 of acquisition indebtedness, is made permanent — as is the exclusion of interest on home equity indebtedness. However, the definition of residence interest is expanded to now include mortgage insurance premiums.
Alternative Minimum Tax (AMT) — §55. Beginning in 2026, the temporary increases to the AMT exemption under TCJA are made permanent and the phase-out thresholds revert to 2018 levels of $500,000 for single filers or $1 million for joint filers. Adjustments for inflation are made annually thereafter.
For Businesses
Energy Investment Tax Credit (ITC) — §48E. The §48E clean energy investment tax credit (ITC), which the 2022 Inflation Reduction Act extended, will now terminate early for qualifying solar and wind facilities. The ITC is no longer available for projects that begin construction more than 12 months after the date of enactment and are placed in service after December 31, 2027. In addition, new rules now limit the extent to which foreign-owned entities or investors can finance or participate in the ownership of qualifying projects, and requirements to use domestic content are increased each year beginning in 2025 through 2027.
100% Bonus Depreciation Made Permanent — §168(k)(2). First-year bonus depreciation, which was set to phase out under the TCJA, is increased to 100% and made permanent for assets acquired on or after January 19, 2025. Additionally, taxpayers may elect to take a reduced bonus depreciation rate of 40% or 60% depending on the type of property in the first taxable year ending after January 19, 2025.
Increased Limitation for 179 Expensing of Certain Depreciable Business Assets — §179(b). Beginning in 2025, the maximum deduction is increased from $1 million to $2 million and the phaseout for qualifying property placed in service is increased from $2.5 million to $4 million.
Qualified Business Income (QBI) Deduction — §199A. Beginning in 2026, the 20% deduction for Qualified Business Income (QBI) under current law is made permanent and the phase-in threshold is increased from $100,000 to $175,000 for joint filers. Additionally, there is a new $400 minimum deduction for taxpayers with at least $1,000 of QBI from an active trade or business in which they materially participate.
R&D Expensing — §174A, §174. Immediate expensing is permanently restored for domestic research and development (R&D) costs, beginning with costs paid or incurred in tax years beginning in 2025 and after, or taxpayers may elect to capitalize and amortize costs over the useful life of the research, but not less than 60 months. However, taxpayers must continue to capitalize and amortize expenditures for research and development activities conducted outside the United States over 15 years. In addition, there are also new R&D credits for small businesses, some of which are refundable, as well as for qualifying R&D activities.
Opportunity Zones — §1400Z-1(c), §1400Z-2. There are a number of permanent new rules and modifications to the Qualified Opportunity Zone (QOZ) Program which include:
New rolling ten-year QOZ designations with a narrower definition of a 'low income community' — effective July 1, 2026, governors will designate new QOZs to go into effect January 1, 2027, re-designated every ten years thereafter.(ii) Tax on capital gain invested in a Qualified Opportunity Fund (QOF) on or after January 1, 2027 is deferred for five years or until the date of disposition, if earlier.
Investors receive a 10% basis increase for QOF interests held for five years or more.
New qualified Rural Opportunity Funds include a basis increase equal to 30% of the deferred gain.
Investors who hold a QOF investment for between 10 and 30 years do not pay tax on the realized gain at disposition.
Business Interest Limitation (Combined 163(j) Provisions) — §163(j), §163(j)(8)(A), §163(j)(8) & §163(j)(9). For tax years beginning in 2026, Adjusted Taxable Income (ATI), used to determine the maximum deductible business interest expense, will no longer add back depreciation, amortization, or depletion. This change effectively increases ATI, raising the 30% deduction cap. Additional coordination rules apply to capitalized interest and special adjustments, as outlined in the revised 163(j) framework.
WHAT THIS MEANS FOR YOU
The One Big Beautiful Bill signals that the tax landscape will remain highly dynamic, blending extended incentives with new limitations that demand thoughtful planning. For entrepreneurial wealth creators, this legislation presents a timely opportunity to align tax, investment, and succession strategies.
Key actions to consider:
- Evaluate capital investment strategies to fully leverage extended expensing opportunities. Reassess pass-through income structures to optimize QBI deductions.
- Adapt business loss and income management strategies in light of permanent limitations. Advance legacy planning efforts while the expanded estate exemption remains in place. Monitor the evolution of the SALT cap and adjust planning assumptions accordingly.
- Explore Opportunity Zone investments where they align with broader wealth and tax objectives.
NEXT STEPS
With the legislation now signed into law, proactive preparation is critical. We recommend that entrepreneurial wealth creators:
Engage with trusted advisors to assess the impact of these tax changes on business, investment, and estate plans.
Identify opportunities to leverage extended expensing and income deductions under the new law.
Advance legacy and succession strategies while the higher estate tax exemption is preserved.
Stay informed, as technical guidance and implementation details may continue to evolve.
The Addicus team is closely tracking these changes and will provide ongoing insights as new developments arise. We are here to help translate complex changes into clear strategies that preserve flexibility and maximize opportunity for our clients and their families.
THE TIME FOR STRATEGIC PLANNING IS NOW
The OBB direction is clear: certain tax efficiencies have been extended, while new limitations will shape future planning. This is the time for entrepreneurial wealth creators to engage with their advisory teams, evaluate how these changes may impact their business and personal strategies, and position themselves to act. Thoughtful, proactive planning today will help maximize opportunities and mitigate future constraints in a rapidly shifting tax landscape.
About Addicus
The Addicus Consulting Group brings deep expertise in tax policy, business advisory, private equity investments, and legacy planning. Our team specializes in helping entrepreneurial wealth creators navigate complex financial landscapes — delivering tailored strategies that drive strategic growth, optimize tax outcomes, and support long- term vision. With a collaborative approach and a commitment to clarity, we serve as a trusted partner in aligning financial strategies with the bold ambitions of our clients.
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