One Big Beautiful Bill Act Enacted, Impacting Estate Planning, Elder Law, Special Needs Planning, and Business-Owning Clients
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), which makes permanent some provisions included in the 2017 Tax Cuts and Jobs Act and includes many new provisions impacting individuals and businesses.
Exemptions and Taxes
The OBBBA permanently increases the estate and gift tax exemption amount to $15 million for individuals and $30 million for married couples, indexed annually for inflation using 2025 as the new base year, for the estates of individuals dying and gifts made after December 31, 2025. The OBBBA does not change rules applicable to portability elections, and the lifetime generation-skipping transfer (GST) tax exemption will continue to be equal to the basic exclusion amount.
Other provisions included in the 2017 Tax Cuts and Jobs Act that the OBBBA makes permanent include the following:
The current tax brackets, with a bottom rate of 10 percent and a top rate of 37 percent
The doubled standard deduction, which will increase to $15,750 for individuals and $31,500 for married couples filing jointly
The $750,000 limit for the home mortgage interest deduction
The OBBBA temporarily increases the state and local tax (SALT) deduction from $10,000 to $40,000 (indexed for inflation) through tax year 2029, which will then decrease to $10,000. The OBBBA does not impact the availability of pass-through business entity tax workarounds. The temporary increase phases out for taxpayers with incomes exceeding $500,000. This change applies to taxable years beginning after December 31, 2024.
For individuals who itemize, the OBBBA limits the charitable deduction to contributions exceeding 0.5 percent of their taxable income. For individuals who do not itemize and instead take a standard deduction (and who historically have not been able to deduct charitable donations), the OBBBA allows a charitable deduction of up to $1,000 for individuals and $2,000 for married couples filing jointly.
Long-Term Care Medicaid, ABLE Accounts, and Social Security
The OBBBA includes provisions impacting seniors who may need long-term care in a nursing facility, including the following:
For applicants seeking Medicaid eligibility for long-term care, the OBBBA amends the home equity exclusion to $1 million, not indexed for inflation, meaning that individuals who would otherwise be eligible for long-term care services under the Medicaid program will not qualify if their home equity exceeds $1 million, effective January 1, 2028. The OBBBA allows states greater flexibility for properties zoned for agricultural use.
Effective January 1, 2027, the retroactive eligibility period is reduced from three months to two months for traditional Medicaid enrollees.
The Centers for Medicare & Medicaid Services’ (CMS) Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment final rule, aimed at simplifying Medicaid long-term care enrollment (and other Medicaid processes), is suspended until 2035, effective on the date of enactment.
The CMS final rule Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting will not be enforced or implemented until September 30, 2034, effective on the date of enactment. Please note that on December 2, 2025, the CMS issued an interim final rule repealing the staffing rule, effective February 2, 2026.
New funding is provided for home and community-based services and rural hospitals.
In addition, the OBBBA makes the increased limitation on contributions to ABLE accounts permanent and modifies the inflation adjustment to apply to taxable years beginning after December 31, 2025.
The new law also provides an additional standard deduction of $6,000 for individuals aged 65 and older between 2025 and 2028, which begins to phase out for single taxpayers whose modified gross income exceeds $75,000 ($150,000 for married couples filing jointly).
Small Businesses
The OBBBA includes provisions that impact small businesses. Specifically, these provisions do the following:
Make the section 199A pass-through deduction permanent and keep the deduction rate at 20 percent
Permanently restore the 100 percent bonus depreciation for qualified property acquired and used after January 19, 2025
Allow a section 179 deduction for investment in qualified business equipment and certain other assets and increase the deduction cap from $1.5 million to $2.5 million
Increase the amount of business interest expenses that can be deducted by removing depreciation, amortization, and depletion deductions from the calculation of adjusted taxable income
Permit domestic research and development expenses to be deducted in the year incurred, or costs may be capitalized and amortized over the life of the research (at least 60 months)
Make the excess business loss limitation permanent
Expand the exclusion of gain recognition for the sale of qualified small business stock
Note that the State of Illinois exemption is $4,000,000.