Category: Business Owners

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The 10 Biggest Recent Tax Law Changes for High-Income Households

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In our previous articles, we have said that the One Big Beautiful Bill Act (OBBBA) represents one of the most significant tax law updates in years. While the legislation contains hundreds of provisions, several changes are particularly relevant for high-income households, including business owners and families with substantial estates.

Below are ten of the most important changes and the planning conversations they may trigger.

1. Greater Certainty for Long-Term Tax Planning

A major theme of OBBBA is permanency. Several provisions that were previously temporary have now been extended indefinitely. This includes:

  • pass-through deductions
  • estate tax exemptions
  • certain business deductions

Planning opportunity:

Greater certainty allows families and business owners to build long-term tax strategies with fewer sunset concerns.

2. TCJA individual tax rates made permanent

The Tax Cuts and Jobs Act (TCJA) passed in 2017 lowered top federal income tax rate to 37%. Instead of reverting to higher pre-2018 rates, the OBBBA makes it permanent, providing greater long-term planning certainty.

Planning opportunity:

Years with temporarily lower taxable income may still present opportunities to:

  • convert portions of traditional IRAs to Roth IRAs
  • reduce future required minimum distributions
  • leave tax-free assets to heirs

3. The 20% Pass-Through Income Deduction Is Now Permanent

The Internal Revenue Code Section 199A Qualified Business Income deduction allows many business owners to deduct up to 20% of pass-through income. Before OBBBA, this deduction was set to expire after 2025.

Planning opportunity:

Business owners may want to revisit –

  • S-corporation salary strategies
  • entity structure decisions
  • income timing strategies

4. Expanded Tax Benefits for Qualified Small Business Stock

The law enhances the tax advantages under Internal Revenue Code Section 1202 Qualified Small Business Stock (QSBS). Changes include:

  • Tiered capital gains exclusion
    • 50% exclusion after 3 years
    • 75% exclusion after 4 years
    • 100% exclusion after 5 years
  • Higher exclusion limit
    • Increased to $15 million
  • Expanded company eligibility
    • Asset threshold increased to $75 million

Planning opportunity:

For founders or investors expecting a business exit, entity structure and stock issuance timing may significantly affect future taxes.

5. Immediate Deduction of Domestic R&D Costs

The law restores immediate deductibility of domestic research and development expenses under Internal Revenue Code Section 174. This reverses the previous rule requiring five-year amortization.

Planning opportunity:

Technology firms, engineering companies, and innovation-driven businesses may benefit from improved cash flow and faster tax deductions.

6. More Favorable Interest Deduction Rules

Changes to Internal Revenue Code Section 163(j) increase the allowable deduction for business interest expenses. The formula once again resembles EBITDA rather than EBIT, allowing many leveraged businesses to deduct more interest.

Planning opportunity:

Real estate investors and private business owners may benefit from re-evaluating financing strategies.

7. Changes to Energy and Clean-Technology Credits

Several energy-related incentives are being phased out over the coming years. Credits affected include those related to:

  • electric vehicles
  • energy-efficient buildings
  • clean energy infrastructure

Planning opportunity:

Households and business owners planning energy projects may want to review timelines to capture remaining credits before phase-outs occur.

8. Higher Estate and Gift Tax Exemptions Made Permanent

One of the biggest changes affects estate planning. The law makes the historically high federal estate tax exemption permanent under Internal Revenue Code Section 2010. For 2025 and beyond:

  • Individuals can transfer roughly $15 million+ estate-tax-free
  • Married couples can transfer $30 million+

Without legislative action, the exemption was previously scheduled to drop roughly in half after 2025.

Planning opportunity:

Families may still benefit from strategies such as spousal lifetime access trusts (SLATs) or dynasty trusts to lock in exemption and protect assets from estate taxes in future generations.

9. Estate Planning Strategies Still Matter

Even with higher estate exemptions, many high-net-worth families still benefit from thoughtful planning using tools such as:

  • irrevocable trusts
  • dynasty trusts
  • lifetime gifting strategies
  • charitable planning

Planning opportunity:

Proper structuring can help families reduce estate taxes, protect assets, and preserve wealth across generations.

10. Expanded 529 Education Savings Plan Flexibility

Effective January 1, 2026, the federal 529 plan distribution limit for K–12 education doubles from $10,000 to $20,000 per beneficiary per year. Qualified withdrawals remain federal income tax-free. The $20,000 annual limit is per student (beneficiary), not per family. Also, the OBBBA significantly expanded the definition of qualified K–12 education expenses. In addition to private school tuition, qualifying expenses may now include:

  • Certain educational therapies and services for students with disabilities (subject to the statutory rules)
  • Tuition at public, private, or religious schools
  • Curriculum and instructional materials
  • Books
  • Online educational materials
  • Certain tutoring expenses
  • Fees for standardized tests
  • Dual-enrollment fees

Planning opportunity:

If you’re planning for private school, the combination of a 529 plan (up to $20,000/year of tax-free qualified withdrawals), and your state’s eligible education savings account could substantially reduce your family’s out-of-pocket education costs.

In summary, the One Big Beautiful Bill Act introduces significant tax changes affecting affluent households, and business owners. While many provisions provide new opportunities, their impact depends heavily on your:

  • income level
  • business structure
  • estate size
  • investment strategy

A coordinated approach between your financial professionals and attorneys can help ensure these changes are incorporated into your broader wealth plan.

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Top 5 Planning Moves for Small Business Owners Now

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The One Big Beautiful Bill Act (OBBBA), which was signed into law last year, represents one of the most significant tax law updates affecting entrepreneurs in years. While many provisions target large corporations, several changes create new opportunities for small business owners to reduce taxes, improve cash flow, and plan for future growth.

Below are five planning moves business owners may want to discuss with their financial advisors.

1. Re-Evaluate Your Entity Structure

The Internal Revenue Code Section 199A Qualified Business Income deduction — commonly known as the 20% pass-through deduction — is now permanent under OBBBA.This deduction applies to income from:

  • S-corporations
  • Partnerships
  • LLCs taxed as partnerships
  • Sole proprietorships

Because the deduction was previously scheduled to expire after 2025, many owners delayed structural decisions. Now that it is permanent, this may be a good time to review:

  • S-corp vs LLC tax treatment
  • Owner compensation strategies
  • Profit distribution planning

For many businesses, optimizing the 20% deduction can meaningfully reduce lifetime tax liability.

2. Consider Whether Future Growth Favors a C-Corporation

OBBBA expanded the benefits associated with Internal Revenue Code Section 1202 Qualified Small Business Stock (QSBS). If your company is structured as a C-corporation, qualifying stock may allow shareholders to exclude a large portion of capital gains when the business is eventually sold. New rules provide:

  • 50% gain exclusion after 3 years
  • 75% exclusion after 4 years
  • 100% exclusion after 5 years

The lifetime gain exclusion limit was also increased to $15 million. For founders building a high-growth company with an expected exit, the potential tax savings from QSBS could be substantial.

3. Accelerate Research and Development Spending

Recent tax law changes had required businesses to amortize research and development expenses over five years, which reduced the tax benefit of innovation spending. OBBBA restores the ability to deduct domestic R&D costs immediately. This is particularly valuable for companies investing in:

  • software development
  • engineering and product design
  • manufacturing innovation
  • technology development

Immediate deductions can improve after-tax cash flow, which may allow growing companies to reinvest more capital back into the business.

4. Revisit Your Financing Strategy

The law also adjusts the interest deduction limitation under Internal Revenue Code Section 163(j). The deduction calculation now again resembles EBITDA rather than EBIT, which generally increases the amount of interest businesses can deduct. This change may benefit businesses that rely heavily on financing, including:

  • real estate companies
  • capital-intensive businesses
  • companies funding expansion with debt

If your business uses leverage, reviewing your capital structure may uncover opportunities to improve tax efficiency.

5. Take Advantage of Workforce-Related Tax Credits

OBBBA expands several employer tax incentives designed to support hiring and employee benefits. Examples include credits related to:

  • workforce training and apprenticeships
  • employer-provided childcare programs
  • hiring employees from targeted groups through the Work Opportunity Tax Credit

These incentives can help offset the cost of recruiting and training workers; providing family-friendly employee benefits, and strengthening employee retention. For many small businesses facing a tight labor market, these credits can meaningfully reduce the cost of building a strong team.

For small business owners, the One Big Beautiful Bill Act creates several opportunities to improve tax efficiency and long-term planning. In summary, key areas worth reviewing include:

  • business entity structure
  • innovation and R&D spending
  • financing strategy
  • workforce incentives
  • long-term exit planning

Because the impact varies widely depending on income, industry, and growth plans, coordinating with financial professionals can help ensure you are making the most of these new rules.

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5 Financial Mistakes Small Business Owners Make

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Small business owners face a unique set of financial challenges, from managing cash flow to dealing with taxes and regulations. While running a small business is rewarding, it can also be difficult to navigate the financial landscape. Here are five common financial mistakes that we’ve identified that small business owners often make plus our tips on how to avoid them:

  1. Mixing Personal and Business Finances

One of the most common financial mistakes that small business owners make is mixing personal and business finances. This can lead to confusion, errors, and even legal problems. It’s important to keep your personal and business finances separate by opening a separate bank account for your business and using it only for business expenses.

  1. Not Tracking Expenses

Another common mistake is not tracking expenses properly. It’s important to keep track of all your business expenses, no matter how small. This will help you to identify areas where you can cut costs and improve your profitability. Use accounting software or hire a bookkeeper to help you keep track of your expenses.

  1. Failing to Plan for Taxes

Taxes can be a major headache for small business owners, especially if they don’t plan ahead. Make sure you are aware of all the taxes you need to pay, including federal and state income taxes, payroll taxes, and sales taxes. Set aside money each month to pay your taxes, and consider hiring a professional to help you navigate the complex tax code.

  1. Ignoring Cash Flow

Cash flow is the lifeblood of any small business. It’s important to monitor your cash flow regularly and to have a plan in place to address any shortfalls. You can improve your cash flow by invoicing promptly, offering discounts for early payment, and negotiating better payment terms with your suppliers.

  1. Failing to Plan for the Future

Finally, small business owners often fail to plan for the future for their business and/or for themselves. It’s important to have a long-term strategy in place for your business, including plans for growth, succession, and retirement. Make sure you have not only a solid business plan but also a financial plan that outlines your business and personal goals and how you plan to achieve them. Consider hiring a financial advisor to help you develop a comprehensive plan for your business and your family.

Running a small business is challenging, but avoiding these common financial mistakes can help you to achieve success. Keep your personal and business finances separate, track your expenses, plan for taxes, monitor your cash flow, and have a long-term strategy in place. By avoiding these mistakes and making smart financial decisions, you can build a strong and profitable small business.