OBBB Act Explained: Key Tax Strategies for Estate, Business & Cross-Border Planning

The “One Big Beautiful Bill” (OBBB) is now law—and it brings the most sweeping overhaul to the U.S. tax code since 2017. With dozens of changes affecting individual taxpayers, estates, businesses, and international structures, the OBBB Act reshapes both near-term filing strategy and long-term planning priorities.

While headlines have focused on Trump Accounts and clean energy cuts, the real story lies in the fine print: permanent estate tax reforms, expanded business deductions, new rules for U.S.-controlled foreign corporations, and the rollback of dozens of pandemic- and IRA-era incentives. Many of these changes kick in for the 2025 or 2026 tax year, which means clients have a brief but critical window to act.

This guide breaks down the most relevant provisions by taxpayer type and planning theme, and highlights what to do now, what to prepare for in 2026, and where hidden opportunities may still exist.

International Tax Overhaul: 7 Major Cross-Border Changes You Need to Know

The OBBB Act introduces the most sweeping update to the U.S. international tax regime since the 2017 TCJA. Whether you operate a multinational business, manage a foreign investment structure, or rely on foreign tax credits, these changes will likely require a fresh review of your exposure, elections, and planning models. Below, we break down the seven most significant provisions.

1. GILTI is Renamed and Retooled as NCTI

Global Intangible Low-Taxed Income (GILTI) has officially been renamed Net CFC Tested Income (NCTI) under amended §951A. More than just a rebrand, the effective tax rate is increasing:

• The §250 deduction is reduced from 50% to 40%, raising the effective U.S. tax rate on NCTI from 10.5% to 12% (before credits).
• The 20% haircut for FTCs is reduced: Deemed-paid credits under §960(d) now allow 90% of foreign taxes to be claimed.

Planning Insight: Clients should re-model FTC availability and Subpart F/NCTI allocation across their CFCs. Consider whether foreign effective rates are still sufficient to avoid residual U.S. tax.

2. FDII Becomes FDDEI—with Sharper Limits

The Foreign-Derived Intangible Income (FDII) deduction becomes Foreign-Derived Deduction Eligible Income (FDDEI). Key changes include:

• The §250 deduction drops from 37.5% to 33.34%, raising the effective U.S. tax rate from ~13% to ~14%.
• New restrictions limit the use of R&D and interest deductions to reduce FDDEI, and outbound IP transfers are largely excluded.

Planning Insight: U.S. exporters and IP-heavy businesses may find that benefits under FDDEI no longer justify their current structuring. Consider IP migration, cost-sharing revisions, or shifting income to non-preferred jurisdictions.

3. Attribution and Blocker Reform: §958(b)(4) and New §951B

The OBBB Act reverses the TCJA-era repeal of §958(b)(4), meaning U.S. subsidiaries are no longer treated as owning their foreign parent’s stock via downward attribution.

But there’s a catch: new §951B imposes Subpart F and NCTI inclusion on foreign-controlled U.S. shareholders (FCUS) even if the technical “CFC” test isn’t met. This is aimed at U.S. blocker entities commonly used by foreign funds and family offices.

Planning Insight: Don’t assume a domestic blocker shields you. Carefully review any U.S. entity with foreign parentage or co-ownership to see if it now qualifies as a FCUS under §951B.

4. Sourcing and FTC Planning: Inventory and Real Property

Two major changes affect sourcing and foreign tax credit usage:

• Inventory Sourcing (§865): Sales of U.S.-manufactured goods through foreign branches may now treat only 50% of the income as foreign source. A $1 million de minimis threshold excludes small exporters.
• Real Property Taxes & Late Refunds: New FTC “basket” rules exclude non-creditable foreign real estate taxes and refunds received more than three years after accrual from the general/passive baskets.

Planning Insight: If your structure depends on high FTC utilization—especially in manufacturing or real estate—you may face higher residual U.S. tax unless sourcing or jurisdiction is optimized.

5. Look-Through Rule Made Permanent (§954(c)(6))

A long-standing “temporary extender” is now permanent. The CFC look-through rule under §954(c)(6) allows dividends, interest, rents, and royalties between related CFCs to avoid Subpart F inclusion.

Planning Insight: This is a win for foreign holding companies and layered CFC groups. Permanent look-through simplifies deferral and income rebalancing planning across jurisdictions.

6. Timing and Ownership Rules Tightened

The OBBB Act adds important anti-abuse timing rules:

• Inclusions under §951 and §951A (Subpart F and NCTI) must now be allocated based on actual ownership period.
• Stock acquired or disposed of mid-year triggers daily pro rata allocation rules, preventing inclusion avoidance by short-term holding strategies.

Planning Insight: Year-end restructurings and “just-in-time” stock transfers to shift income now have limited value. Mid-year changes should be closely modeled to avoid surprise inclusions.

7. One-Month Deferral Election Repealed (§898)

U.S. shareholders can no longer elect a one-month deferral for specified foreign corporations (SFCs). Instead, all foreign subsidiaries must align their year-end with that of the U.S. shareholder.

Planning Insight: This closes a long-used deferral technique, particularly among fund structures and consolidated reporting groups. Year-end alignment may require adjustments in accounting systems and Q1 cash flow modeling.

Final Thoughts on International Tax Changes

From tightened sourcing and ownership rules to new attribution mechanics and renamed regimes, the OBBB Act overhauls key pillars of international tax planning. For clients with foreign subsidiaries, outbound structures, or inbound U.S. investments, these rules introduce compliance risks—but also planning opportunities.

We recommend a comprehensive review of the full cross-border structure and an update to the NCTI/FTC modeling for 2025–2026. Book a strategy session with our international tax team to ensure your structure remains optimized under the new law.

Estate & Gift Tax Planning: A Permanent High Exemption

One of the most client-relevant wins under the OBBB Act is the permanent increase in the federal estate and gift tax exemption to $15 million per person, indexed for inflation beginning in 2025.

What Changed

Under prior law, the temporarily doubled exemption created by the 2017 TCJA was scheduled to sunset after 2025, potentially reducing the exemption from over $13 million per person to around $7 million. The OBBB Act eliminates this sunset entirely by:

• Establishing a new base exemption amount of $15 million per person, indexed for inflation starting in 2025.
• Repealing the TCJA sunset clause entirely under amended IRC §2010(c)(3).
• Retaining the unified structure of the gift and estate tax exemption.

As a result, high-net-worth individuals have more certainty and more room for strategic lifetime gifting without clawback risk.

Example

A taxpayer who used $12 million of their exemption in 2024 will still have approximately $3+ million of new exemption available in 2026 and beyond (depending on indexing). Under prior law, they would have exhausted their exemption entirely.

Key Planning Opportunities

• Still the Right Time to Act: Although the OBBB Act removes the 2025 sunset threat, clients shouldn’t delay strategic estate planning. Gifting now allows families to remove appreciating assets from the estate, lock in valuation discounts, and take advantage of favorable IRS audit timelines.
• IDGTs and SLATs remain powerful tools for removing appreciating assets from the estate while retaining income tax burn benefits.
• Partial Gifting Top-Offs: Clients who gifted part of their exemption between 2018 and 2025 may now top up to the full $15M+ level.
• State-Level Strategy: Clients in California, which has no state estate tax, can take full advantage of the expanded federal exemption without worrying about state-level offsets, making CA a prime jurisdiction for lifetime gifting. In contrast, states like New York or Massachusetts, which have lower thresholds, still require upstream planning and drafting of credit shelter trusts.

Summary Table

Scenario	Without OBB (2026)	Post-OBBB Law (2026)
Lifetime exemption amount	~$6–7M	$15M+ (indexed)
TCJA clawback risk	Yes	Eliminated
Gift made in 2024 of $13M	Fully covered, but risk in 2026	Fully covered with room to spare

Business Tax Planning Under the OBBB Act

The OBBB Act reshapes the landscape for pass-through entities, service professionals, and corporate taxpayers. Below are the most impactful updates for closely held businesses, professional practices, and high-income earners.

1. Section 199A QBI Deduction Gets a Boost

What Changed:
The Qualified Business Income (QBI) deduction under §199A has been:

• Increased from 20% to 23% of qualified business income
• Made permanent—no longer sunsets after 2025
• Expanded to allow partial deductions for higher-income SSTBs, with a new phase-out structure (75% reduction on income above the threshold)
• Extended to Business Development Company (BDC) dividends

Who Benefits:
Pass-through business owners, especially those in previously limited Specified Service Trades or Businesses (SSTBs) like law, medicine, and consulting, who now retain some benefit even at higher incomes.

Planning Tip: Use income-smoothing techniques (e.g., retirement plans, S corp salary optimization) to stay within deduction thresholds. Consider splitting non-grantor trusts to allocate QBI deductions efficiently.

Here’s how the OBBB Act stacks up against prior law across key business provisions:

Provision	Pre-OBBB Law	OBBB Act (Post-2025)
§199A QBI Deduction	20%, sunset in 2025	23%, permanent, phase-out revised
SSTB Limitation	Full phase-out at ~$440K MFJ	Partial deduction phased in (75%)
Excess Business Loss Rule (§461(l))	Scheduled to expire after 2028	Made permanent
Interest Deduction (§163(j))	EBIT-based limitation (2022–2024)	EBITDA-based restored (2025–2029)
SALT Cap (Individual)	$10,000 limit through 2025	$40,000 cap (2025–2029), phased out
C Corp Charitable Deduction	Up to 10% of taxable income	10% cap, but must exceed 1% floor

2. Permanent Excess Business Loss (EBL) Limitation

What Changed:
The §461(l) EBL rule is now permanent, and disallowed losses are treated as cumulative trade/business losses, not regular NOLs.

Implication:
Clients with large real estate or operating losses can no longer offset them against investment income or wages. Prior “loss harvesting” strategies are curtailed.

Planning Tip: Use entity-level grouping, loss allocation planning, and recharacterization techniques to manage deductibility year-by-year.

3. Interest Deduction Reverts to EBITDA-Based Limitation

What Changed:
The §163(j) limitation reverts to the EBITDA standard (vs EBIT), restoring depreciation and amortization addbacks for 2025–2029. Applies to all except small businesses (<$30M gross receipts).

Who Benefits:
Capital-intensive companies—especially in real estate, manufacturing, or private equity—with higher depreciation expenses and debt loads.

Planning Tip: Take advantage of this window for strategic debt financing. But model carefully—this benefit sunsets in 2029.

4. SALT Cap Temporarily Increased to $40,000

What Changed:
Individual SALT deduction cap increased to $40,000 from 2025–2029, then reverts to $10,000 in 2030. A 30% phase-out applies to MAGI over ~$500K.

Who Benefits:
Owners of pass-throughs in high-tax states like California and New York.

Planning Tip: PTET elections remain a valid workaround. Model MAGI to avoid cap phase-out and consider entity-level planning to absorb SALT deductions.

5. Charitable Contributions by C Corporations Limited by 1% Floor

What Changed:
C corporations can only deduct charitable contributions exceeding 1% of taxable income, though the 10% cap still applies. Special rules apply to carryforwards.

Planning Tip: For C corps with philanthropic goals, time contributions carefully. Consider making large gifts in years with strong taxable income to avoid floor limits and carryforward restrictions.

Final Thoughts

The OBBB Act delivers a mix of opportunity and complexity for business owners. Whether you’re a solo practitioner, multi-entity owner, or involved in private equity or real estate ventures, now is the time to reassess your entity structure, income smoothing tools, and loss utilization strategy. Book a consultation with our team to evaluate how these changes apply to your unique business model.

Individual Tax Planning Under the OBBB Act

The OBBB Act reinstates and reshapes many key provisions affecting individual taxpayers, especially those with higher income, real estate holdings, or complex deductions. Here’s what you need to know:

1. Pease Limitation Reinstated (2026 and Beyond)

The Act reinstates a modified version of the Pease limitation under IRC §68, which reduces total itemized deductions by 3% of adjusted gross income (AGI) above a set threshold, up to a maximum 80% reduction.

• Thresholds (indexed for inflation):
  • Approximately $400,000 for single filers
  • Approximately $450,000 for married filing jointly
• Certain deductions are excluded from reduction, including medical expenses, investment interest, casualty and theft losses, and gambling losses.

Planning Consideration: High-income earners in states like California may see a meaningful reduction in deductions. Strategies such as maximizing above-the-line deductions (e.g., HSA contributions, retirement deferrals) can help mitigate the impact.

2. Mortgage Interest Cap Permanently Set at $750,000

The $750,000 limit on mortgage interest deductions for acquisition indebtedness is now permanent, locking in the TCJA-era cap for all post-2017 home loans.

• Applies only to debt used to buy, build, or substantially improve a qualified residence.
• No change to the pre-2017 grandfathering rule for up to $1 million.

Planning Consideration:
California homeowners with high-value mortgages will continue to face deductibility limits. For clients considering refinancing or home improvement projects, proper debt structuring remains essential.

3. Casualty and Theft Losses Limited to Federal Disaster Areas

Casualty and theft losses are now permanently deductible only if they occur in a federally declared disaster area. Losses from local events or non-disaster-related property damage are no longer deductible.

Planning Consideration:
Clients should review their homeowner’s and umbrella insurance policies, especially in areas with elevated wildfire or storm risk.

4. Miscellaneous Itemized Deductions Permanently Repealed

The Act makes permanent the suspension of miscellaneous itemized deductions subject to the 2% AGI floor. This includes:

• Tax preparation and advisory fees
• Investment management fees
• Unreimbursed employee expenses
• Legal fees not connected to income production

Planning Consideration:
Clients with significant advisory or unreimbursed work expenses should consider entity structuring options (e.g., converting to an S corporation or Schedule C consulting arrangement) to reclassify those costs as deductible business expenses.

5. Temporary Enhanced Deduction for Seniors (2025–2028)

For 2025 through 2028, individuals age 65 or older can claim an additional above-the-line deduction of $4,000 per person ($8,000 for couples), even if they itemize.

• Phases out between $75,000–$175,000 (single) and $150,000–$350,000 (married filing jointly).

Planning Consideration:
This benefit helps seniors who still itemize due to property taxes or medical expenses but have limited earned income.

6. Temporary Deduction for Personal Auto Loan Interest (2025–2028)

The OBBB Act allows an above-the-line deduction for up to $10,000 annually in personal-use auto loan interest for qualified vehicle loans.

• Phaseout thresholds: $100,000–$150,000 (single), $200,000–$250,000 (MFJ)
• Only applies to first-lien loans on qualifying personal vehicles, not used for business

Planning Consideration:
Clients planning large auto purchases may want to accelerate financing decisions to capture the deduction during this limited window.

7. “No Tax on Overtime” Deduction (2025–2028)

Employees subject to the Fair Labor Standards Act (FLSA) may deduct all income from qualified overtime wages during this period.

• Not available to highly compensated employees (over $150,000 annual income)
• Only applies to mandatory overtime; excludes bonuses and commissions
• Employers must separately report qualifying wages on Form W-2

Planning Consideration:
This provision is especially relevant for working-class clients or employees in hourly sectors such as healthcare, hospitality, or logistics. Employers may need to adjust payroll systems for proper reporting.

Trump Accounts & Savings Incentives (IRC § 530A)

The OBBB Act introduces a new class of tax-advantaged savings accounts known as Trump Accounts, created under Section 530A of the OBBB Act. These are not to be confused with Coverdell Education Savings Accounts, which are governed by IRC §530 under current law. While both are intended to support long-term education savings, Trump Accounts are structurally distinct, with stricter eligibility rules, different contribution and usage limits, and broader potential uses—including small business startup costs and first-time home purchases.

Overview: What is a Trump Account?

A Trump Account is a custodial investment account created for the benefit of a U.S. child under age 8, established and administered by a qualifying trustee (e.g., a bank or similar financial institution). It grows tax-deferred, and earnings used for qualified purposes are taxed at favorable capital gains rates.

These accounts may be automatically created by the IRS beginning in 2025, especially for newborns receiving the $1,000 federal Trump Account Pilot Program contribution.

Key Features at a Glance

Feature	Rule
Beneficiaries	Must be U.S. children under age 8 at account creation
Annual Contribution Limit	$5,000 per year (indexed after 2027)
Contribution Start Date	No contributions allowed before 2026
Investment Restrictions	Only U.S.-based index-tracking mutual funds; no crypto, real estate, or private equity
Tax Treatment	Tax-deferred growth; earnings taxed at long-term capital gains rates if used for qualified purposes
Qualified Uses	Postsecondary education, credentialing programs, first-time home purchase, small business startup/loan expenses
Distributions Allowed	After age 18, limited to 1.5× the account’s value at age 18 until age 25; account must terminate by age 31
Penalty for Early Use	10% tax on earnings for non-qualified distributions before age 30
One Account Rule	Only one Trump Account allowed per beneficiary

What Qualifies as a Tax-Favored Distribution?

If account earnings are used for the following, they are taxed at favorable long-term capital gains rates:

First-Time Home Purchase
Must meet the definition under IRC §36; likely subject to $10,000 cap (final guidance pending).

Qualified Higher Education Expenses
As defined under §529(e)(3), including tuition, room and board, books, technology, and more (excludes K–12).

Recognized Credentialing Programs
Includes industry certifications, apprenticeships, licensing programs under VA, DoD COOL, or state WIOA lists.

Small Business Start-Up or Loan Costs
Must be tied to official small business or farm loans (pending further Treasury regulations).

Automatic $1,000 Contribution Pilot (2025–2028)

For U.S. citizens born between January 1, 2025, and December 31, 2028, the IRS will automatically deposit $1,000 into a newly created Trump Account upon filing a qualifying tax return.

• Opt-out is available
• SSNs for parents and child must be included on the return
• A default trustee will be selected by the IRS

Planning Considerations & Comparisons

• Trump Accounts vs. 529 Plans:
  Trump Accounts are more restrictive, but may offer better capital gains treatment for small business or home purchase uses.
• Trump Accounts vs. Roth IRAs:
  Trump Accounts do not require earned income, but have more rigid rules on age and usage. Roth IRAs may offer more flexibility for older children.
• Trump Accounts vs. Coverdell ESAs:
  Although similarly named, Trump Accounts are entirely separate from Coverdell Education Savings Accounts governed by IRC §530. Coverdells remain available and are often used for K–12 education savings, whereas Trump Accounts are limited to postsecondary, first-home, or business uses. Depending on your goals, both may be used in tandem.
• Estate Planning & Gifting:
  Trump Accounts may be a valuable lifetime gifting vehicle for grandparents or parents, especially in states with no gift tax conformity. However, be cautious of contribution limits and duplicate account rules.

Final Thoughts

While the Trump Account is still new and awaiting implementation guidance from the IRS, its combination of early savings, targeted usage, and favorable tax treatment makes it a potentially valuable tool for education-focused families, young entrepreneurs, and estate planners looking to transfer wealth with purpose.

If you’d like to model a Trump Account contribution strategy or coordinate it with existing 529 or irrevocable trust planning, our team is happy to help. Read More: 6 Tax-Efficient Ways to Save for Your Child’s Future.

Education & Family Planning Incentives: Expanded Support for Modern Households

The OBBB Act introduces a suite of changes aimed at modernizing the tax code for families, working parents, and nontraditional educational paths. These provisions reflect a broader commitment to educational flexibility, access to child care, and support for working-class taxpayers. Here’s what changed and how it impacts planning.

1. 529 Plan Expansion for K–12 and Homeschooling (Section 110110)

Families can now use 529 plan distributions tax-free for a wider range of K–12 expenses, including:

• Curriculum and instructional materials
• Books and online platforms
• Tutoring by qualified third parties
• Standardized testing and AP exam fees
• Dual enrollment courses
• Educational therapies for disabilities

Homeschooling families benefit as well—these qualified expenses apply even if the homeschool isn’t registered as a private school under state law.

Effective: Distributions after the enactment date.

2. 529 Coverage for Vocational Credentialing (Section 110111)

529 plans can now fund expenses tied to vocational and professional training, such as:

• Tuition, fees, and supplies for credentialing programs
• Licensing and exam prep for trades or careers
• Continuing education required to maintain credentials

Eligible programs must appear on official lists, such as WIOA directories, the VA’s WEAMS database, or be recognized by the Treasury or Labor Departments.

This change allows 529 funds to support trade schools, apprenticeships, and postsecondary certifications beyond the traditional 4-year college route

3. Enhanced Employer-Provided Child Care Credit (Section 110105)

Employers now receive a larger credit for providing child care benefits:

• Credit rate increases from 25% to 50% for small businesses
• Max annual credit rises to $500,000 ($600,000 for eligible small employers)
• Expanded eligibility includes shared centers and third-party child care contracts

Effective: Expenses after December 31, 2025.

4. Expanded Paid Family & Medical Leave Credit (Section 110106)

This provision enhances the employer credit under §45S by:

• Allowing credits for wages paid directly or for insurance premiums
• Tightening employee eligibility: 1-year tenure, ≥20 hours/week, ≤60% of HCE threshold
• Excluding leave that’s mandated under state law

Effective: Tax years beginning after December 31, 2025

5. Partially Refundable Adoption Tax Credit (Section 110107)

Families adopting children may now claim up to $5,000 of the adoption credit as refundable, even if they have no tax liability. All thresholds are now indexed for inflation.

Effective: Tax years beginning after December 31, 2024.

6. Permanent Exclusion of Student Loan Discharges for Death/Disability

The OBBB makes permanent a TCJA-era rule: student loan discharges due to death or permanent disability are not taxable. This applies to federal and eligible private student loans discharged after 2025.

7. Preservation and Distinction of Coverdell ESAs (IRC §530)

While Trump Accounts were created under the OBBB Act (IRC §530A), Coverdell Education Savings Accounts under IRC §530 remain intact. Coverdells still offer:

• $2,000 annual contributions
• Broader use for K–12 expenses
• Tax-free growth for qualified educational costs

Planning Note: Families can use Coverdell ESAs and 529 Plans simultaneously, particularly if they want flexibility for both K–12 and postsecondary education.

Health Insurance & HSA Reforms: Modern Flexibility, Expanded Access

The OBBB Act delivers major upgrades to health-related tax planning. From reshaping employer plan options to expanding who can contribute to HSAs and how much, these reforms reflect a shift toward individual flexibility, greater small-business support, and modernization of legacy barriers.

I. CHOICE Arrangements: A New Path for Employer Health Coverage

The OBBB Act creates CHOICE Arrangements, a new type of Health Reimbursement Arrangement (HRA) that allows employers to reimburse employees for individual market health insurance premiums and medical expenses—without offering a traditional group plan. This reform is especially beneficial for small employers and solo practitioners who want to provide coverage without navigating the complexity of a full group plan.

Key Features:

• Employers must segment employees into defined eligibility classes (e.g., full-time, part-time, seasonal).
• CHOICE plans cannot be offered to the same class of employees as a traditional group plan.
• Reimbursements must follow substantiation, nondiscrimination, and advance notice rules.
• All reimbursements will be reported on the employee’s W-2.
• Effective for tax years beginning after December 31, 2025.

Integration with Cafeteria Plans

Employees in a CHOICE Arrangement may now use Section 125 cafeteria plans to make salary reduction contributions toward their individual market health coverage—reversing prior ACA restrictions.

Small Business Tax Credit

Small employers (generally under 50 FTEs) may claim a new CHOICE Arrangement credit of:

• $100/month per employee in year one, and
• $50/month per employee in year two

The credit is available only for the first two years the arrangement is offered and may offset regular or AMT liability.

II. HSA Reforms: More Eligibility, Higher Contributions, and Modern Uses

The OBBB Act significantly expands access to Health Savings Accounts (HSAs) and modernizes how and when they can be used.

1. Medicare-Age Eligibility
Beginning in 2026, individuals enrolled in Medicare Part A due to age alone (without full Medicare coverage) may contribute to an HSA.

2. Bronze & Catastrophic ACA Plans Now Qualify as HDHPs
ACA Bronze and Catastrophic plans now count as high-deductible health plans (HDHPs) for HSA eligibility starting in 2026.

3. Direct Primary Care and HSA Compatibility
Taxpayers enrolled in Direct Primary Care arrangements may contribute to an HSA, provided monthly fees do not exceed $150 (individual) or $300 (family). Covered services must be limited to basic outpatient care.

4. Joint Catch-Up Contributions for Married Couples
Spouses age 55+ may now make catch-up contributions to a single HSA, instead of separate accounts. By default, contributions will be split 50/50 unless otherwise agreed.

5. FSA and HRA Rollovers to HSAs for New Enrollees
Employees transitioning to an HDHP can roll over unused general-purpose FSA or HRA funds into their HSA, subject to contribution caps. Rollover amounts must be segregated into HSA-compatible arrangements after the transfer.

6. Retroactive Reimbursements for Initial HDHP Enrollees
Taxpayers who enroll in an HDHP and open an HSA within 60 days may retroactively reimburse themselves for eligible expenses incurred during that period.

7. Spousal FSA Ownership No Longer Disqualifying
HSA eligibility is preserved even if a spouse has a health FSA, so long as that FSA does not reimburse the HSA contributor’s expenses.

8. Income-Based HSA Contribution Boost
Beginning in 2026, lower- and moderate-income taxpayers gain access to enhanced HSA contribution limits:

• Additional $4,300 (individual) or $8,550 (family)
• Phased out between $75K–$100K MAGI (single) or $150K–$200K (married filing jointly)

9. Fitness and Exercise Now Qualify for HSA Reimbursement
Taxpayers may withdraw up to $500 (individual) or $1,000 (joint) per year from their HSA for structured fitness programs, gym memberships, or instructor-led physical activities. Self-guided or on-demand workouts do not qualify.

Clean Energy Credit Rollbacks: Sunsets, Restrictions & Foreign Entity Clamps

The OBBB Act marks a decisive rollback of key clean energy incentives enacted under the Inflation Reduction Act (IRA). While some credits remain intact through transition periods, many face early sunsets, foreign-affiliation restrictions, or repealed transferability, fundamentally reshaping clean energy project economics for individuals and businesses alike.

1. Residential Energy Credits Terminate After 2025

• §25C Energy-Efficient Home Improvements: Ends for property placed in service after 12/31/2025.
• §25D Residential Clean Energy Credit (solar, geothermal, battery, etc.): Ends 12/31/2025; no phase-out.
• §45L New Energy-Efficient Home Credit: Ends for homes acquired after 12/31/2025 (or 12/31/2026 if construction began before May 12, 2025).

Takeaway: Clients should complete solar and home energy upgrades before year-end 2025 to retain federal credit eligibility.

2. Electricity Production & Investment Credits Sunsetting

• §45Y Clean Electricity Production Credit and §48E Investment Credit end for:
  • Projects beginning construction more than 60 days after enactment, or
  • Placed in service after 12/31/2028.
• Advanced nuclear facilities are exempt through 2028.
• Leased solar/wind systems to third parties are no longer eligible if the lessee could otherwise qualify under §25D.

3. Foreign Entity Restrictions Sweep Broadly

No credits are allowed for any project or component that:

• Involves ≥5% payments (≥15% aggregate) to a prohibited foreign entity (PFE),
• Uses components or IP with “material assistance” from a PFE, or
• Is developed or controlled by a foreign-influenced or specified foreign entity.

Covered credits: §45Y, §48E, §45Q, §45X, §45V, §45U, and §48.

4. Repeal of Credit Transferability (§6418)

Transferability is repealed or phased out for:

• §45X Advanced Manufacturing: Ends for components sold after 12/31/2027.
• §45Q Carbon Capture: Transferability ends 2 years after enactment.
• §48 Traditional Energy Property: Ends 2 years post-enactment.
• §45Z Clean Fuel Production: Ends for fuel produced after 12/31/2027

5. Commercial Clean Vehicle Credits Accelerated Sunset

• §25E Used Clean Vehicle Credit: Ends after 12/31/2025.
• §30D New Clean Vehicle Credit: Ends after 12/31/2026, subject to a revived 200,000 vehicle cap per manufacturer.
• §45W Commercial Clean Vehicle Credit: Ends 12/31/2025 unless under a binding contract by 5/12/2025

6. Clean Hydrogen, Carbon, and Manufacturing Credits Limited

• §45V Clean Hydrogen: Ends for projects beginning after 12/31/2025.
• §45Q Carbon Capture: Now barred for foreign-controlled taxpayers; transferability ends in two years.
• §45X Advanced Manufacturing: Ends for wind components after 2027, full phaseout after 2031.

Strategic Planning Takeaways

Many clean energy tax incentives are ending sooner than expected—and others are now restricted by foreign ownership or supply chain rules. Whether you’re a business owner, developer, or individual considering renewable upgrades, now is the time to reassess your eligibility and timeline. Strategic clean energy tax credit planning in 2025 may be the difference between capturing full federal benefits or missing them entirely.

Action Items & 2025–2026 Planning Timeline

The OBBB Act introduces dozens of changes that take effect across different timelines, with 2025 and 2026 being critical years for strategic action. Here’s how clients can prepare:

Tax Year 2025: Prepare and Act

• Gifting and Estate Planning: The new $15 million exemption is indexed starting in 2025. Consider topping off prior gifts, funding SLATs or IDGTs, and moving appreciating assets off the estate balance sheet early in the year to benefit from valuation discounts.
• Clean Energy Investments: Plan and install solar panels, battery systems, and other qualifying clean energy equipment before December 31, 2025, to qualify for credits under §§ 25D and 45L, which expire after 2025.
• Business CapEx Acceleration: With 100% bonus depreciation returning for purchases after January 19, 2025, businesses should prioritize acquiring and placing in service qualifying equipment to maximize expensing.
• Trump Account Contributions: Consider opening and funding Trump Accounts early to start the 5-year clock for tax-free withdrawals.
• R&D Spend: For companies with domestic research activity, 2025–2029 is the window to deduct costs immediately under the rollback of §174 amortization rules.

Tax Year 2026: Critical Transition Year

• Sunsets & Terminations: Many temporary provisions from the TCJA and IRA now face early repeal under OBBB. Key credits like §§ 25D, 30D, and 45W end after 2025 (or 2026 with grandfathering). Confirm construction and delivery timelines for any energy or vehicle-related projects.
• New International Rules: The §951B foreign-controlled U.S. shareholder regime and repeal of downward attribution rules take full effect. Multinationals should review ownership charts, tax year alignments, and Subpart F exposure before 2026 filings.
• BEAT & FDII Adjustments: The 10.1% flat BEAT rate and permanent changes to the §250 deduction apply for tax years beginning after December 31, 2025—requiring modeling of transfer pricing and offshore IP income.
• Business Meals and 1099s: General business meals become non-deductible as of January 1, 2026, except for public-facing exceptions under §274(e)(8). The 1099 reporting threshold increases from $600 to $2,000.
• Education & Family Benefits: The new Trump Accounts are fully in effect, while expanded adoption credits, family leave enhancements, and CHOICE health arrangements may affect tax return preparation and benefit planning.

Let’s make a 2025–2026 tax roadmap that fits your goals. Whether you’re planning gifts, investing in your business, or navigating international exposure, our team can help you prioritize the right strategies and deadlines under the new law. Schedule a strategy session today.

Conclusion: A New Era of Tax Strategy Begins

The One Big Beautiful Bill represents the most comprehensive rewrite of the U.S. tax code since 2017—reshaping everything from estate planning and business deductions to international structuring and clean energy incentives. While some provisions simplify and expand taxpayer benefits, others impose new limitations, deadlines, and reporting obligations that require early action and careful review.

Whether you’re a high-net-worth individual, business owner, or cross-border investor, now is the time to reevaluate your planning in light of the OBBB Act. Many opportunities will narrow—or disappear—by the end of 2025.

To learn how the new law affects your estate, business, or investment structure, book a consultation with our team.

Frequently Asked Questions (FAQs)

Does the OBBB Act make the estate and gift tax exemption permanent?

Yes. The OBBB Act sets the federal estate and gift tax exemption at $15 million per person, indexed for inflation starting in 2025. This eliminates the risk of a sunset back to ~$7 million in 2026 under prior law.

Can I still claim tax credits for installing solar or clean energy systems?

Only if the system is placed in service by December 31, 2025. After that, residential clean energy credits under §25D and others are repealed. Act now to preserve eligibility.

Are Roth IRAs or 529 plans affected by the OBBB Act?

Not directly. However, the OBBB Act creates Trump Accounts (IRC §530A), a new savings vehicle for children under age 8. It does not repeal or replace Roth IRAs or 529 plans.

What do business owners need to know about the QBI deduction?

The Qualified Business Income (QBI) deduction under §199A is increased to 23% and made permanent. Phaseouts are softened for service businesses, expanding eligibility at higher income levels.

When should I start planning under the new rules?

Now. Key opportunities—including gifting, equipment purchases, and energy installations—must be completed before 2026 to fully benefit. Others, like international structuring and CHOICE plan adoption, require planning in early 2025.