The One Big Beautiful Bill signed into law by President Donald Trump on July 4 provides an opportunity for financial advisors to connect with clients, but advisors should be aware of numerous planning considerations regarding the new law.
That’s according to Lincoln Fleming, CPA/PFS, CFP, a senior wealth strategist at BlackRock, who lays out the bill’s implications in a publication on the online BlackRock Advisor Center.
The OBBB increases the state and local tax (SALT) deduction limit to $40,000 for people with income up to $500,000.The deduction previously was $10,000.
Fleming notes that the under SALT deduction increase:
More investors should itemize deductions.
Decisions on “bunching” deductions should be reconsidered.
Non-grantor trusts may be advantageous in some situations. The IRS treats the trusts as separate taxpayers for income tax purposes, so they are eligible for their own SALT deduction.
Existing non-grantor trusts should be evaluated to determine if income distributions to beneficiaries should be reduced to take advantage of trust SALT deductions.
Consider bracket management, tax-loss harvesting and related planning to keep modified adjusted gross income below $500,000 and maintain eligibility for the SALT deduction.
Fleming writes that tax benefits of itemized deductions are capped, so top bracket investors may want to speed up charitable giving to minimize impact.
The bill has a higher alternative minimum tax exemption and phase-out thresholds have been made permanent. Fleming says there is no large spike in the number of individuals subject to AMT.
Fleming notes changes to the gift/estate tax exemption, which has been increased to $15 million per taxpayer and is indexed for inflation.
Under OBBB, there is no longer an immediate exemption “use it or lose it” deadline for wealthy investors.
Additional wealth can be transferred to beneficiaries/heirs tax-free.
Advisors should evaluate the differences between federal and state exemption amounts, when relevant.
For many investors, income tax and step-up in basis planning are more important than estate tax planning.
