John E. Chapman
Chief Executive Officer
For high-net-worth individuals, this Q4 is shaping up to be interesting from a tax planning perspective. The recent passage of the “One Big Beautiful Bill Act” (OB3) has created some significant opportunities that are worth your attention before we close out 2025.
While the OB3 made many of the Tax Cuts and Jobs Act provisions permanent, it also introduced some new rules that change how we should be thinking about certain strategies.
Charitable Giving: Act in 2025 for a Higher Tax Benefit
The OBBBA introduces a new “Pease-like” limitation on itemized deductions for top earners starting in 2026. This new rule will reduce the tax savings from each dollar of itemized deduction. For top-bracket taxpayers, a $1 deduction will provide a 35-cent tax benefit in 2026, down from the 37-cent tax benefit it provides in 2025.
Action Item: Explore accelerating planned charitable contributions into 2025 to lock in the higher tax deduction. Consider “bunching” multiple years of donations into a Donor-Advised Fund (DAF) this year. This could allow you to claim a significant deduction at the more favorable 2025 rate while retaining the flexibility to distribute funds to charities over time.
Additionally, starting in 2026, the OBBBA imposes a new 0.5% of AGI floor on individual charitable contribution deductions, further highlighting the advantage of front-loading gifts in 2025.
Retirement and Business Planning Q4 2025 Action Items
While the OB3 largely leaves individual retirement contribution limits unchanged for 2025, there are still items to wrap up before year’s end:
- Max Out Contributions: Look to maximize your contributions to tax-advantaged retirement accounts, such as a 401(k) or traditional IRA. For high-income business owners, consider advanced strategies like a Cash Balance Plan, which allows for significantly higher tax-deferred contributions.
- Roth Conversions: Evaluate if a Roth conversion makes sense for your situation. While you’ll pay tax on the converted amount in 2025, it can be a wise move if you anticipate being in a higher tax bracket in the future.
- Business Structure: For business owners, your entity structure is a cornerstone of tax planning. The OB3’s permanent reinstatement of 100% bonus depreciation and immediate expensing for domestic R&D expenses can create significant tax-saving opportunities. Review your business structure with your tax professional to help you maximize these benefits.
Estate Planning Exemption “Permanently” Elevated
Perhaps the most significant change is the OB3’s permanent increase in the federal estate and gift tax exemption to $15 million per person ($30 million for married couples), with inflation indexing starting in 2027.
Action Items:
- Re-evaluate Your Plan: The removal of the “use it or lose it” pressure on the exemption’s sunset provides a perfect opportunity to review your estate plan with fresh eyes. Keep in mind that while the exemption has been “permanently” raised, that does not mean future legislation will never lower it again.
- Utilize Annual Gifting: Continue to use the annual gift tax exclusion, which is $19,000 per recipient for 2025. This can be a simple, effective way to transfer wealth without using your lifetime exemption.
The Bottom Line
OB3 has shifted the tax landscape, providing clarity in some areas while creating new considerations in others. While the panic over sunsetting TCJA provisions has subsided, proactive Q4 2025 planning is still essential. By acting now, individuals and businesses can look to secure significant tax savings and better position themselves for the future.
For more information regarding the “One Big Beautiful Bill Act” (OB3), please visit www.irs.gov.
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