KPMG Personal Tax Planning Guide

What’s New

Since its enactment in 2017, the Tax Cuts and Jobs Act (TCJA) has shaped the tax environment by temporarily enacting a number of changes to the individual, business, and gift and estate tax rules. Many of these changes were set to expire at the end of 2025. 

However, with the passage of the OB3, the sunset of most of the TCJA tax changes impacting individuals has been effectively cancelled with the OB3 enacting a number of permanent law changes as well as a few new temporary provisions.

Among the key changes enacted in the OB3 are:

• Permanent extension of current individual income tax rates and modified tax brackets including the top marginal rate of 37 percent
• A temporary increase in the limitation on the deductibility of state and local taxes to $40,000, subject to phasedown for taxpayers with modified adjusted gross income over $500,000 (with a minimum deduction cap of $10,000) through 2029
• Permanent lifetime gift, estate, and generation-skipping transfer tax exemptions of $15 million per person with annual inflation adjustments
• Permanent extension of the 20 percent deduction for an individual’s domestic qualified business income from a partnership, S corporation or sole proprietorship, with indexing of certain threshold amounts and a new minimum deduction amount
• A new limitation on itemized deductions for high-income taxpayers subject to the 37 percent bracket
• A permanent charitable contribution deduction of up to $1,000 ($2,000 for married filing jointly) for non-itemizers
• Permanent extension of the increased 60 percent adjusted gross income limitation for certain charitable contributions
• A new limitation on deductions for charitable contributions made by itemizers, which provides that such contributions are deductible only to the extent that they exceed 0.5 percent of adjusted gross income.

Looking Ahead

With the enactment of the OB3, the pressure for Congress to act to address the looming changes to the federal tax landscape has significantly lessened. However, some policymakers have expressed an interest in the possibility of enacting additional tax legislation in the relatively near future, including perhaps examining a number of issues related to health care tax policy that could impact some individuals or businesses. It is unclear if the opportunity for future legislating in the tax arena will come to fruition in the near future and, if it does, if the legislation under consideration would be bipartisan in nature.

It is recommended that individuals watch legislative developments closely, as well as how political, economic, and other factors might affect tax policy, and be prepared to react quickly from a tax planning perspective. You can follow unfolding implementation of the new law, as well as future legislative developments by checking KPMG LLP's TaxNewsFlash and TaxNewsFlash Legislative Update sites. For KPMG’s analysis and observations of the OB3 provisions most relevant to individuals, families, and their closely held businesses, please see the booklet entitled KPMG reports: Tax subtitle for “One Big Beautiful Bill Act.”