How the Big Beautiful Bill Affects High-Income Americans

Introduction: The “One Big Beautiful Bill Act” (H.R. 1) represents a sweeping tax reform passed in 2025 that enacts major changes aimed at making permanent the tax cuts of 2017 and introducing new tax incentives. Signed into law on July 4, 2025 after a narrow 218–214 House vote and a 51–50 Senate vote (with the Vice President breaking the tie), the bill emerged from a highly charged political context. Backed by President Trump and Republican lawmakers, its high-level goals were to prevent scheduled tax hikes in 2026, boost investment through tax relief, and trim certain spending programs, all under the banner of pro-growth policy. High-net-worth individuals, entrepreneurs, and investors have much at stake in this legislation. On one hand, it locks in lower tax rates and expands estate and business tax breaks; on the other, it curtails some deductions and credits (notably in clean energy) and adds rules to curb perceived abuses. The Congressional Budget Office projected the package would increase federal deficits by roughly $3.4 trillion over the next decade, reflecting the bill’s large tax reductions alongside only partial offsets. This article provides a clear breakdown of how the Big Beautiful Bill’s provisions affect high-income Americans – from income and estate taxes to investment incentives – and examines the economic outlook and planning considerations going forward.

Overview of H.R.1 “One Big Beautiful Bill”: Origins, Context, and Goals

H.R.1, nicknamed the “Big Beautiful Bill,” was the flagship legislative priority of the new Congress and administration in 2025. Its origin lies in the impending expiration of many Tax Cuts and Jobs Act (TCJA) provisions from 2017. Without action, individual tax rates would have jumped in 2026, with the top rate reverting to 39.6% (from 37%), the standard deduction halving, and various deductions becoming more restrictive. The Big Beautiful Bill was crafted to permanently extend those tax cuts and avoid what supporters characterized as a looming tax hike on families and businesses. In the words of one House sponsor, H.R.1 “enacts the largest tax cut in American history, lowering rates for working families, providing tax relief for senior citizens, eliminating taxes on tips and overtime pay, and expanding incentives for domestic manufacturing”.

Politically, the bill was packaged not just as a tax cut but as part of a broader conservative agenda. It included measures to reduce federal spending growth and tighten eligibility for welfare programs, which supporters said would “stop the spigot of spending” and yield significant deficit reduction. (Critics dispute this deficit reduction claim given the bill’s large tax cuts, and independent estimates indeed foresee higher deficits despite the spending curbs.) The high-level goals of the legislation, as promoted by its advocates, were to spur economic growth and competitiveness by locking in low tax rates, encouraging investment in U.S. businesses, and simplifying the tax code, while also claiming to eliminate “waste, fraud, and abuse” in areas like green energy subsidies and social programs. The White House and business groups hailed the bill as a pro-growth, pro-investment milestone. For example, the Business Roundtable applauded it for ensuring America “will remain a premier destination for business to invest, hire, and grow”, and Americans for Prosperity called it a “generational win” that “makes pro-growth tax policy permanent”.

On the other side, opponents argued the Big Beautiful Bill disproportionately benefits wealthy individuals and corporations, while risking harm to fiscal stability and social programs. They point out that high earners reap the largest tax savings (e.g. the average millionaire was estimated to receive a far larger tax cut than middle-class families) and that the bill’s cuts to safety-net spending (like tighter Medicaid work requirements) could “take Medicaid and health insurance away from millions”. Analysts noted the bill “will make the country more indebted, more unequal and less green,” summarizing that it adds trillions to the national debt, widens income inequality, and repeals many clean-energy incentives. Indeed, the law rolls back a number of 2022 climate-related tax credits and is projected to contribute to U.S. federal debt reaching roughly $40 trillion by decade’s end. These debates set the stage for how different stakeholders perceive its impact.

For high-net-worth Americans, it’s crucial to cut through the political framing and understand the concrete tax changes. Below, we delve into the key provisions of the Big Beautiful Bill affecting individual taxation, investment strategy, and business ownership, with an emphasis on those relevant to affluent taxpayers. We also discuss the overall economic and market outlook in light of these changes. Throughout, technical terms are explained in plain language – consider this your high-level guide to H.R.1’s impact, without the dense tax jargon.

Key Tax Changes for High-Income Individuals

Under the Big Beautiful Bill, high-income individuals will see a continuation (and expansion) of many tax benefits introduced in 2017, along with a few new deductions. However, some limits on deductions remain or tighten, and certain credits are eliminated. Here are the major changes:

Permanence of Lower Income Tax Rates and AMT Relief

One of the cornerstone features of H.R.1 is making the individual income tax rates from the 2017 tax law permanent. This means the current marginal tax brackets – topping out at 37% for the highest incomes – will not increase in 2026 as they would have under prior law. (Previously, the top rate would have reverted to 39.6% in 2026.) High earners can thus plan on the status quo rates continuing, barring any future legislation. The bill also preserves lower capital gains and dividend tax rates, with no new surtaxes on investment income.

Importantly, the legislation keeps the Alternative Minimum Tax (AMT) at bay for high earners. The AMT is a parallel tax system designed to ensure wealthy taxpayers pay a minimum tax by disallowing certain deductions. The 2017 law had significantly raised AMT exemption amounts, meaning far fewer upper-income folks get hit by AMT now. H.R.1 extends those higher AMT exemption levels permanently (indexed for inflation), so the AMT will continue to affect only a small fraction of very-high-income households. In short, the AMT “fix” remains in place, allowing affluent taxpayers to utilize their deductions and credits without suddenly triggering an AMT bill in most cases.

Another piece of the puzzle is the standard deduction, which was nearly doubled in 2017. The Big Beautiful Bill not only makes that higher standard deduction permanent, it actually increases it further starting in 2025. For example, the standard deduction in 2025 will be $15,750 for single filers and $31,500 for married couples filing jointly, with annual inflation adjustments thereafter. This generous deduction reduces taxable income for all taxpayers. High-income individuals often itemize deductions instead, but the larger standard deduction provides a valuable fallback or simplifies filing in years with fewer deductible expenses.

To summarize these changes and a few others, the table below compares select tax parameters before the bill (under prior law) and after the Big Beautiful Bill’s enactment:

Comparison of key individual tax provisions before vs. after the Big Beautiful Bill. The bill locks in lower rates and higher exemptions from the 2017 tax law, avoiding a reversion to higher taxes in 2026. It also introduces new expansions in certain deductions and credits. (MFJ = Married Filing Jointly.)

Tax Provision	Prior Law (Post-2025)	H.R.1 “Big Beautiful Bill”
Top marginal income tax rate	39.6% (would have returned in 2026)	37% permanent from 2026 onward
Standard deduction	~$13,000 single / $26,000 joint (2017 law, would halve after 2025)	$15,750 single / $31,500 joint in 2025, indexed
State & Local Tax (SALT) deduction cap	$10,000 cap (through 2025); full deduction would return in 2026	$40,000 cap (2025–2029), then reverts to $10k; phase-out of the higher cap for AGI >$500k (phased down to $10k by $600k)
Pease itemized deduction limit (phase-out of deductions at high incomes)	Would return in 2026 (reducing itemized deductions for high earners)	Repealed/Permanent repeal (the bill continues to suspend this limitation)
Alternative Minimum Tax	Exemption ~$81k (single) / $126k (joint) in 2025; would drop in 2026	High exemption (~$500k single / $1M joint) permanent, inflation-adjusted
Estate & gift tax exemption	~$5 million per person from 2026 (was $12.9M in 2023, set to revert)	$15 million per person ( ~$30M per couple ) from 2026, indexed
Child Tax Credit	$2,000 per child (2025), would drop to $1,000 after 2025	$2,200 per child from 2025 onward
65+ Senior income deduction	None (standard deduction only, plus age 65 add-on ~$1,850)	New $6,000 deduction for age 65+ (phased out at >$75k single)

As shown above, high-income taxpayers avoid the across-the-board rate increases that would have hit in 2026 under prior law. The continuation of the 37% top bracket (instead of 39.6%) and similarly lower brackets at other income levels will save wealthy filers thousands to tens of thousands annually in taxes, compared to a scenario where the cuts expired. The estate tax exclusion jump to $15 million per individual is especially impactful for high-net-worth families, potentially sheltering an additional ~$10 million per person from estate taxation compared to previous permanent law (which would have been about $5–6 million). In practical terms, very few estates will owe federal estate tax under this regime, easing concerns about wealth transfer planning (though of course, state estate taxes in some states could still apply).

The SALT deduction cap is a mixed bag for affluent individuals in high-tax states. The bill temporarily raises the cap from $10,000 to $40,000 (for 2025–2029), which substantially increases the deductible amount of state and local taxes for those who itemize. However, this higher cap comes with an income-based phase-out: for joint filers with adjusted gross income (AGI) over $500,000 ($250k for singles), the $40k cap is gradually reduced, and at incomes above $600,000 it drops back to the $10k base level. In other words, many upper-income taxpayers will not get the full benefit of the $40k SALT cap – by around $600k AGI (joint), you’re effectively back to a $10k cap. This compromise was one of the most contentious issues in the bill’s drafting. It offers moderate relief to upper-middle-income households in high-tax states, but for the ultra-high-income (making well into six figures and above), the SALT deduction remains largely limited. After 2029, the cap is slated to fall back to $10k absent further legislation. High-income individuals should plan accordingly: bunching deductions or utilizing any available Pass-Through Entity (PTE) SALT workaround at the state level (notably, the federal bill did not provide any special PTE workaround on SALT). Essentially, the SALT cap continues, albeit at a higher level for a few years, which tempers but doesn’t eliminate the deduction loss felt in high-tax locales.

In addition, the Big Beautiful Bill permanently disallows the old “Pease” itemized deduction phase-out that used to reduce total itemized deductions for very high-income filers. This phase-out (named after former Rep. Don Pease) was repealed in 2017 but would have come back in 2026. By preventing its return, H.R.1 ensures that itemized deductions (like mortgage interest, charitable contributions, SALT up to the cap, etc.) are fully usable without an arbitrary overall reduction for high earners. This is a subtle but important win for wealthy taxpayers, as Pease effectively added about 1-1.2% to the marginal tax rate of the highest earners by clawing back deductions. That will not happen under the new law – high-income filers keep their deductions (subject only to specific caps like SALT or mortgage interest limits).

Changes to Itemized Deductions: Mortgage Interest and More

Speaking of itemized deductions, it’s worth noting how the bill handles mortgage interest. The TCJA had limited the mortgage interest deduction to interest on the first $750,000 of principal for new loans and eliminated the deduction for home equity loan interest (unless used for home improvements). H.R.1 makes those rules permanent. So high-income individuals purchasing expensive homes should be aware: interest on mortgage amounts beyond $750k remains non-deductible, and interest on most home equity loans remains non-deductible as well. This primarily affects wealthy homeowners in high-cost real estate markets. There was no further tightening in H.R.1 beyond the TCJA-era limits; it simply ensures those limits don’t sunset.

Charitable contribution deductions also see a tweak that can affect high-bracket taxpayers. The bill imposes a small floor of 0.5% of income for itemizers’ charitable deductions, meaning only the portion of giving above 0.5% of your adjusted gross income is deductible. Additionally, for the very wealthiest (those in the top 37% bracket), the value of the charitable deduction is effectively capped – this appears to be done by a provision limiting the deduction’s rate benefit, a detail likely intended to raise some revenue. While these changes don’t prevent charitable giving deductions, they slightly reduce the tax incentive for major donors (for example, a billionaire in the 37% bracket might only get perhaps a ~27% effective subsidy for donations instead of 37%). High-income philanthropists may want to consult with advisors on how to navigate these new limitations (such as possibly using donor-advised funds or bunching contributions into one year to clear the floor).

On the alternative minimum tax front, as mentioned, the higher exemption (around $1 million for couples) is locked in. The practical upshot is that very few people will owe AMT, except perhaps those with extremely large incentive stock option exercises or unusual tax preference items. The dreaded AMT “tax trap” that once hit many upper-middle and high earners (especially in high SALT states) should remain a rarity.

Estate and Gift Tax: Higher Exemptions Locked In

For estate planners and wealthy families, the estate and gift tax exemption increase is a headline change. The exemption amount – the value of assets you can transfer without incurring federal estate/gift tax – roughly doubles from what it would have been. Specifically, H.R.1 sets the unified estate and lifetime gift exemption at $15 million per individual (indexed for inflation), effective for estates of people dying in 2026 or later. For a married couple, this means $30 million can be passed on tax-free. This is permanent (as permanent as any tax law can be – of course a future Congress could lower it, but there is no sunset).

Before this law, the exemption in 2025 was about $13 million per person due to inflation adjustments on the TCJA’s $10 million base; but it was scheduled to fall back to around $5–6 million in 2026. That reversion would have pulled many more affluent estates back into the estate tax net. Now, with a $15 million base from 2026 onward (plus continued inflation indexing), the number of estates subject to tax will remain minuscule. Only ultra-high-net-worth estates will owe the 40% estate tax above those thresholds. Wealthy individuals can thus plan large transfers of wealth (through gifts or at death) with much less concern about federal transfer taxes.

It’s still prudent for those in the $15M+ wealth range to consider advanced estate planning (GRATs, dynasty trusts, etc.) to leverage the high exemption while it’s available – and note that many states have much lower estate tax thresholds. But the pressure of the federal exemption “sunsetting” is gone. In fact, some advisors may now revisit existing plans: if you rushed to make large gifts before 2026 out of fear of losing the exemption, you may have new flexibility (though gifts already made are still beneficial to remove future appreciation from the estate). The permanency provides clarity: barring political change, the estate tax is essentially a non-issue for estates under $15 million.

“No Tax on Tips,” Overtime, and Other New Carve-Out Deductions

One of the more eye-catching provisions of the Big Beautiful Bill is its creation of several targeted tax deductions, sloganized as “No Tax on Tips,” “No Tax on Overtime,” and even “No Tax on Car Loans.” These were high-profile promises intended to show benefits for working individuals, though they come with income phase-outs that may limit their relevance to high-income taxpayers.

• No Tax on Tips: The law provides a deduction for qualified tip income received by workers in tipped industries. In effect, tips (up to a cap) are deductible from gross income, making them tax-free. The deduction is limited to $12,500 per year for individuals (and $25,000 for joint filers) and only applies to tips that have been reported to employers (as required by law). It also phases out for higher incomes – specifically, the deduction is reduced once a worker’s modified AGI exceeds $150,000 (single) or $300,000 (joint). Above those levels, the benefit decreases $100 for every additional $1,000 of income, meaning many high-income individuals won’t qualify. Practically, this “no tax on tips” primarily helps hospitality and service industry employees in moderate income ranges. For high-net-worth readers, you might not benefit directly (unless you have a side business waiting tables!), but if you own restaurants or service businesses, be aware that your employees will be very interested in this change. It’s temporary – available for tax years 2025 through 2028 – so it creates a four-year window where tips are tax-free up to that cap. Employers will need to provide guidance to employees on how it works, and the IRS will issue regulations to prevent abuse (ensuring, for example, that people don’t try to reclassify wages as “tips” improperly).
• No Tax on Overtime: Similarly, the bill allows a deduction for overtime pay for workers under certain conditions. The intent is to make overtime hours (the pay earned for hours worked beyond 40 in a week for non-exempt employees) effectively tax-free up to a limit. The deduction cap is $12,500 for single ($25,000 joint), which roughly corresponds to making up to $50,000 of overtime wages tax-free for an average worker in the 22% bracket. However, here too, it phases out at incomes above $150k/$300k AGI. Thus, higher-income professionals who earn overtime (e.g. some in medical fields or trades) may or may not see a benefit if their total income exceeds the threshold. The deduction only applies to FLSA-required overtime (basically time-and-a-half pay mandated by law for hourly workers), not, say, bonus income or self-declared overtime for salaried employees. This provision is also slated to sunset after 2028. For business owners, note that you’ll need to report overtime pay separately on W-2 forms so that employees can claim this deduction. Again, the direct impact on high-income investors or executives is limited (since those folks often aren’t hourly), but it’s part of the overall tax landscape now in a way that could affect labor markets and employee morale.
• Auto Loan Interest Deduction (“No Tax on Car Loans”): In a nod to populist appeals (and perhaps the automotive lobby), H.R.1 creates a temporary deduction for interest on new car loans. Personal interest is usually not deductible (only mortgage interest and student loan interest have been, historically), but from 2025 through 2028 interest on a loan for a new personal vehicle can be deducted up to a maximum of $10,000 of interest per year. This only applies for loans on cars, trucks, motorcycles, etc., that are purchased after 2024 and assembled in the U.S. (so it excludes used car loans and perhaps some foreign-assembled vehicles). It also excludes loans for vehicles not used for personal driving (no business fleet vehicles, no commercial-use vehicles). High-income taxpayers should note that this too phases out – the deduction begins phasing down for taxpayers with over $100,000 AGI (or $200,000 for joint filers). By $150k single/$300k joint, the benefit likely phases out completely. So this is geared toward middle-class car buyers more than the wealthy. Still, for those in the phase-out range, maybe a luxury car loan’s interest might partially qualify if your income isn’t too high. One favorable aspect is that you can claim this even if you don’t itemize deductions – the law specifically allows it above-the-line, so even taxpayers taking the standard deduction can deduct car loan interest now. This is a novel break and might factor into financing decisions (perhaps encouraging auto purchases during 2025–2028). High-net-worth individuals probably won’t be rate-chasing car loan deductions, but if you have family members or younger folks buying cars, it’s an interesting temporary perk to be aware of.

In summary, these carve-out deductions (tips, overtime, car loan interest) provide targeted tax relief largely to moderate earners and specific groups. They likely won’t materially change the tax liability of very high-income individuals, due to the phase-outs. However, they reflect the bill’s attempt to show direct benefits to the workforce. As an active investor or business owner, you might take note of these as indicators of policy direction (e.g., favoring domestic auto purchases, encouraging work) and understand their administrative requirements for your companies. They are also items to watch in tax planning for any family members who might qualify. Notably, all these provisions sunset after 2028, so they are temporary stimulative measures rather than permanent structural changes.

Clean Energy and Other Credits: What’s Eliminated

High-income taxpayers with green energy investments or business interests in renewables need to be aware that the Big Beautiful Bill rolls back a number of clean energy tax credits that were expanded in recent years. In particular, it repeals or phases out many credits from the 2022 Inflation Reduction Act (IRA), which the drafters derided as “green corporate welfare”. For example, credits for EV purchases, solar installations, energy-efficient home upgrades, and various renewable energy production incentives are curtailed. The nonprofit sector’s analysis warned that this move “reverses a large number of effective major climate initiatives under the Inflation Reduction Act”.

For an investor, this means that tax subsidies for clean energy projects are now more limited. Utility-scale solar or wind farm investments, for instance, might no longer qualify for the full production or investment tax credits if the project has significant foreign ties (the law introduced strict “foreign entity of concern” rules denying credits for projects using certain Chinese-made components). Energy credits under Sections 45, 48, etc., have new restrictions that could affect the ROI of such projects. Wealthy individuals who invest in renewable energy partnerships or funds will want to review how the changes impact their tax equity deals. Some credits are outright eliminated over a transition period, which could alter the economics of pending projects.

From a tax planning perspective, the elimination of clean energy credits removes some of the incentives high earners used to reduce taxes. For instance, installing a large solar array on a residence or investing in carbon capture projects previously came with hefty credits/direct pay options – those may no longer be available, or may be greatly reduced. One projection cited by Newsweek suggested that these repeals “may effectively eliminate about 840,000 clean energy jobs by 2030” due to reduced investment, underscoring the scale of pullback in that sector. While that figure is contested, there is no doubt the tax landscape for green investments is less favorable now than it was in 2022–2023. High-net-worth investors should revisit any assumptions of tax credits for ongoing or future sustainable investment ventures.

Besides energy, some other niche tax benefits were removed. The bill, for example, rescinded a controversial new IRS reporting rule that would have required Venmo/PayPal and similar platforms to issue 1099s for transactions over $600. That’s a relief for small business owners and gig workers (and arguably for anyone occasionally splitting bills with friends), though it doesn’t directly impact tax liability, just reporting complexity. On the other hand, an earlier Senate version had proposed taxing certain litigation finance proceeds and increasing taxes on private foundations’ investment income; the final bill dropped some of those proposals. One thing that did survive is a higher excise tax on large private college endowments – the tax on net investment income of the wealthiest university endowments increases from 1.4% to 8% for the richest schools (scaled down to 4% or 1.4% for slightly smaller endowments). So, if you are a donor or board member of an Ivy-plus university, be aware that their endowment now faces a steeper tax, which could indirectly affect spending or fundraising needs.

In summary, for high-income individuals, the Big Beautiful Bill solidifies a low-tax environment on the income, capital gains, and estate fronts, while trimming some deductions and nixing many recent credits. You’ll enjoy the continuation of lower rates and bigger exemptions, and possibly benefit from niche deductions like the SALT cap increase or the child credit bump. But you’ll also see the removal of some tax incentives (especially around clean energy) that might have featured in your investment strategies. The next sections turn to specific investment-related provisions and business owner considerations, which further flesh out the opportunities and changes introduced by this new law.

Investment Implications for the Wealthy: QSBS, Opportunity Zones, Real Estate, and Retirement

High-net-worth investors and entrepreneurs often structure their finances to take advantage of various tax-favored investments. The Big Beautiful Bill introduces significant enhancements to certain investment incentives, while also making some temporary provisions permanent. Here’s how it affects key investment-related areas:

Qualified Small Business Stock (QSBS) – Enhanced Breaks for Startup Investors

If you invest in startups or private businesses, you’re likely familiar with Qualified Small Business Stock (QSBS) under Section 1202 of the tax code. QSBS allows investors in certain C-corp startups (with assets <$50M) to potentially exclude 100% of the capital gains on the sale of that stock, up to a $10 million gain (or 10× investment) limit, if they hold the stock for 5+ years. It’s a powerful incentive for angel investors and VCs. The Big Beautiful Bill doubles down on QSBS benefits, making them even more generous.

First, the law increases the per-investor gain exclusion cap from $10 million to $15 million for stock issued after the enactment date. This $15M cap will also be indexed for inflation going forward. That means an investor can now potentially enjoy up to $15 million in tax-free gains per qualified company (the 10× basis alternative cap remains in place as well). For serial entrepreneurs or angel investors, this significantly boosts the tax-free upside on a successful startup investment. Given that $10M from 1993 (when QSBS started) would be over $110M today if fully inflation-adjusted, some argue $15M is still modest, but it’s a clear improvement.

Second, H.R.1 raises the eligibility threshold for companies: the definition of a “qualified small business” is expanded by increasing the gross assets limit from $50 million to $75 million. This means companies can be larger and still qualify as QSBS issuers. A company raising capital can now have up to $75M in assets post-funding and still give investors QSBS-eligible stock. This change recognizes inflation and the larger funding rounds common today – it widens the net of companies whose stock sales can qualify for tax-free treatment, thereby encouraging more investment in slightly larger startups.

Perhaps most notably, the bill introduces a tiered exclusion based on holding period for QSBS acquired after enactment. Previously, you had to hold QSBS for 5 years to get any exclusion (100%). Now there are intermediate rewards: 50% of the gain is excluded after a 3-year hold, and 75% after a 4-year hold, with the full 100% exclusion still at 5 years. This is a significant development. It provides liquidity options for investors and founders – if an exit happens a bit sooner than five years, you don’t lose the benefit entirely; you get a partial exclusion. For example, selling after 4 years would mean only 25% of the gain is taxed (effectively a 25% of gain * 23.8% tax ≈ 5.95% effective tax rate on the total gain) instead of the full 23.8% one would normally pay on long-term gains for high earners. Of course, holding the full 5 years for 0% tax is still ideal, but this adds flexibility in planning exits. It might also stimulate more secondary market transactions around the 3- to 4-year mark, since sellers and buyers can factor in these thresholds.

These QSBS enhancements reflect a policy choice to promote long-term investment in startups and emerging businesses. The venture capital community strongly supported expanding QSBS, noting it “has a proven track record of promoting long-term investment in high-risk startups”. By increasing the exclusions and thresholds, the law aims to channel more capital into innovative companies. Critics, however, label QSBS a giveaway to the wealthy – indeed, the benefits “accrue almost entirely to the highest-income taxpayers” and cost the government billions in lost revenue. Regardless of the debate, as an investor, one actionable insight is: consider structuring investments to qualify for QSBS when possible (e.g. invest in C-corps, mind the gross assets limit, and hold for at least 3 years). Also, if you’re a founder, be aware of these rules when issuing stock or considering conversions and exits. The effective tax rate on a QSBS sale could now be anywhere from ~0% to ~10% depending on holding period and gain size, which is tremendously favorable.

It’s worth noting these QSBS changes apply only to stock issued after the law’s enactment. Stock you already hold (acquired before this law) still falls under the old rules (5 years for 100% exclusion up to $10M etc.). So there won’t be retroactive benefit for existing holdings, but any new investments going forward will use the expanded criteria. If you’re in the midst of funding rounds, there might be strategic considerations (for instance, if feasible, closing an issuance post-enactment could confer the new benefits). As always, careful documentation and consultation with tax advisors is key, since QSBS qualification has many technical requirements (type of business, active business test, etc.). But overall, the Big Beautiful Bill makes QSBS an even sweeter deal for high-income investors fueling the next generation of companies.

Opportunity Zones – Now a Permanent Fixture with New Perks

Opportunity Zones (OZ), created in 2017, offered tax deferral and potential tax-free appreciation for investments in economically distressed areas, but those incentives had a timeline (the deferral of prior gains was only until 2026, and the program wasn’t set to accept new investments indefinitely). H.R.1 revamps and permanently extends the Opportunity Zone program. This is a major development for real estate investors and others who use OZ funds.

Key changes include:

• The OZ program is made permanent with rolling designations. Instead of all zones expiring after 2028, the law allows for new 10-year OZ designations starting in 2027 and beyond. This means there will continuously be Opportunity Zone areas where new investments can qualify for benefits, refreshing the map of eligible communities over time.
• It updates the criteria for what counts as a low-income community to refocus zones on truly needy areas (and eliminates some prior loopholes like contiguous high-income tracts qualifying). High-income investors should be aware that some zones might change; you’ll want to verify that a location is indeed a qualified OZ before investing, especially with new rounds of designations.
• The tax benefits are tweaked: originally, investors could defer a capital gain by investing in an OZ and potentially reduce that deferred gain by up to 15% if held long enough (that part was time-limited and is essentially moot now), and importantly, any gain on the new OZ investment itself is tax-free if held 10+ years. The new law enhances the basis step-up for certain investments, especially in rural Opportunity Zones. While details will require IRS guidance, it implies investors might get even better tax treatment (perhaps shorter holding for partial exclusion, or greater exclusion percentages) for projects in rural areas, to spur development there.
• The timing of gain recognition for deferred gains is adjusted – under old law, all deferred gains were due at the end of 2026. With H.R.1’s passage, that likely got moved or modified, although specifics in summaries are scant. It’s possible the recognition date was extended or conditions changed.
• Reporting requirements are added and transparency increased. For the ultra-wealthy utilizing OZs, expect a bit more compliance paperwork; Congress wants to ensure the program’s benefits are reaching communities.

For investors, the takeaway is Opportunity Zones are here to stay and perhaps more attractive, especially for long-term investments in rural and underserved areas. If you have capital gains, you can continue to roll them into Opportunity Zone Funds beyond 2026 to defer and potentially eliminate tax on the new investment’s appreciation. The permanence removes the rush that existed to get into an OZ before the program ended. It becomes a standard tool in the tax planning toolkit for high-net-worth portfolios: have a big gain? Consider OZ if a suitable project is available. The enhancements may improve returns on certain projects – for instance, a rural OZ renewable energy project might recoup some of the lost direct credits via these OZ boosts (though note if it’s a renewable project, ensure it’s not disqualified by the new foreign entity rules for energy credits).

One caution: The House’s earlier proposal to set aside specific tracts for rural areas was not adopted in final – instead of a quota, they went with incentives, so one must still find qualified projects. Also, OZ tax benefits still generally require a 10-year horizon to get the full exclusion on appreciation. That hasn’t changed (and now that timeline can extend further out since zones will renew). So OZ investments remain a long-term, patient capital play – fitting for those who can afford to lock money away, but not a quick flip strategy. With the program now permanent, we might see renewed interest from family offices and funds focusing on impact investing in OZs, with the dual goal of returns and tax efficiency.

Real Estate Investors: 1031 Exchanges, Depreciation, and REIT Tweaks

Real estate investments see a mix of indirect benefits and one notable change under H.R.1. The good news for property investors is that like-kind exchanges (Section 1031) for real estate were untouched – there had been talks in past years (during other proposals) of limiting 1031 exchanges for high-end real estate, but the Big Beautiful Bill does not alter Section 1031. Thus, investors can continue deferring capital gains by swapping real properties in tax-free exchanges as before. This is significant for high-net-worth individuals in real estate: the strategy of rolling proceeds from one property sale into the next, indefinitely deferring tax (and potentially eliminating it at death via basis step-up), remains viable and is now complemented by generally lower tax rates if one ever cashes out. In short, 1031 exchanges survived intact, allowing real estate portfolios to be rebalanced or upgraded without immediate tax friction.

Another boon comes from the bill’s business expensing provisions, which indirectly benefit real estate developers and investors. The 100% bonus depreciation that was phasing down is now fully restored and made permanent for qualifying property. While most real property itself doesn’t qualify for bonus depreciation (since buildings have long lives), components like qualified improvement property (QIP) – e.g. interior renovations of commercial buildings – and certain equipment do qualify. By being able to immediately write off such costs, developers can significantly shelter income. Moreover, the Act introduced a special “qualified production property” deduction for manufacturing facilities which allows immediate expensing of the structural components of new domestic factories. For real estate investors, that might not directly apply unless you’re building a factory, but it signals a favorable view towards expensing.

Additionally, the Section 179 expensing limit for equipment purchases doubled to $2.5 million (with phase-out threshold at $4M). Real estate businesses (like REITs or property management firms) could utilize this for things like purchasing furnishings, appliances, or vehicles used in operations. This tends to help small-to-mid size operators more than giant ones, but it’s useful across the board for immediate write-offs.

A specific change for real estate investment trusts (REITs) is in their corporate asset rules: The Big Beautiful Bill allows REITs to have a larger portion of assets in Taxable REIT Subsidiaries (TRS). Previously, a REIT could not have more than 20% of its assets comprised of securities of its TRSs. H.R.1 raises that limit to 25%. This gives REITs a bit more flexibility to hold ancillary businesses or services (through a TRS) without jeopardizing their REIT status. For example, a hotel REIT often has a TRS that manages the hotels (since operating a hotel is not a passive real estate rental activity). Now the size of that TRS relative to the REIT can be larger, which could facilitate growth or additional service offerings. For high-income investors who hold REIT shares, this might mean REITs can pursue slightly more diversified income streams (still within limits). It doesn’t change your taxation directly, but a healthier REIT sector and possibly higher yields could result from such flexibility.

Another confirmation from the bill is that the 20% pass-through deduction (Section 199A) for REIT dividends is permanent. Under TCJA, investors in REITs can deduct 20% of their qualified REIT dividends, effectively lowering the tax rate on those dividends. That deduction was tied to 199A and would have expired in 2026, but it’s now permanent along with 199A itself. So investors in REITs continue to enjoy a tax-favored status on those distributions (typically taxed at ordinary income rates, but with a 20% deduction now locked in).

Real estate investors should also note the interest expense limitation change (Section 163(j) EBITDA rule) discussed in the business section below – many large real estate partnerships had to deal with interest deductibility limits and the switch back to an EBITDA basis from EBIT will allow more interest to be deducted starting in 2025. Real estate is often a leverage-heavy investment, so this technical change (allowing depreciation and amortization to be added back when calculating the 30% income limit for interest) is very helpful, as depreciation is huge for real estate and under prior law (2022–2024) it was not counted, artificially constraining interest deductions. Now, full deductibility of interest (subject to the higher threshold) will reduce taxable income for property investors with financed deals.

All told, the Big Beautiful Bill reinforces real estate’s tax-favored status: 1031 exchanges remain, depreciation gets a boost, interest deductibility is eased, and REITs keep their advantages. There weren’t new housing-specific incentives (no new low-income housing credit changes, etc., in this bill), but for high-end investors the playing field is as good as or better than it was. If anything, one should keep an eye on local real estate markets: the higher SALT cap might slightly improve high-tax coastal markets by easing the property tax deduction issue in the near term, and interest rates (driven by macro policy) will be the major factor outside the bill’s scope. We’ll touch on macro implications later, but from a pure tax perspective, real estate continues to be a prime vehicle for tax-efficient wealth building.

Retirement Plans and the New “Trump Accounts”

High-net-worth individuals often maximize retirement plans and perhaps establish savings vehicles for the next generation. The Big Beautiful Bill’s effect on standard retirement plans (401(k)s, IRAs, etc.) is mostly preservative – it does not cap or remove any existing benefits for tax-deferred retirement savings. This was a conscious choice, and industry groups cheered that “tax deferral of retirement savings is preserved”, meaning no new taxes on 401(k) or IRA contributions/distributions beyond current law. In short, you can keep contributing to your 401(k) or backdoor Roth or what have you, under the same rules as before. There had been some fear that Congress might seek revenue by, say, limiting mega-IRA sizes or changing Roth rules (ideas floated in the past), but none of that happened here.

What did happen is the creation of a novel vehicle: “Trump Accounts,” which are essentially new tax-advantaged savings accounts for children. A Trump Account is defined as a type of individual retirement account (IRA) for minors, except it isn’t a Roth and has special rules. Under the law, the Treasury will facilitate the creation of these accounts for every eligible child. Here are key points:

• Eligibility: Children under 18 with a Social Security Number can have a Trump Account; the government may auto-enroll newborns or allow parents to elect within a timeframe. A pilot program even provides $1,000 seed money for each child born 2025–2028 to kickstart these accounts.
• Contributions: Up to $5,000 per year can be contributed on behalf of the child (after the first year from enactment). These contributions are not tax-deductible (no upfront deduction) – think of it like a Traditional IRA with no deduction, or more similarly, like a Coverdell Education Savings Account but with broader usage. There are no contributions allowed once the child turns 18.
• Investments: The accounts can only invest in very safe, low-cost index funds – the law specifies eligible investments as mutual or exchange-traded funds tracking broad indices (like the S&P 500) with no more than 0.1% annual fees and no leverage. This is to ensure the funds are conservatively managed for the long term.
• Distributions: No withdrawals are allowed before age 18 (except on death/disability of the child). After reaching adulthood, the account can be used for “qualified uses” – which the summary indicates as educational purposes, starting a business, or other eligible purposes. The law’s text references that distributions would otherwise follow IRA rules; it appears early withdrawals (before typical retirement age) are permitted for those specific uses without penalty. Essentially, it’s like a nest egg for young adults to either pursue higher education or entrepreneurship or perhaps buy a first home (depending on what Treasury defines as eligible).
• Tax Treatment: These Trump Accounts are treated like Traditional IRAs for tax purposes – meaning the earnings grow tax-free inside the account, and distributions for qualified purposes would presumably be tax-free (or taxed if not qualified). Rollovers and even employer contributions are permitted, interestingly. Since contributions weren’t deducted, one would hope distributions are tax-free (similar to a Roth), but the bill text treats it as an IRA not designated as Roth, which is a bit confusing. It may function akin to a “child’s Roth IRA” with after-tax contributions and tax-free withdrawals for allowed expenses.

For high-income families, the Trump Account is an intriguing new tool. It effectively creates a government-blessed investment account for your kids that can appreciate from birth to adulthood, then help fund college or a startup. It’s somewhat like a 529 college savings plan, but broader in usage (and with a lower contribution limit). One could imagine contributing $5k each year for a child; if invested in the S&P 500 from birth to age 18, it could potentially grow significantly (market conditions varying) and then be used for college tuition or seed capital, with no tax on the growth. The downside is the restrictive investment choices (no picking individual stocks or higher-yield assets) and the relatively modest cap of $5k/year.

Still, for wealthy parents or grandparents, maxing out Trump Accounts for the young ones could be a no-brainer – it’s extra tax-advantaged space. Combined with 529 plans (which remain unchanged and can now even roll into Roth IRAs for the beneficiary under SECURE Act 2.0 rules), families have multiple avenues to grow wealth for the next generation tax-free.

It’s worth noting that the Senate tweaked the Trump Account provisions before final passage. They dropped some earlier House conditions (like certain distribution restrictions) and aligned it with IRA rules more closely, which actually made the accounts more flexible (e.g. allowing rollovers from other accounts). Because these are new, it will take time for Treasury to implement and for financial institutions to create products. For now, just know that starting in 2025, a new child born in your family is likely eligible for a $1,000 government-funded deposit and you can begin contributing to their “Trump Account.”

Overall, on retirement and family savings: no news is good news for existing plans (your 401k remains fully in play, no new caps), and new opportunities exist for intergenerational wealth building via the Trump Accounts and continued backdoor Roth techniques, etc. The preservation of the Saver’s Credit and even its extension to ABLE accounts (for disabled individuals) in the bill further underscores the continued support for retirement and savings vehicles.

Business Owners and Entrepreneurs: Tax Breaks for Pass-Throughs, Expensing, R&D, and International Reforms

Many high-net-worth individuals are business owners – whether of pass-through entities like LLCs/S-corps, or C-corporations – or are investors in privately-held businesses. The Big Beautiful Bill carries numerous provisions aimed at businesses, big and small. Here we’ll highlight those most relevant to entrepreneurs and investors in businesses:

199A Qualified Business Income (QBI) Deduction – Now Permanent

The 20% QBI deduction for pass-through business income (Section 199A) has been a major tax benefit from TCJA for owners of S-corporations, partnerships, and sole proprietorships. It allows eligible business owners to deduct 20% of their qualified business income, effectively reducing the top rate on that income. However, it was scheduled to sunset after 2025. H.R.1 makes the 199A deduction permanent at the 20% rate. This is a big win for entrepreneurs and investors in pass-through entities – it means that, going forward, you can continue to deduct a fifth of your business profits each year, significantly lowering the tax burden on that income (e.g., a top-bracket business owner faces an effective rate of ~29.6% instead of 37% on their passthrough income).

This permanence provides certainty – business owners can make long-term plans, valuing their firms or cash flow with the assumption that roughly one-fifth of profits will remain untaxed (by virtue of the deduction). It also cements an element of tax parity given that the corporate tax rate is 21%; with a 20% QBI deduction, the top effective individual rate on business income ~29.6% is not too far off when considering one layer of tax vs two layers for C-corps (21% + dividend taxes).

One caution: the guardrails of 199A (like the exclusion of certain service businesses over the threshold, and the wage & property basis limitations) remain in effect. Those were not removed. So high-earning doctors, lawyers, consultants, etc., still do not get the QBI deduction if their income is above the threshold, unless they’ve structured around it (via splitting into separate entities or such). Manufacturing, real estate, and other qualified businesses do continue to enjoy it. The bill, by extending 199A, essentially preserves the status quo planning landscape – nothing drastically new to do, but you won’t lose the deduction after 2025.

Additionally, the law made permanent the limitation on excess business losses for non-corporate taxpayers. This rule (Section 461(l)), originally set to expire in 2026, prevents individual business owners from using more than $500,000 (joint filers) of business losses to offset other income in a year – excess losses get carried forward. This is a trade-off: while you keep 199A, you also permanently keep this loss limitation. For wealthy individuals who invest in businesses that generate large paper losses (say through depreciation or start-up costs), you can’t use those losses beyond $500k to shelter other income in the year – the rest carries to the next year. Many entrepreneurs hit by this likely have their losses deferred, not eliminated, but it does affect tax liquidity. So in planning, be aware that using huge losses (from real estate or businesses) against other income faces a fixed cap each year.

Full Expensing and Depreciation Breaks

The Act contains big benefits for capital investment:

• 100% Bonus Depreciation is back, permanently. The TCJA’s full expensing (100% immediate write-off) for most new machinery, equipment, and certain eligible property was phasing down (80% in 2023, 60% in 2024, etc.). H.R.1 restores it to 100% for property placed in service after Jan 1, 2025 and makes it permanent. This means businesses can continue to write off the entire cost of equipment and short-lived assets in the year of purchase, rather than depreciating over several years. For business owners, that’s a major cash-flow and tax-shelter boon. Buying a $1 million piece of equipment? Deduct $1 million immediately, lowering your taxable income. This applies to both new and used property (as before) and includes things like computers, machines, vehicles (over 6,000 lbs), furniture, etc. It does not include buildings or structures, but it does include Qualified Improvement Property (QIP), which refers to interior improvements to commercial buildings. QIP is 15-year property eligible for bonus – so a renovation of your office or retail store could be expensed outright, encouraging reinvestment in properties.
• Section 179 Expensing expanded. Section 179 is a separate provision that lets smaller businesses deduct the cost of assets (with some limits, and it phases out for larger purchases). The bill doubles the maximum Section 179 deduction to $2.5 million, with the phase-out starting at $4 million of purchases. In practice, many mid-size and even fairly large businesses can now use Section 179 without hitting the phase-out. Section 179 can be used for a broad range of property including certain improvements to non-residential real estate (roofs, HVAC, security systems, etc.). Combined with bonus, most businesses will simply opt for bonus depreciation now (since it doesn’t have a taxable income limit, whereas 179 can’t create a loss beyond certain bounds). But it’s nice to have an expanded 179 especially for specific assets ineligible for bonus or for flexibility (179 can be cherry-picked asset by asset; bonus is all-or-nothing by class life, unless you elect out). The key point: invest in your business’s capital needs confidently – the tax code will allow immediate write-off of most investments.
• Special Expensing for Manufacturing Facilities. A new concept introduced is Qualified Production Property (QPP) deduction. This seems to allow even structures (buildings) that are part of a manufacturing or production facility to be immediately expensed if they meet criteria (engaged in manufacturing, substantial transformation of product, etc.). Essentially, if you build a factory or plant in the U.S., you might get to deduct the construction costs fully in year 1 rather than depreciating over 39 years. The IRS will have to clarify this, but it’s potentially a game-changer for industrial businesses and could heavily incentivize domestic factory construction. For high-net-worth investors considering building a plant (or funding one), this could dramatically improve after-tax ROI. It’s like turning real estate into an immediately deductible expense if it’s for manufacturing – a very generous policy intended to boost U.S. manufacturing capacity.

Putting these together, business owners should accelerate or front-load capital expenditures to take advantage of full expensing. The time value of money benefits of writing off an asset now rather than over years are significant. It effectively reduces the cost of new investments (the government is footing some of the bill via tax savings). Particularly in sectors like tech, manufacturing, construction, transportation – where equipment needs are high – this permanent extension removes uncertainty (no more worrying that “bonus might go away, should we buy now or later?”). Now it’s just a stable part of planning: buy whenever needed, you’ll expense it.

Research & Development (R&D) – Immediate Expensing Restored

Another huge change: the bill reverses the recent requirement to amortize R&D expenses over 5 years, re-allowing businesses to deduct R&D costs in the year incurred. This is effective for expenses after 2024, and it’s made permanent. It also provides a catch-up: businesses that were forced to capitalize R&D in 2022–2024 can write off the remaining balance either fully in 2025 or split between 2025 and 2026. Furthermore, very small businesses (under $31 million gross receipts) get retroactive relief back to 2022 – meaning they can amend returns to immediately expense those prior R&D costs.

This is a big deal for any founder or company investing in development – be it software development, product design, biotech research, etc. Under the TCJA’s quirk, starting in 2022, companies had to start amortizing domestic R&D over 5 years (and foreign R&D over 15). It was widely criticized for disincentivizing innovation. H.R.1 kills that requirement for domestic R&D. Now, you can write off 100% of your R&D spending each year, which often creates or increases net losses that can offset other income or be carried forward. High-growth startups will benefit since they often spend heavily on R&D – they can now preserve cash via tax refunds (or reduced estimated tax payments if profitable). The foreign R&D still must be amortized over 15 years, which is a bit of a nod to not encouraging offshoring research. But domestic R&D is fully incentivized.

Example: if your tech startup spends $5 million on engineers’ salaries and other R&D in 2025, you deduct $5M in 2025 (under prior law, you would have only deducted $1M and amortized the rest). This could generate a net operating loss (NOL) that you carry forward to offset future income (NOL usage rules still apply). Or if you’re an established company, it directly reduces taxable profit now. The bill not only fixes this going forward but also says: those of you who had to capitalize costs in 2022-24, you can clean that up by dumping the remaining amortization into 2025 (or 2025-26). That could mean a really big deduction in 2025 for some companies, essentially catching up on 3 years’ worth of R&D expense.

From a planning perspective, the tax code again encourages investing in innovation. Companies can confidently ramp up research efforts without worrying about losing immediate tax benefits. High-income owners of businesses can utilize R&D expensing to reduce current taxable income. It might even encourage more R&D in the U.S. vs abroad, since the latter still has the amortization penalty.

One caveat: the R&D credit (separate from expensing) is unchanged. Companies can still take the R&D tax credit for qualified research which is a dollar-for-dollar offset of taxes (particularly valuable for profitable firms or startups via payroll credit). Expensing and the credit can coexist (with some addback adjustments). The return of expensing makes the credit slightly less critical for cash flow, but it’s still lucrative to claim both if eligible.

Interest Deduction (163(j)) – Back to EBITDA Basis

The 2017 tax law introduced a cap on interest expense deductions for businesses: interest could be deducted only up to 30% of adjusted taxable income (with unlimited carryforward of excess interest). Through 2021, adjusted taxable income was essentially EBITDA (earnings before interest, taxes, depreciation, amortization). Starting 2022, it tightened to EBIT (depreciation and amortization not added back), making the limit harsher. This disproportionately affected asset-heavy, leveraged industries (like manufacturing, transportation, and real estate) where depreciation is large – their allowable interest dropped since depreciation no longer padded the income measure.

The Big Beautiful Bill reverts the interest limitation to an EBITDA basis permanently from 2025. This means more interest expense will be deductible for businesses starting in 2025, as they’ll calculate the 30% limit on a higher income number (since they can add depreciation/amortization back). In effect, it loosens the restriction on interest write-offs. Additionally, the bill leaves in place relief for small businesses (exempting those under $27 million gross receipts, inflation adjusted).

For entrepreneurs and private equity investors who often use debt financing in acquisitions or expansions, this is quite beneficial. The stricter EBIT-based limit was a concern because it could lead to denied interest deductions, especially as bonus depreciation was phased down (which raises taxable income, ironically mitigating some interest limit impact). Now with bonus back at 100% and interest limit back to EBITDA, the combination is great: you can depreciate fully and not have that reduce your ability to deduct interest.

In practical terms, a capital-intensive business will rarely face nondeductible interest now, unless it’s extremely leveraged, because 30% of EBITDA is a fairly generous allowance in most cases (and if it’s extremely leveraged, other limitations or business considerations might be at play). High-income business owners using leveraged buyouts or expanding via loans will get full interest deductions, reducing after-tax cost of debt. This aligns with the bill’s general stance of encouraging investment and expansion.

One should note, though, that interest expense is still disallowed above the limit (that hasn’t gone away), it’s just that the calculation is friendlier. Also, this doesn’t change the treatment of interest for real estate that elected out (those electing out had to use ADS depreciation and keep interest fully deductible – those elections remain as they were). But for those who did not elect out, 2025 onward becomes easier.

International Tax Reforms: GILTI, FDII, and Global Considerations

For globally active founders and multinational business owners, H.R.1 makes some adjustments to the international tax regime put in place by TCJA. The law basically retains the structure of GILTI and FDII – the minimum tax on foreign earnings and the incentive for export income – but tweaks the rates and mechanics to arguably make the U.S. system more competitive (while not fully embracing the OECD global minimum tax, which the U.S. has not adopted).

Key points:

• GILTI (Global Intangible Low-Taxed Income): This is the regime that taxes U.S. multinationals on a portion of their foreign earnings. Pre-law, GILTI effective rate was 10.5% (set to rise to 13.125% in 2026 as a deduction shrank). H.R.1 renames GILTI to “Net CFC Tested Income” (NCTI) and sets a permanent effective tax rate of about 14% on it. They achieve this by adjusting the Section 250 deduction to 40% (instead of 50%), and by changing foreign tax credit rules (the credit “haircut” on foreign taxes paid goes from 20% to 10%). End result: if you have a controlled foreign corporation earning profit, the U.S. will tax it at ~14% (after the 80% credit for foreign taxes, effectively). This is actually a bit higher than the originally scheduled 13.125%, but it’s lower than what would have happened if nothing was done (because it would have gone to 16.4% if the TCJA changes fully lapsed). So, in one sense, they prevented a tax increase on foreign earnings that was coming in 2026, keeping the rate relatively low.
  • They also eliminated the complicated “QBAI” exemption (which gave a 10% return on tangible assets exempt from GILTI). Now it appears GILTI (er, NCTI) will just tax a straight percentage of CFC earnings without that carve-out for tangible asset returns. This simplifies things but means even income from tangible-heavy businesses abroad is fully in the base.
  • For high-net-worth business owners, the implication is that if you operate abroad through CFCs, you’ll face a minimum U.S. tax of ~14% on those foreign profits. If the foreign country’s tax is at least 14%, you’ll mostly avoid additional U.S. tax (due to credits). If it’s lower, you top up to 14%. This rate is below the 15% global minimum tax other countries are discussing, so the U.S. remains on the lower side.
• FDII (Foreign-Derived Intangible Income): Renamed to “Foreign-Derived Deduction Eligible Income” (FDDEI), this is the carrot to GILTI’s stick – a lower tax rate on export income of U.S. companies (to incentivize keeping IP in the U.S.). It was effectively ~13.125% (set to rise to 16.406% in 2026). The law adjusts the deduction to make FDII’s effective rate also ~14% and equal to the GILTI rate. The FDII deduction becomes 33.34% (instead of 37.5%). They remove the linkage to intangible assets by eliminating the deemed routine return subtraction. And importantly, they deny FDII benefits for income from exporting intangible property (like patents). So FDII (or FDDEI) will essentially become a modest export incentive for goods and services, but not for IP licensing – likely an anti-abuse measure so companies don’t just book massive royalties in the U.S. at a preferential rate.
  • If you’re a U.S. company selling products or services abroad, you still get a lower tax on that income (14% instead of 21%). If you’re licensing IP or selling to related foreign parties, you’ll need to see if those qualify. By leveling GILTI and FDII both at ~14%, the law arguably simplifies planning: whether you earn profit in the U.S. and export or earn it abroad, you face similar tax rates, reducing the incentive to shift profits one way or the other.
• BEAT (Base Erosion and Anti-Abuse Tax): The bill keeps the BEAT (which targets large multinationals eroding the U.S. base via payments to foreign affiliates) at 10.5% permanently. It cancels a scheduled increase to 12.5%. It also maintains the current exemption threshold (the de minimis for base erosion percentage) and does not add the proposed reliefs that business wanted (like exempting high-taxed payments or allowing cost of goods sold exceptions). Essentially, BEAT remains a concern for big companies making lots of related-party payments out of the U.S., but now at a fixed rate. For most individual business owners, BEAT isn’t directly relevant unless you run a pretty large corporation.
• Other international tweaks: Foreign tax credit simplifications and making the CFC look-through rule permanent. The look-through rule (allows certain intercompany dividends, interest, rents between related CFCs to not be treated as passive income) is now permanent, which is helpful for those with complex CFC structures. Also, a reversal of a 2017 change: downward attribution rules (which caused some foreign-owned domestic companies to be treated as CFCs unexpectedly) were rolled back to pre-2017 law, which is good if you had minority stakes in foreign companies that got roped into CFC status by those rules.

In plain terms, for globally active high-net-worth entrepreneurs: The international provisions of the 2017 tax law (a minimum tax on foreign earnings and a lower tax on export income) are largely kept in place, preventing them from expiring or becoming more burdensome. The rates for both GILTI and FDII are aligned at ~14%, which is higher than the old GILTI 10.5% but lower than what FDII would have been. It creates a sort of symmetry and arguably a simpler, more stable international tax regime going forward. This may not excite anyone, but it averts uncertainties – you know what the playing field is. If you have overseas subsidiaries, you should plan on paying at least 14% tax on that income, one way or another. There might be planning opportunities in blending high-tax and low-tax income, using foreign tax credits more fully now that 90% can be credited instead of 80%, and considering where to hold IP given the new FDII rules.

The U.S. did not implement a global minimum tax at 15% on a country-by-country basis (the OECD Pillar 2) – instead, Congress doubled down on its own system. This could mean some U.S. multinationals might face top-up taxes by foreign countries if those countries adopt Pillar 2. But that’s an evolving international landscape. For now, U.S. firms have clarity: no new complex regime, just tweaks to the existing one.

From a high-level perspective, these international changes were welcomed by business groups who feared a big tax hike on foreign earnings. By keeping rates moderate, the bill “retains core international provisions of the Tax Cuts and Jobs Act” which businesses had gotten used to. International founders and investors should still remain vigilant in structuring: even a 14% tax is significant, so using the FDII deduction by keeping valuable IP and income onshore might be beneficial as long as it qualifies (14% is better than 21%). And using the 100% dividend exemption for actual repatriation of foreign earnings remains available – that territorial aspect was not changed. So you can still bring home foreign profits without additional U.S. tax if they’ve already been subject to GILTI (or local tax above 14%).

In sum, the bill’s impact on entrepreneurs with cross-border operations is to stabilize the rules and slightly lower the future tax burden relative to what it would have been in 2026. It’s a continuation of a relatively business-friendly international tax posture (especially when compared to some other countries’ moves). However, it’s wise to keep an eye on foreign tax law changes and the potential interplay with U.S. rules.

Economic and Market Outlook: Reactions, Risks, and Opportunities

The passage of the Big Beautiful Bill has elicited strong reactions across industries and has implications for the broader economy. High-net-worth investors should understand these perspectives as they shape the context in which they’ll be making decisions.

Industry Reactions: By and large, business and investor communities praised the tax relief and certainty provided by H.R.1. In the venture capital and startup ecosystem, the expansion of QSBS and R&D expensing was especially applauded. The National Venture Capital Association supported the QSBS reforms, seeing them as critical to “help drive innovation and economic growth” by rewarding long-term investment in startups. Small business advocates and sectors like manufacturing, construction, and agriculture also welcomed the bill. The U.S. Chamber of Commerce and allied groups noted that permanent lower rates and expensing provisions “boost American small businesses” and will fuel capital investment. Manufacturing associations, like the National Association of Manufacturers and American Iron and Steel Institute, highlighted that restoring full expensing, R&D write-offs, and a friendly interest deduction rule gives companies the confidence to invest in new plants and equipment. Real estate industry voices were a bit more mixed – they liked the extension of 20% pass-through deductions and the higher SALT cap (for a few years), but there was disappointment that a full SALT repeal didn’t happen. Nonetheless, groups like the National Association of Home Builders appreciated that there were no negative changes to housing incentives, and the continuation of Opportunity Zones was a plus for property development.

Financial markets initially reacted positively to the bill’s passage, with stock indices in sectors like banks, energy, and industrials seeing gains, anticipating higher after-tax earnings. Banks benefit from a generally lower tax environment and expect increased business investment (loan demand) due to expensing provisions. Energy companies, especially fossil fuel industries, cheered the repeal of green energy credits (as it levels the playing field) and the bill’s separate measures to expand oil and gas leasing (the bill included energy production initiatives outside our tax scope). On the flip side, clean energy and some healthcare stocks underperformed after the bill, reflecting concerns that removing subsidies for renewables could slow growth in that sector, and that spending cuts in Medicaid/SNAP might impact healthcare providers’ revenues (e.g., hospitals expecting more uninsured patients if coverage drops). A Seeking Alpha analysis noted defense and infrastructure stocks rose (due to the bill’s defense and infrastructure spending elements), whereas industries tied to public welfare spending felt headwinds.

Perhaps the most vocal positive reactions came from conservative and pro-business advocacy groups, who heralded the bill as a fulfillment of promised tax cuts. Americans for Prosperity, a prominent advocacy group, stated “we’re delivering a generational win… job creators and families will have the certainty they need to invest…reigniting the American Dream.” The message from these groups is that making the tax cuts permanent will lead to stronger economic growth, more jobs, and higher wages, as businesses expand and invest in the U.S. The White House (under President Trump) and Republicans argue that this supply-side boost could even increase tax revenues in the long run by growing the economy (though most mainstream economists are skeptical it would offset the full cost).

Risks and Concerns: Critics, including many economists, warn of several risks:

• Ballooning Deficits and Debt: By the government’s own estimates, this bill is deficit-financed. The national debt will rise by an additional ~$3.4–3.8 trillion over 10 years due to the tax cuts and spending combined. The U.S. was already running large deficits, and this increases them. For high-income individuals, large deficits can signal future tax hikes or spending cuts down the road. The concern is that today’s tax relief could translate into tomorrow’s fiscal crunch. One former Treasury official called the tax cut bill “the big, beautiful billionaire tax-cut bill that will hasten America’s decline,” arguing that piling on debt without offset will eventually force painful measures like a $500 billion cut in Medicare spending or other drastic steps. Essentially, the bill bets on growth over fiscal consolidation. If growth doesn’t boom sufficiently, the U.S. may face higher interest costs (which, ironically, this year became a huge budget line-item) and pressure on the dollar or credit rating. Wealthy investors should keep an eye on the bond market: indeed, after the bill’s passage, Treasury yields ticked up as traders anticipated heavier government borrowing needs. Over time, if deficits keep climbing, it could lead to upward pressure on interest rates and inflation, which in turn might erode asset values or prompt the Federal Reserve to keep monetary policy tighter.
• Interest Rate and Inflation Implications: With unemployment low and inflation still a concern in 2025, injecting fiscal stimulus via tax cuts could complicate the Fed’s job. Some economists caution that making tax cuts permanent could add to demand in an economy already near capacity, thus pushing the Fed to raise interest rates more than they otherwise would have. For high-income investors, rising rates can hurt bond portfolios and compress equity valuations, although they may also provide opportunities in fixed income. The Fed will have to weigh the fiscal boost – potentially on the order of a few percent of GDP over a decade – and possibly counteract it to maintain price stability. So one risk is a more hawkish monetary stance than previously expected.
• Inequality: The distributional effects of the bill heavily favor the wealthy, critics say. The top 1% of earners receive a significant share of the tax benefits, through the rate permanency, estate tax changes, and pass-through deductions, whereas lower-income individuals see comparatively modest benefits (some will see slightly higher child credits or use the new deductions for overtime/tips, but many provisions like the Trump Accounts or SALT relief don’t affect them). Analysis by the Tax Policy Center found that letting the TCJA cuts expire would have actually increased progressivity, so by preventing that, this bill “substantially increases income inequality” relative to current law baseline. Democrats have lambasted it as a giveaway to billionaires that does little for the middle class. Over time, rising inequality can lead to political and social strains, and potentially reactive policies in the future (for instance, a future administration might seek new wealth taxes or surcharges to rebalance). For now, though, high-net-worth individuals are on the winning side of this equation – the key is to remain aware that this could swing again with elections (the permanence of these cuts is only as good as the political will to keep them).
• Less Green Investment: As noted, the rollback of clean energy incentives poses long-term risks in terms of climate change and energy transition. Environmentally, it could slow the deployment of renewable energy. For the economy, it may mean the U.S. misses out on some growth in green industries or cedes leadership to countries that maintain strong climate policies. High-income investors who are bullish on ESG and clean tech might find the domestic landscape less friendly and may look abroad for such opportunities. Conversely, traditional energy sectors might flourish more – but that comes with its own volatility given global climate trends and policies in other jurisdictions.

Opportunities and Strategy: Within these changes lie opportunities:

• Investment Shifts: With QSBS more attractive, we might see more capital flow into qualifying startups. As a high-net-worth investor, you may consider allocating more to venture capital or direct startup investments, knowing the first $15M of gain can be federal-tax-free. Likewise, Opportunity Zones being permanent means impact investments in underserved areas can be a continuous strategy, not a one-time window. Real estate investors can plan acquisitions and improvements more aggressively due to the expensing rules and stable 1031 regime.
• Business Expansion: If you own a business, now is an opportune time to invest in growth. The combination of 100% expensing, R&D write-offs, and stable lower tax rates means the after-tax cost of expansion is at a modern low. For example, building a new facility or purchasing a competitor could yield immediate tax deductions offsetting income. The bill encourages “front-loading” of expenses – so expanding sooner rather than later could maximize present value. Just be mindful of the macro environment (if interest rates rise, borrowing costs might partially offset these benefits).
• Estate Planning: With the estate tax exemption so high and made permanent, ultra-high-net-worth families have a bit less urgency to rush complex estate planning moves before a deadline. However, this also could be an opportunity: using the currently high exemption to make large gifts or create dynasty trusts while it’s politically protected. Some advisors might counsel to actually lock in planning now (for example, using $15M of exemption now in case a future Congress reduces it) – essentially treat this period as a golden era for wealth transfer. Techniques like GRATs, SLATs, etc., remain very effective with a high exemption and relatively low interest rates (though rates are higher than the ultra-low environment of a few years ago, they’re still moderate historically).
• Retirement and Education Savings: The introduction of Trump Accounts means families should incorporate them into their financial planning. It’s a new tool to give your children or grandchildren a financial head start. In conjunction with 529 plans (which can now roll to Roth for the beneficiary under certain caps), one can envision a roadmap where a child at 18 has a pot of money for college or entrepreneurship (Trump Account funds) and another for retirement (perhaps from leftover 529 rolled to Roth). High-income families might effectively fully fund a child’s life stages tax-free if they optimize these accounts. Start early, since $5k/year from birth can compound nicely by 18. Encourage any clients or peers to take advantage of the $1,000 government pilot too – free money on the table.

Macro Outlook: Economists are split on how much extra growth, if any, these tax changes will generate. Supporters say that with businesses facing certainty on taxes and improved cash flow from expensing, we’ll see a supply-side boost: more investment, higher productivity, and possibly a bump in GDP growth. Some estimates suggest a modest increase in GDP over the long run (the Tax Foundation scored the House version as increasing long-run GDP by about 1.5% and wages by 1%, with 400,000 jobs created). However, with the economy near full employment, demand-side effects could just lead to inflation without much extra output – hence the Fed’s careful watch.

From a markets perspective, equities tend to favor tax cuts – higher after-tax earnings directly boost stock valuations. Many publicly traded companies will see their effective tax rates dip a bit if they were expecting 2026 reversion. For example, companies that are domestic and high-tax (like certain retailers or telecoms) avoid a 2026 jump; that’s good for their valuations. Private equity investors benefit from the extended deductibility of interest for LBOs and the continued 20% passthrough deduction for portfolio companies. The estate tax relief might channel more wealth into family offices and investment vehicles (since less will go to taxes), potentially increasing capital supply chasing investments.

One potential market risk is the bond market’s reaction to more issuance. If deficits explode and there’s no political appetite for future tax increases, bond investors may demand higher yields. We’ve already seen upward drift in long-term yields; additional stimulus could accelerate that. For high-net-worth investors, this underscores the importance of diversification – equities might enjoy near-term gains from tax cuts, but your bond portfolio could face mark-to-market losses if rates rise. Also, if down the road the government’s fiscal position deteriorates significantly, it’s not out of the question that future policymakers consider revenue-raising measures (like a VAT or wealth tax) that could impact the wealthy. It’s a low-probability in the near term but worth keeping on the radar as a hedge scenario (e.g., political risk management might involve trusts or asset relocation in extreme cases).

Planning Ahead: The Big Beautiful Bill is now law, but it could still become a political football in future elections. If administrations change, some provisions could be rolled back or modified (though a full repeal is unlikely given the split Congress scenarios needed). For the next few years, however, high-income individuals have a relatively clear runway of tax policy. Use this stability to execute long-term tax strategies:

• Consider Roth conversions or realizing gains during this extended low-rate period (especially if you suspect rates might go up after 2028 due to political shifts or debt concerns).
• Review your business structure: C-corp vs S-corp vs partnership decisions may tilt one way or another with the international changes and 199A permanency. Many businesses that considered converting to C-corps for a lower rate might now stick with passthrough given 199A stays. But if global minimum taxes abroad bite, some might still choose C-corp + FTC route. It’s nuanced.
• Charitable giving strategies: With a new floor and limits for high earners on deductions, large charitable contributions might be slightly less tax-efficient. Donors might respond by bunching donations or using vehicles like donor-advised funds to ensure deductibility above the floors each year. The ultra-wealthy might consider charitable trusts or foundations as well, which have their own rules but are unaffected by the itemized floors (though private foundations have that excise tax which increased for endowments).
• State-level responses: Some high-tax states were pushing to repeal their SALT workaround taxes if SALT cap was gone. Now with a $40k cap and eventual snapback, states like NY, NJ, CA will likely continue or expand PTE tax workarounds. If you’re in those states and a partner in a firm, take advantage of those workarounds to fully deduct your state taxes at the entity level (bypassing the federal cap). That remains a key strategy.

In closing, the “One Big Beautiful Bill” indeed ushers in a new chapter of tax law very favorable to high-income Americans. It cements low tax rates, introduces targeted perks for investment and wealth transfer, and aims to stimulate business activity. As professionals and investors, the best approach is to leverage the opportunities it presents (for growth and tax savings) while keeping a prudent eye on the long-term fiscal and economic balance. With wise planning, high-net-worth individuals can utilize this tax landscape to further their financial goals – whether that’s growing a business, building a family legacy, or investing in the next big idea – all while keeping more of their returns in their own hands. The ultimate impact on the economy will unfold in the years ahead, but one thing is certain: the tax rules of the game have changed, and those who understand them stand to benefit the most.

Sources:

• Sikich, “One Big Beautiful Bill Passed by Congress – Key Tax Changes”
• Whiteford Taylor Preston, “Client Alert: Tax Provisions of One Big Beautiful Bill Act”
• Frost Brown Todd, “Big Beautiful Bill Act Doubles Down on QSBS Benefits”
• PlanSponsor, “President Trump Signs Massive Tax and Policy Bill”
• Nonprofit Law Blog, “Highlights of H.R.1 – One Big Beautiful Bill Act”
• Congressman Dan Webster’s Press Release on H.R.1
• Politifact, “Fact-checking falsehoods about Trump’s Big Beautiful Bill”
• News from the States (Jim Jones Op-Ed), “Big, beautiful billionaire tax-cut bill”
• The White House, “What They Are Saying: Support for One Big Beautiful Bill”