On May 22, 2025, the House of Representatives passed a sweeping new tax reform bill titled The One Big Beautiful Bill Act (H.R.1)—by just one vote. While it still faces an uncertain fate in the Senate, this bill proposes some of the most significant changes to the tax code in recent years and is already sparking debate across the financial industry.
Here’s a breakdown of what’s included, what it means for you, and how we at Alison Wealth Management are preparing our clients for the potential impact.
š A Closer Look at the Key Proposals
1. Permanence of the Tax Cuts and Jobs Act (TCJA) Provisions
The TCJA, passed in 2017, was scheduled to sunset after 2025. The new bill would make many of its provisions permanent, including:
Income Tax Rates: The bill retains the current seven tax brackets, with rates ranging from 10% to 37%. It also provides additional inflation adjustments for the lower six brackets, effectively reducing taxes for most Americans—but notably, not for the top bracket.
Capital Gains: No changes to the top long-term capital gains tax rate of 20%, plus the 3.8% Net Investment Income Tax (NIIT) still applies.
ā Planning Insight: Clients in the lower to middle income brackets may see slightly reduced tax bills due to the inflation adjustments, offering a window to reassess income deferral or Roth conversion strategies.
2. Enhancements to the Standard Deduction and Itemized Deductions
The doubled standard deduction is made permanent and enhanced with inflation indexing.
From 2025–2028, the deduction will increase by $1,000 for single filers and $2,000 for married couples.
A senior deduction of $4,000 per person will be added for taxpayers over 65, subject to phaseouts starting at $75,000 (single) or $150,000 (married).
The SALT cap (state and local tax deduction) will rise from $10,000 to $40,000 starting in 2025, but with phaseouts at $250,000/$500,000 AGI. It will gradually increase until 2033 and then remain fixed.
ā Planning Insight: The increased SALT deduction may provide significant relief for clients in high-tax states—especially if they currently itemize or are near the phaseout thresholds.
3. Small Business and Pass-Through Income Provisions
The bill increases the Qualified Business Income (QBI) deduction from 20% to 23% and makes it permanent.
Most importantly, the bill reforms the way this deduction phases out for professionals in Specified Service Trades or Businesses (SSTBs)—such as financial advisors, attorneys, and healthcare providers.
Currently, high-income SSTBs lose the deduction entirely once they exceed income limits (2025: $197,300 single / $394,600 married).
Under the new proposal, SSTBs will instead receive a graduated, step-down version of the deduction as income exceeds the threshold—not a total phaseout.
This smoothing mechanism is a welcome change, providing partial relief to higher earners who were previously penalized with an all-or-nothing cutoff.
ā Planning Insight: High-income service professionals may now retain at least some of the QBI benefit under the new rules. Strategic income management, business structuring, and entity classification remain critical tools—but the new design adds flexibility and fairness for SSTBs.
4. Estate Tax Relief—Redefined
Perhaps one of the most dramatic proposals is around estate planning:
The bill proposes a permanent estate tax exemption of $15 million per person, starting in 2026, adjusted annually for inflation.
This is a substantial increase from the currently scheduled reversion to approximately $6.5 million in 2026.
ā Planning Insight: This could significantly reshape high-net-worth estate planning. Many families may no longer need to rush to use exemption amounts before 2025 ends, but proactive legacy and gifting strategies will still be critical—especially given ongoing political uncertainty.
5. No Change to the Corporate Tax Rate—for Now
Despite political wrangling, the corporate tax rate remains at 21%, with no changes enacted in this bill.
š¤ What Should You Do Now?
While the bill has cleared the House, the Senate is the next hurdle—and passage is far from guaranteed. But whether or not it becomes law, the fact that such a sweeping proposal advanced this far suggests the tax policy landscape is shifting, and proactive planning is more important than ever.
At Alison Wealth Management, we’re closely monitoring this legislation and modeling its implications across:
Tax-efficient retirement distribution strategies
Business entity structure planning
Charitable and legacy planning
Roth conversion and income acceleration strategies
Gifting, trust creation, and estate tax mitigation
We’re also helping clients navigate opportunities within the 2025 planning window—a unique and time-sensitive chance to lock in today’s exemptions and deductions while preparing for possible new rules.
š¬ Let’s Talk About It
If you're a client or business owner wondering how this bill could impact your financial plan, we're here to help. Schedule a conversation with our advisory team to evaluate how these proposals intersect with your goals.
Stay tuned to our blog and newsletter for timely updates as this legislation progresses through Congress.