Tax and Client Strategies: A Comprehensive Guide for Financial Advisers: Six Transformative Opportunities
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings about significant changes that financial advisers and their clients should be aware of. The Act introduces key changes such as permanent income tax rates and brackets, a new additional deduction for older individuals, and a significant increase in estate and gift tax exemptions, creating numerous planning opportunities for financial advisers.
Key Changes:
- Income Tax Rates and Brackets: The OBBBA permanently maintains the seven TCJA income tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%) with inflation adjustments starting in 2026, preventing a reversion to pre-TCJA higher rates like 39.6%. The standard deduction amounts are also permanently increased, such as $31,500 for married filing jointly in 2025.
- Deductions for Older People: The bill introduces an additional standard deduction of $6,000 available for individuals aged 65 and older from 2025 through 2028, supplementing the permanent expanded standard deduction.
- Estate and Gift Tax Exemptions: The federal estate and gift tax exemption is permanently increased to $15 million per individual starting January 1, 2026, indexed for inflation thereafter (up from $13.99 million for 2025), with a 40% tax rate maintained. For married couples, the exemption effectively doubles to $30 million. Additionally, the generation-skipping transfer (GST) tax exemption aligns with this higher amount.
Opportunities for Financial Advisers:
- Incorporate the newly permanent lower income tax rates and higher standard deductions into client tax planning, potentially reducing tax liability over the long term.
- For clients aged 65+, advise on how to optimize the additional $6,000 standard deduction, improving cash flow or tax efficiency in retirement.
- Revise estate plans to take advantage of the higher and permanent estate and gift tax exemptions, enabling clients to transfer larger amounts to heirs tax-free and pursue long-term multi-generational wealth strategies without fear of sunset provisions.
- Monitor inflation adjustments for exemptions and deductions each year to optimize timing and amounts of gifts or asset transfers.
- Educate high-net-worth and business owner clients about the elimination of the "Pease" limitation on itemized deductions but the new 35% cap, as well as the permanent disallowance of miscellaneous itemized deductions (including investment fees), adjusting strategies accordingly.
By proactively integrating these changes, financial advisers can help clients maximize tax efficiency, leverage expanded deductions, and implement estate plans that capitalize on the more favorable exemption amounts and permanent provisions under the OBBBA.
In addition, the OBBB offers other opportunities for tax savings, wealth growth, and financial stability, such as the temporary increase in the SALT deduction cap for households earning under $500,000, the ability for new-car buyers to deduct up to $10,000 annually in loan interest for vehicles built in the United States, and the extension of key provisions from the 2017 Tax Cuts and Jobs Act (TCJA).
Advisers should build flexibility into client strategies to adapt to future adjustments in tax legislation, educate clients on potential risks and opportunities, and communicate regularly to ensure they understand how legislative shifts might influence their long-term goals. The mission of Advisors Excel is to help good advisers become great business owners while enabling their clients to enjoy the retirement of their dreams. By staying informed on potential tax reforms and collaborating with experts, financial advisers can build resilient plans for their clients that meet the challenges of the changing tax landscape.
- Financial advisers should consider incorporating the new permanent lower income tax rates and higher standard deductions into their clients' business operations and personal tax planning strategies, as these changes can potentially reduce tax liability over the long term.
- With the significant increase in estate and gift tax exemptions, financial advisers have opportunities to help clients optimize their estate plans, enabling them to transfer larger amounts to heirs tax-free and pursue multi-generational wealth strategies without fear of sunset provisions, thereby promoting financial stability for both their clients and their businesses.
