What H.R. 1 means for tax policy

On July 4, President Donald Trump signed H.R. 1, officially known as the One Big, Beautiful Bill Act. Widely regarded as the most significant tax reform since the 2017 Tax Cuts and Jobs Act, the law introduces major changes with broad implications for individuals, businesses and the overall economy. Its journey through Congress was complex, requiring Senate reconciliation; a narrow House vote; and intense negotiations over Medicaid, the state and local tax deduction, and the bill’s projected $3.4 trillion impact on the national debt. 

For those in the financial security profession, however, what’s equally important is what’s not in the bill. H.R. 1 does not create new taxes on the industry, nor does it restrict the critical work financial security professionals do to help families achieve financial security. Instead, it extends many taxpayer-friendly provisions of the TCJA — from individual and business tax cuts to the Section 199A deduction for small pass-throughs to the increased estate tax exemption.

Below is a breakdown of a few of the most significant changes in H.R. 1 and what they mean for businesses, individuals and the clients financial security professionals serve.

Estate and gift tax

Extension and enhancement of increased estate and gift tax exemption amounts (Section 70106)

Estate and gift tax exemption permanently increased to $15 million per individual and $30 million for married couples, indexed for inflation after 2026.

Effective date: Tax years beginning after Dec. 31, 2025. No expiration date.

The current estate and gift tax exemption is $13.99 million per individual and was set to sunset at the end of 2025 to 2017 levels.

While alleviating concerns that the estate and gift tax exemption would sunset after this year, the new law presents an ideal opportunity to reassess current estate plans or establish new ones to ensure alignment with personal goals, family needs and recent tax law changes.

Individual income tax 

Extension and enhancement of reduced rates (Sec. 70101)  

Permanently extends individual income tax cuts from the 2017 TCJA. These reduced rates were set to expire at the end of this year and revert to pre-TCJA levels.

Effective date: Applicable to taxable years beginning after Dec. 31, 2025. No expiration date.

The top marginal income tax rates and brackets will remain at 37%, avoiding the scheduled increase to 39.6%.   

The inflation adjustment increased by an extra year to the 10% and 12% brackets.

Permanence provides greater certainty for long-term financial planning.

There remains an opportunity to use non-grantor trusts to reallocate income to beneficiaries who may be in lower tax brackets, potentially resulting in overall tax savings.

Limitation on individual deductions for certain state and local taxes (Sec. 70120)  

The $10,000 SALT cap established under the TCJA is preserved but temporarily increased to $40,000, increasing each year by 1%. This higher cap remains in effect through 2029 before reverting to $10,000 in 2030.

Effective date: Applicable to taxable years beginning after Dec. 31, 2024. Expires after Dec. 31, 2029.

The cap amount is reduced for taxpayers with a modified adjusted gross income of more than $500,000 but will not fall below the original $10,000 threshold.

The House’s initial version proposed eliminating state-level SALT cap workaround provisions, but this language was ultimately excluded from the final bill. Its inclusion would have negatively affected the 36 states that implemented pass-through entity tax workarounds to mitigate the impact of the SALT deduction cap.

Extension and enhancement of increased standard deduction (Sec. 70102)  

Permanently increases and extends the doubled standard deduction amounts introduced under the 2017 TCJA. These higher deduction levels, which were set to expire at the end of this year and revert to pre-2017 amounts, will now remain in place.

Effective date: Applicable to taxable years beginning after Dec. 31, 2024. No expiration date.

For 2025, the standard deduction is $15,750 for single filers, $31,500 for married filing jointly and $23,625 for head of household, indexed for inflation after 2025.

Business tax  

199A extension and enhancement of deduction for qualified business income (Sec. 70105)   

Makes permanent the 20% qualified business income deduction under Section 199A, originally enacted as part of the TCJA.

Effective date: Applicable to taxable years beginning after Dec. 31, 2025. No expiration date.

Increases the phase-in income limits from $50,000 to $75,000 for single filers  and from $100,000 to $150,000 for joint filers.

Creates a minimum deduction of $400 for taxpayers with at least $1,000 of QBI from an active trade or business, adjusted for inflation.

This gives advisors an opportunity to review and plan with owners of pass-through entities to maximize QBI and available deductions.

Alex Kim is vice president, public policy, with Finseca. He may be contacted at [email protected].