What the New Tax Law Means for You, Your Family, and Your Business

What the New Tax Law Means for You, Your Family, and Your Business

Hi. Thank you for tuning into today's Emerald Gem, which stands for Get Educated in Minutes. I'm Josh Lansman, senior Wealth strategist for Wilmington Trust, Emerald Family Office and Advisory, and your host for today's podcast. In today's gem, I'm gonna answer the question, what are the key takeaways from the new tax law that may impact you, your family, and your business?

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law.  The passage of the One Big Beautiful Bill Act provides some much-desired clarity on how the tax landscape for individuals and businesses will look beginning on January 1, 2026. While we are continuing to unpack this expansive new tax bill and all of its ramifications, this GEM will lay out key takeaways along with some planning considerations from the new law in three different areas: your estate tax planning, your personal income tax planning, and for some of you, your business’ income tax planning. 

So first, let's cover five key takeaways related to your estate tax planning.

First, under the new law, the estate gift and generation skipping transfer exemption was increased to $15 million per individual $30 million for married couples. Inflation adjustments to the exemption amount will start in 2027.

This change is permanent under the new law and while fewer taxpayers will be subject to the Federal estate tax, individuals may live in states with a State level estate tax, for example, New York, Massachusetts, and Connecticut, all have their own state level estate tax, so for many individuals, domicile planning may become a focus.

Second, there are no changes to the so-called stepped-up basis rules. Basis generally refers to an individual's cost for income tax purposes of an asset. This means that assets passed on at death will continue to receive a new basis equal to their fair market value, potentially reducing capital gains taxes for heirs. Individuals with existing planning who are no longer subject to an estate tax, potentially as a result of the increased exemptions should consider reviewing your trust to see if additional planning can be done to accomplish a basis, step up a death.

Third, there are no changes to the grantor trust rules and therefore use of grantor trust should continue to be considered as part of new estate plans and for existing grantor trust. There may be opportunities to swap or substitute assets from grantor trust for income tax planning purposes.

Fourth, for ultra-high-net-worth individuals planning should still be considered to freeze current estate value, so appreciation on assets, continue to escape future estate tax.

Fifth, portability or the ability to transfer unused estate tax exemption to a surviving spouse is unchanged. Remember, portability still only applies to the estate tax exemption and not generation skipping transfer or GST exemption. It's important to evaluate whether your plan is designed to optimize both exemptions, especially if you plan to leave assets to grandchildren and family members in later generations.

Plans utilizing formula clauses may need to be evaluated to ensure intent is accomplished.

Now that we've covered the takeaways from your estate tax planning, let's take a look at five key takeaways relating to your individual income taxes.

First, tax rates remain unchanged for taxpayers and with taxpayers at the top tax rate, that means that the top tax rate is still at 37%. Even though rates remain unchanged for taxpayers paying taxes at the top rate, future changes in Washington could shift the landscape. So proactive planning is key. Strategies,  such as Roth conversion should still be evaluated as part of overall planning.

Second, the cap for the deduction for state and local taxes was increased from $10,000 to $40,000 as part of the new law, with the caveat that this increase is only temporary through tax year 2029, and there is an income phase out. For those in high tax stage strategies like using a Delaware incomplete gift non-grant tour trust, or so-called ding trust may help reduce state income taxes and maximize this deduction. However, this type of trust planning may not be available in every state. For example, California, New York, and Connecticut have reduced the effectiveness or eliminated by statute the ability to use this strategy.

Third, the Qualified Opportunity Zones program was extended permanently with some enhancements, including the creation of a new category of fund, the Qualified Rural Opportunity Fund, which focuses on development in rural areas.

Fourth, the new tax law expanded the permitted uses of 529 accounts such as to include post-secondary credentialing expenses, as permitted uses of those accounts. The expansion of uses may make these tax advantage accounts more attractive for individuals looking for ways to benefit children or grandchildren for educational purposes.

Fifth, a new type of tax deferred account officially called a Trump account is now available for children under the age of 18. These new accounts will be treated as IRAs under the new law and will be tax deferred inside the accounts. They may be a compelling alternative to traditional UGMA and UTMA accounts for gifting to children or grandchildren.

However, future guidance from the Treasury Department will help further provide clarification on how these accounts may be used, uh, for the benefit of a beneficiary.

Finally, now let that we've covered your estate tax planning and your personal income tax planning. Let's cover five key takeaways relating to business income taxes.

First, the 199A deduction for qualified business income remains at 20% for businesses taxed as a pass through entity, such as a partnership or an S corporation and is now permanent in the tax code. Business owners should review their entity classification and ensure that they're maximizing this in benefit.

Second, 100% bonus depreciation is back permanently. Businesses can now deduct the cost of a certain qualified property fully, like certain equipment, vehicles, or even aircraft in the tax year the property's placed in service. If you're planning a major purchase, you should consult with your advisors to ensure it's structured properly to take full advantage of this deduction.

Third, research and development costs no longer need to be spread out over time. They can be deducted immediately. This is a big win for innovative businesses investing in new products, technology, or processes. The expenses, however, must be qualified and meet the definition under the Internal Revenue Code as research and development expenses.

Fourth, updates to the qualified small business stock gain exclusion, or QSBS exclusion rules, which could allow eligible entities taxes C corporations have been enhanced under the new law. Gains may now be excluded up to $15 million, up from $10 million under the prior law upon the sale of a C corporation, uh, of a qualified small business stock.

The new law also introduced shorter holding period requirements. If you're thinking about a future sale, it's worth reviewing your entity type and considering whether converting to a C corp would allow you to take advantage of the QSBS rules.

Fifth, the rules for deducting business interest will likely provide larger deductions for business interest. Specifically, the calculation for adjusted gross income now uses an EBITDA—earnings before interest, taxes, depreciation, and amortization—standard, which generally allows for a larger deduction than with the previous earnings before interest taxes or EBIT standard.

Thanks for listening to some of the key takeaways of the One Big Beautiful Bill Act. Please contact your Wilmington Trust advisor if you have any questions about what impact. The new tax. All we'll have on you, your family or your business, we would be glad to help you and we'll see you next time.

DISCLOSURES:

This podcast is for general information only and is not intended as an offer or solicitation for the sale of any financial product, service, or other professional advice. The information in this podcast has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed.

The opinions, estimates, and projections expressed are subject to change without notice.

Wilmington Trust is not authorized to and does not provide legal, accounting or tax advice. Our advice and recommendations provided to you is illustrative only and subject to the opinions and advice of your own attorney, tax advisor or other professional advisor.

Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment, financial, or estate planning strategy will be successful. Past performance cannot guarantee future results.

Investing involves risk, and you may incur a profit or a loss. Investment products are not insured by the FDIC or any other governmental agency and are not deposits of, or other obligations of, or guaranteed by, Wilmington Trust, M& T Bank, or any other bank or entity, and are subject to risks, including a possible loss of the principal amount invested.

Wilmington Trust Emerald Family Office and Advisory® is a registered trademark and refers to wealth planning, family office, and advisory services provided by Wilmington Trust N. A., a member of the M& T family. Wilmington Trust Family Office is a service mark for an offering of family office and advisory services provided by Wilmington Trust

N.A. Wilmington Trust is a registered service mark used in connection with various fiduciary and nonfiduciary service offered by certain subsidiaries of M& T Bank Corporation.

©2025 M& T Bank Corporation and its affiliates and subsidiaries. All rights reserved.