How the Latest Tax Legislation Could Affect Your Wealth Plan

Brew

| Jul 2025

NEW TAX LAW CHANGES AND HOW THEY MAY IMPACT YOU

The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, marks a pivotal moment in U.S. tax policy. This comprehensive legislation introduces both permanent and temporary changes, primarily by extending and modifying provisions from the 2017 Tax Cuts and Jobs Act (TCJA). Understanding these shifts is crucial for optimizing financial strategies, managing liabilities, and capitalizing on new opportunities for wealth preservation and growth.

Permanent Extension of TCJA Income Tax Structure

One of the most significant aspects of the OBBBA is the permanent extension of the individual income tax structure established by the TCJA. This means the seven tax brackets—10%, 12%, 22%, 24%, 32%, 35%, and 37%—will remain in place indefinitely, providing a stable framework for income tax planning.

The standard deduction, which was substantially increased by the TCJA, has also been made permanent and slightly raised for 2025. These amounts are now set at $31,500 for Married Filing Jointly, $23,625 for Head of Household, and $15,750 for Single filers. These figures will also undergo annual inflation adjustments. The permanence and increase of the standard deduction simplify tax filings for many and can influence whether itemizing deductions remains beneficial.

Estate and Gift Tax Evolution: Empowering Intergenerational Wealth Transfer

The OBBBA significantly enhances opportunities for wealth transfer. The lifetime estate and gift tax exemption is set to increase to $15 million in 2026, with subsequent annual inflation adjustments. This substantial increase provides high-net-worth individuals with greater capacity for tax-free transfers of wealth during their lifetime or at death, making sophisticated estate planning even more impactful.

Benefits for Working Americans and Families

The OBBBA includes provisions specifically designed to increase take-home pay for working individuals and families:

Deduction for Tips and Overtime Pay: A new temporary deduction allows for up to $25,000 of qualified tipped income to be deducted from federal income taxes from 2025 through 2028. Additionally, income tax on overtime pay premiums for hourly workers has been eliminated, and a deduction for overtime income is provided during the same period.
Enhanced Child Tax Credit: The Child Tax Credit will increase to $2,200 per child starting in 2026, providing further financial relief for families.
Temporary Senior Deduction: For seniors aged 65 and older, the bill introduces an additional temporary deduction through 2028. This helps offset the tax impact on Social Security benefits and overall tax liability for senior taxpayers.

State and Local Tax (SALT) Deduction Adjustment
A notable expansion in the OBBBA is the increase in the State and Local Tax (SALT) deduction cap to $40,000, up from the previous $10,000. This change, starting in 2025, can significantly benefit taxpayers in high-tax states by reducing their federal taxable income. However, it also introduces a new 0.5% adjusted gross income (AGI) floor on charitable contributions beginning in 2026, which warrants a review of charitable giving strategies.

While the OBBBA touches many areas of the tax code, the highlights in the table below capture the most significant changes. Your financial advisor can help you understand how these updates affect your specific situation and guide you in adjusting your plan. If you’d like to explore strategies tailored to you, we’re here to help.

Area of Impact	Key OBBBA Changes	Potential Action / Implication
Income Tax Planning	Permanent TCJA rates (10-37%) & increased standard deduction.	Greater certainty for long-term income and retirement planning. Review income distribution strategies.
Estate & Gift Planning	Increased lifetime exemption ($15M in 2026); New gain exclusion rules on inherited assets.	Enhanced flexibility for wealth transfer. Consider accelerating gifts or updating trust structures.
Charitable Giving	New 0.5% AGI floor on charitable contributions (2026).	Adjust giving strategies to maximize tax benefits. Consider donor-advised funds.
High-Tax State Residents	SALT deduction cap increased to $40,000.	Potential federal tax relief for those in high-tax states. Re-evaluate state tax mitigation strategies.
Senior Taxpayers	Temporary deduction for seniors (65+) through 2028.	Review retirement income planning to leverage new deduction.
Working Individuals	Temporary deduction for tips and overtime pay; Enhanced Child Tax Credit.	Review retirement income planning to leverage new deduction.

MARKET BACKDROP

ASSET CLASS SUMMARY
As of 7/16/2025

Asset Class	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
U.S. Stock	+3.96%	+19.33%	+6.86%	+11.71%	+18.67%	+15.35%	+12.77%
Global Ex U.S.	+0.66%	+13.09%	+17.63%	+13.82%	+15.26%	+9.57%	+6.44%
U.S. Bond	+0.55%	+0.83%	+3.06%	+3.38%	+2.02%	-1.07%	+1.66%
Global Bond	-0.29%	+0.95%	+5.82%	+5.54%	+2.47%	-1.66%	+1.12%
U.S. Real Estate	+0.89%	+6.13%	+3.96%	+5.80%	+4.34%	+7.17%	+6.12%

SECTOR SUMMARY
As of 07/16/2025

Cyclical	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
Consumer Cyclical	+2.59%	+21.19%	-2.83%	+13.56%	+16.96%	+10.59%	+12.14%
Financials	+3.32%	+12.22%	+8.51%	+21.57%	+20.02%	+18.83%	+11.92%
Materials	+1.51%	+11.18%	+7.18%	-1.23%	+9.59%	+10.18%	+8.66%
Real Estate¹	+0.56%	+5.88%	+4.31%	+6.52%	+4.28%	+7.52%	+7.16%

Sensitive	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
Comm. Services	+1.52%	+23.22%	+9.36%	+21.02%	+26.18%	+15.21%	+11.61%
Energy	-1.00%	+8.90%	+2.58%	-3.27%	+11.90%	+23.39%	+5.94%
Industrials	+5.03%	+21.14%	+14.92%	+19.15%	+22.12%	+17.94%	+12.46%
Technology	+8.14%	+35.14%	+11.24%	+13.47%	+31.23%	+23.32%	+23.15%

Defensive	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
Consumer Defensive	-0.76%	+0.77%	+4.98%	+9.04%	+8.07%	+9.91%	+8.49%
Health Care	-0.60%	-1.06%	-1.52%	-8.84%	+2.76%	+6.93%	+7.61%
Utilities	+1.96%	+7.27%	+9.92%	+20.58%	+8.97%	+10.31%	+10.10%

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Consumer Cyclical (S&P 500 Consumer Discretionary (Sector) Total Return), Financials (S&P 500 Financials (Sector) Total Return), Materials (S&P 500 Materials (Sector) Total Return), Real Estate (S&P 500 Real Estate (Sector) Total Return¹), Comm. Services (S&P 500 Communication Services (Sector) Total Return), Energy (S&P 500 Energy (Sector) Total Return), Industrials (S&P 500 Industrials (Sector) Total Return), Technology (S&P 500 Information Technology (Sector) Total Return), Consumer Defensive (S&P 500 Consumer Staples (Sector) Total Return), Health Care (S&P 500 Health Care (Sector) Total Return), Utilities (S&P 500 Utilities (Sector) Total Return).

1) The index Launch Date is Sep 19, 2016. All information for an index prior to its Launch Date is hypothetical back-tested, not actual performance, based on the index methodology in effect on the Launch Date. Back-tested performance reflects application of an index methodology and selection of index constituents with the benefit of hindsight and knowledge of factors that may have positively affected its performance, cannot account for all financial risk that may affect results and may be considered to reflect survivor/look ahead bias. Actual returns may differ significantly from, and be lower than, back-tested returns. Past performance is not an indication or guarantee of future results. This back-tested data may have been created using a “Backward Data Assumption”. For more information on “Backward Data Assumption” and back-testing in general, please see the Performance Disclosure.

This article is for informational purposes only and is not intended as individual investment advice or as a recommendation of any particular security, strategy or investment product. Investing involves risk including the potential loss of principal. SEIA is not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Past performance is not indicative of future results. Signature Investment Advisors, LLC (SIA) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. Investment advisory services offered through SIA, LLC, 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323. The information provided in this article is for general informational purposes only and does not constitute professional advice. Individual results may vary, and it is important to consult with a qualified professional before making any financial or legal decisions. For details on the professional designations displayed herein, including descriptions, minimum requirements, and ongoing education requirements, please visit seia.com/disclosures. SIA does not accept time-sensitive, action‐oriented messages or transaction orders, including orders to purchase or sell securities, via electronic mail.

How the Latest Tax Legislation Could Affect Your Wealth Plan

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