TL;DR: The Big Beautiful Bill changes taxes for high earners. Key updates include the return of AMT, new estate tax exemptions, and deductions for seniors, tip earners, and car loans. High earners should prepare for AMT, update estate plans, and adjust charitable giving strategies. Regularly review changes with a tax professional to maximize savings.
Key Tax Changes in the Big Beautiful Bill
The bill introduces new rules that reshape how high earners save, give, and plan for the future. Those in their 40s and 50s—a key wealth-building stage—should pay special attention as these provisions can directly affect retirement, legacy planning, and day-to-day deductions.
What’s Staying the Same?
Several tax rules remain unchanged, offering some consistency as other areas shift:
- Tax brackets will stay intact with modest inflation adjustments in 2026.
- The standard deduction increases slightly to $31,500 for married couples in 2025.
- The Child Tax Credit is larger and now tied to inflation.
- The Qualified Business Income (QBI) deduction continues, with higher phase-out thresholds.
What’s Changing for High Earners
AMT Returns in 2026
The Alternative Minimum Tax returns and will apply to more high earners, especially joint filers. AMT limits the effectiveness of popular deductions like SALT and mortgage interest, so it's important to assess your risk now and plan accordingly.
SALT Deduction Cap Adjusted
The SALT cap increases to $40,000, but only applies in full for those with an AGI under $500,000. Above that, the benefit begins to phase out—impacting those in high-tax states the most.
Pease Limitation Reinstated
The Pease limitation is back for taxpayers in the 37% bracket, reducing the value of itemized deductions like charitable giving and mortgage interest. Strategic planning will be key to preserving your deductions.
Estate Tax Exemption Increased
The estate tax exemption now sits at $15 million per person, offering short-term opportunities for large gifts and trust planning. However, this expanded exemption is temporary and will sunset unless extended by future legislation.
New Deductions and Tax Provisions
Several new deductions and tax features have been introduced under the bill:
- $6,000 Senior Deduction for taxpayers aged 65 and older.
- $25,000 Tip Income Deduction, though it remains subject to payroll tax.
- Car Loan Interest Deduction for new vehicles assembled in the U.S.
- Overtime Pay Deduction available to qualifying wage earners.
- Trump Accounts for Kids for children born between 2025 and 2028, requiring additional tax planning for families.
What You Should Do Before 2026
With many of these changes taking effect in 2026, now is the time to take action:
Evaluate AMT Risk
- Review your current deductions and assess whether they trigger AMT exposure.
- Consider adjusting income, increasing retirement contributions, or reworking compensation to reduce risk.
Revisit Your Estate Plan
- Leverage the temporary $15 million exemption by making gifts or updating trusts now.
- Consult with an estate planning attorney to lock in the benefits before the sunset provisions roll in.
Restructure Charitable Giving
- Plan around the Pease limitation by bunching donations into high-income years or donating appreciated assets.
- Use donor-advised funds (DAFs) or charitable remainder trusts (CRTs) to maintain tax efficiency.
Claim New Deductions
- Confirm eligibility for the senior, tip income, and car loan interest deductions.
- Document qualifying expenses and consider how these new breaks affect your 2025 tax planning.
Optimize 529 Plans
- With the K–12 contribution cap doubled to $20,000, make sure you're maximizing your 529 education savings strategy.
Conclusion
The Big Beautiful Bill introduces a wave of tax policy changes that require thoughtful, proactive planning. From the return of the AMT to updated deductions and a limited-time estate tax exemption, high earners have a narrow window to adapt their strategies before 2026.
Ready to navigate the changes brought by the Big Beautiful Bill? Let’s review your strategy and ensure you’re prepared for what’s ahead.
People Also Ask
1. What should I do to prepare for AMT in 2026?
To prepare for the return of the AMT, review your deductions to see if you'll be impacted, especially if you have large state tax deductions or mortgage interest.
- Calculate your exposure to AMT and consider strategies to reduce taxable income, like increasing retirement contributions.
- Consult with a tax professional to determine your potential liability and explore options to minimize the impact.
2. How can I make the most of the estate tax exemption?
The estate tax exemption has been increased to $15 million per person, but it will sunset in the near future.
- Act now by making gifts or adjusting trusts to lock in the current exemption amount.
- Work with a financial adviser to strategize asset transfers and ensure your estate plan takes advantage of this higher exemption.
3. What new tax deductions are available?
The Big Beautiful Bill introduces several new deductions to consider:
- $6,000 for individuals aged 65 and older.
- Up to $25,000 for tip earners.
- Interest deductions on car loans for U.S.-assembled vehicles.
- Review the eligibility for each of these and claim them before potential changes.
4. How do I adjust my charitable giving strategy?
The return of the Pease limitation may reduce the tax benefit of your charitable donations.
- Bunch your charitable contributions into one year to maximize deductions.
- Consider donating appreciated assets to reduce taxable income and avoid the limitation.
- Consult a tax professional to ensure your giving is as tax-efficient as possible.
5. How can I track all these changes?
Stay on top of the tax changes by reviewing your strategy each year.
- Use tax software or hire an adviser to monitor your deductions and credits.
- Adjust your financial plans based on any new laws or rules to avoid surprises come tax season. Staying organized ensures you're not caught off guard by shifting tax policies.