The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, represents the most significant tax reform since the Tax Cuts and Jobs Act. While the Trump tax policy affects all taxpayers, high-income earners face particularly notable changes that could substantially impact their tax strategies and liabilities.
Permanent TCJA Provisions with Modifications
The OBBBA makes permanent many provisions from the Tax Cuts and Jobs Act that were set to expire, but with key modifications affecting wealthy taxpayers. The seven-bracket tax structure is now permanent, providing certainty for long-term tax planning.
2026 Federal Tax Rates for Single Taxpayers
| Current Law (TCJA Expires) | House Republican Tax Bill | |||
|---|---|---|---|---|
| Rate | Taxable Income at Which Rate Begins | Rate | Taxable Income at Which Rate Begins | |
| 1st bracket | 10% | $0 | 10% | $0 |
| 2nd bracket | 15% | $12,150 | 12% | $12,375 |
| 3rd bracket | 25% | $49,300 | 22% | $50,275 |
| 4th bracket | 28% | $119,400 | 24% | $107,200 |
| 5th bracket | 33% | $249,100 | 32% | $204.700 |
| 6th bracket | 35% | $541,550 | 35% | $259,925 |
| 7th bracket | 39.6% | $543,800 | 37% | $639,275 |
2026 Federal Tax Rates for Married Taxpayers
| Current Law (TCJA Expires) | House Republican Tax Bill | |||
|---|---|---|---|---|
| Rate | Taxable Income at Which Rate Begins | Rate | Taxable Income at Which Rate Begins | |
| 1st bracket | 10.0% | $0 | 10% | $0 |
| 2nd bracket | 15.0% | $24,300 | 12% | $24,750 |
| 3rd bracket | 25.0% | $98,600 | 22% | $100,550 |
| 4th bracket | 28.0% | $199,000 | 24% | $214,400 |
| 5th bracket | 33.0% | $498,200 | 32% | $409,400 |
| 6th bracket | 35.0% | $541,550 | 35% | $519,850 |
| 7th bracket | 39.6% | $611,750 | 37% | $767,150 |
The expanded standard deduction is also permanent. Amounts for 2025 are set at $31,500 for married filing jointly and $15,750 for single filers.
SALT Deduction: A Mixed Bag for High Earners
One of the most impactful changes for wealthy taxpayers involves the State and Local Tax (SALT) deduction. The Trump tax policy raises the cap from $10,000 to $40,000 for taxpayers with modified adjusted gross income (MAGI) under $500,000 ($250,000 for married filing separately).
However, high earners face a phaseout mechanism. Those with MAGI over $500,000 see their SALT deduction cap gradually reduced by 30% until it reaches the original $10,000 limit. The cap and income threshold will increase by 1% annually, providing modest inflation protection.
New Deduction Limitations and Caps
Starting in 2026, the OBBBA introduces an itemized deduction cap specifically targeting the highest earners. Taxpayers in the top 37% tax bracket will find their itemized deductions limited to providing a tax benefit equal to only 35 cents per dollar deducted, rather than the full 37 cents they would otherwise receive.
Additionally, charitable deductions face new restrictions for itemizers. Beginning in 2026, those who itemize must reduce their charitable deduction by 0.5% of their contribution base (generally adjusted gross income). For a taxpayer with $1 million in AGI, this means reducing their charitable deduction by $5,000, potentially eliminating the benefit of smaller charitable contributions.
Limited Benefits from New Deductions
While the Trump tax policy introduces several new deductions for overtime pay and tips, these provide minimal benefit to high earners due to income caps and phaseout provisions. The overtime deduction phases out starting at $150,000 for single filers and $300,000 for joint filers. Tips deductions have similar phase-out thresholds.
The new car loan interest deduction, limited to $10,000 of qualified interest on U.S.-assembled vehicles, phases out at 20% for MAGI over $100,000 (single) or $200,000 (joint), making it largely irrelevant for high earners.
Capital Gains Tax Considerations
The 2025 legislation keeps long-term capital gains rates at 0%, 15%, and 20%, depending on income levels. High earners remain subject to the net investment income tax (NIIT), potentially increasing effective rates. Strategic planning, such as tax-loss harvesting and asset location optimization, can help reduce capital gains exposure.
Timing the sale of high-value assets can influence tax outcomes significantly under the Trump tax policy. Executing gains in lower-income years or pairing gains with offsetting losses can minimize total taxation. Careful consideration of these strategies is critical for multi-million-dollar portfolios.
Investors should also consider holding or gifting assets through tax-efficient structures. Trusts, family limited partnerships, and charitable vehicles can provide both immediate and long-term tax advantages. Integrating these approaches into a broader wealth strategy ensures alignment with financial goals.
Education Tax Benefits Made Simple
While new education tax benefits may not apply to you as a high-income earner, these may apply to those you employ, especially if you are assisting with student debt.
New Rules Starting in 2026
Beginning in 2026, several education-related tax breaks will become available, but there's an essential requirement: the person benefiting must have a Social Security number that allows them to work in the United States.
One significant change involves student loan forgiveness. If someone's student loans are cancelled because they become permanently disabled or pass away, they won't have to pay taxes on that forgiven debt amount. Previously, cancelled debt was often considered taxable income, creating an additional burden during already difficult circumstances.
The American Opportunity Credit and Lifetime Learning Credit will continue helping families reduce their tax bills when paying for higher education. However, there's a new paperwork requirement: you'll need to include the school's federal tax identification number when filing your taxes.
Employer Help With Student Loans Gets Permanent Status
Starting in 2026, a popular workplace benefit becomes a permanent part of the tax code. Employers can now contribute up to $5,250 each year to help pay down their employees' student loan debt without the employee owing taxes on this assistance. This amount will increase with inflation over time, making it more valuable in future years.
This Trump tax policy benefit works similarly to employer tuition assistance programs, where the company's contribution doesn't count as taxable income to the worker. It's a win-win situation that helps employees tackle their debt while giving employers a valuable recruiting and retention tool.
New Credit for Supporting Scholarships
Starting in 2027, taxpayers who donate money to qualifying scholarship organizations can receive a federal tax credit for their generosity. This credit is worth up to $1,700, which directly reduces your tax bill dollar-for-dollar rather than just reducing your taxable income.
However, if your state also offers tax credits for scholarship donations, your federal credit will be reduced by whatever state credit you claim. For example, if you receive a $500 state tax credit for a scholarship donation, your federal credit would be limited to $1,200 instead of the full $1,700. This prevents "double-dipping" but still provides meaningful tax benefits for supporting educational opportunities.
International and Transfer Taxes
A new 1% excise tax on foreign money transfers takes effect in 2026, potentially affecting high-net-worth individuals who regularly send money abroad through money orders, cashier's checks, or similar instruments.
Estate and Gift Tax Considerations
While not explicitly detailed in the available provisions, high-income earners should note that the OBBBA's focus on making TCJA provisions permanent likely extends to estate and gift tax exemptions, though specific amounts and provisions require further clarification.
Strategic Planning for High Earners
For high-income taxpayers, the OBBBA creates both opportunities and challenges. The permanent nature of many provisions allows for longer-term tax planning, but the new limitations require careful analysis of optimal deduction strategies.
High earners should implement comprehensive strategies to address anticipated Trump tax policy changes. This includes maximizing contributions to retirement accounts, exploring philanthropic opportunities, and reviewing the timing of income realization. Regular scenario modeling allows families and business owners to evaluate multiple outcomes with confidence.
Charitable giving may become increasingly valuable under new legislation. Contributions to donor-advised funds or family foundations can provide tax benefits while aligning with personal values. Structured giving also supports multi-generational wealth transfer objectives and long-term philanthropic goals.
Engaging with financial professionals allows individuals to create personalized strategies for tax, investment, and estate planning. This collaborative approach reduces risk and improves the likelihood of achieving long-term objectives. Proactive planning positions high earners to preserve wealth while adapting to evolving policies.
ABOUT JEFF
Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic wealth management firm dedicated to providing clients guidance today for tomorrow’s success. With over three decades of industry experience, he has worked as both an advisor and executive-level manager, partnering with and serving a diverse range of clients. Specializing in serving high- and ultra-high-net-worth families, Jeff aims to help clients achieve their short-term and long-term goals, worry less about their finances, and focus more on their life’s passions. Based in Scottsdale, Arizona, Jeff works with clients throughout the entire country. To learn more, connect with Jeff on LinkedIn or email jgilbert@balboawealth.com.
Advisory services provided by Balboa Wealth Partners, Inc., an Investment Advisor registered with the SEC. Advisory services are only offered to clients or prospective clients where Balboa Wealth Partners and its Investment Advisor Representatives are properly licensed or exempt from registration.
