Wealth Insights
The financial impact of 2025 IRS tax changes

Article 10 min read Updated August 26, 2025

Understanding the added benefits from the One Big Beautiful Bill Act.

With the election in the rearview mirror and the passage of the One Big Beautiful Bill Act into law, we now have some clarity around the state of the IRS tax laws as we adjust our sights for the 2025 tax year and beyond.

“The passage of the One Big Beautiful Bill Act extends or makes permanent the majority of the tax laws put in place in 2017,” says Maya Brill, Regions Senior Wealth Strategist in Texas. “Now is the time to re-evaluate and potentially adjust tax planning strategies this year and beyond.”

“Now that we have clarity around the tax laws impacting 2025, we are recommending that clients, who have a draft estate plan in place with their attorney, consider making any necessary adjustments if they haven’t already,” shares Brill. “Get ahead of the changes by getting documents in place and begin implementing a plan now that there is more clarity on what’s next.”

Changes in 2025 at a glance

On the heels of the passing of the One Big Beautiful Bill Act for the 2025 tax year, the standard deduction increases to:

$15,750 for single filers
$23,625 for head of household
$31,500 for married couples filing jointly

The IRS also increased a number of exclusions and specialty circumstances, which could create a notable tax opportunity for those who fall into certain categories.

The annual exclusion for gifts increased to $19,000 for individuals and $38,000 for married couples in 2025. This was not changed by the One Big Beautiful Bill Act.
The estate tax exemption for inheritance remains unchanged by the new laws for 2025 at $13,990,000. However, the One Big Beautiful Bill Act increases it to $15 million in 2026 (had TCJA expired, it would have reverted to approximately $7 million).
An additional benefit in 2025 comes with the deduction of auto loan interest – you can deduct up to $10,000 in interest if purchased between 2025-2028, and the vehicle must have final assembly in the U.S. It is also important to note the income limitations for this deduction, which phases out for taxpayers with a modified adjusted gross income (MAGI) exceeding $100,000 for single filers and $200,000 for joint filers and is eliminated at $150,000 MAGI for single filers and $250,000 for joint filers.
SALT deduction is now capped at $40,000 instead of $10,000 beginning in 2025 with the phaseout beginning at $500,000.
For children born between 2025-2028, the new Trump Accounts will be automatically created and funded with $1,000. Treated like a qualified retirement plan, up to $5,000 per year can be contributed to these accounts for children under 18 years old.

“Clients should begin thinking about what they may want to accomplish financially,” says Brill. “On the estate side, the annual gifting exclusion increase to $19,000 in 2025 provides additional gifting opportunities for smaller gifts that can be made for life’s needs today. Anything from the purchase of a car for a child, expenses to pay for college or graduate school, or opening an investment account for a child.” That can be an important step for the road ahead and has the potential to help build a better financial future.

The increase in the lifetime gift and estate tax exemption is notable, says Brill. “The $15 million lifetime gift tax exemption becomes a significant part of the narrative for high-net worth clients,” said Brill. “Our advisors were already engaged in more conversations around generational legacy planning in 2025, and we expect this trend to continue.”

This increase creates an even greater opportunity to allow the next generation to enjoy such assets in the future while removing them from the current generation’s taxable estate.

The rise of Generation X

While headlines tend to focus on Baby Boomers and Millennials, early 2025 data by KPMG International notes that Generation X, with an average net worth of $1.88 million, has more than double the average of their younger generation who have an average net worth of $757,000. Generation X isn’t too far behind their elder Baby Boomers who lead with an average net worth of $2.31 million.

According to recent Fed data, Generation X has grown steadily. Baby Boomers continue to hold the majority of the country’s wealth, at approximately $82.4 trillion in early 2025. Over the next few decades, that will shift with the Great Wealth Transfer to Generation X and Millennials as the primary beneficiaries.

“Generation X has begun to evolve into a role many Baby Boomers have had over the past decades as the sandwich generation,” notes Brill. “They are finding themselves taking care of their parents and children all while at or approaching their largest income earning years. In turn, they have also begun to benefit in greater frequency from inheritance and gifts. Generation X’s thumbprint for both wealth creation and receipt will create new rules of engagement from which the Millennials and future generations will build from.”

Speaking of Generation X and building wealth, there are additional provisions for contributing to retirement accounts that allow for catch-up contributions in 2025 starting at both age 50 where savers can set aside an additional $7,500 in a 401(k), 403(b) and governmental 457(b) plans and for those age 60-63 where that catch up amount increased to $11,500.

Planning makes perfect

“We consider ourselves to be in the Golden Age of Estate Planning right now,” says Brill. “And with clarity from the new Administration on what will happen beyond 2025, the tax law landscape remains favorable for impactful, generational legacy planning.”

No matter what generation you belong to, Brill notes the increases in the federal gift and estate tax rules create a significant opportunity for sharing generational wealth and building an ongoing legacy.

“Wealth planning with a strategic focus will likely be more methodical, deliberate and thoughtful,” explains Brill. “Depending on your financial picture, looking at your strategic wealth plan should be done thoughtfully. A major purpose of planning is to prepare for scenarios and take advantage of new opportunities which may prove pivotal in strengthening your financial position during the ongoing generational wealth transfer. Testing financial goals and aspirations with financial science provides the best forecasting possible in strategy selection.”

Common considerations

Income tax planning

Estate planning isn’t all about estate and gift taxes; it also includes income tax planning. Assets included in your estate upon your passing are eligible for a step-up in cost basis, reducing capital gains for inheritors. For estates under the exemption amount, it may be prudent to hold onto low basis assets until death. For estates over the exemption amount, trust structuring and ongoing asset selection can provide flexibility for step-up in basis planning. In addition, for those in community property states, couples may consider equalizing ownership of appreciated assets to potentially receive a full step-up in basis upon the death of either spouse. However, this strategy may not be advisable if divorce is a possibility.
Appreciating assets

If a client with a taxable estate has assets that are likely to appreciate significantly over their lifetime, such as income-producing real estate that they don’t need for their personal expenses, gifting can create a tax advantage.

“Gifting part of that real estate to their children takes the current value out of the parents’ estate and the appreciation is to the benefit of the children while not increasing the parents’ potential estate tax liability,” says Brill.

Our advisors often recommend transferring the appreciable asset into a trust rather than giving it outright to the kids. “If the trust is structured properly, the trust assets can be protected from estate tax when the parents pass away and when the children pass away.”