Potential Tax Advantages for High-Income California Business Owners in the OBBBA
Top 3 Key Takeaways from this article:
1. The Estate & Gift Tax Exemption Is Dramatically Increasing
Starting in 2026, the federal estate and gift tax exemption will rise from roughly
$7 million → $15 million per person (or $30 million per married couple), with annual indexing.
➡️ This creates a major window of opportunity for high-net-worth individuals to transfer wealth, restructure ownership interests, and reduce future estate tax exposure.
2. Business Owners Can Optimize Succession Planning
Several OBBBA provisions—such as QSBS enhancements, QBI retention, and expanded retirement plan limits—indirectly strengthen estate planning by:
- Increasing the after-tax value of businesses
- Enhancing liquidity for heirs or successors
- Making it easier to transfer or sell a business with minimized tax impact
➡️ These changes create favorable conditions for business succession, family transfers, and legacy planning.
3. Increased Tax Savings Allow for More Strategic Gifting & Trust Planning
With expanded deductions (SALT, bonus depreciation, Section 179, cash balance plans), business owners can reduce annual taxable income and reinvest those savings into estate-planning tools such as:
- Irrevocable trusts
- Family limited partnerships
- Lifetime gifting strategies
- Life-insurance-based planning
➡️ The more income sheltered now, the more efficiently wealth can be transferred to the next generation—with substantially less tax drag.
Read the full article here:
For California business owners, the advantage of operating in the world’s fourth-largest economy is counterbalanced by the state’s complex and often changing tax landscape. Maximizing earnings while minimizing taxation is a complex balancing act with significant costs for missteps. However, the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, has introduced changes to previous tax provisions that provide opportunities for business owners to reduce their tax bill with strategic planning.
Key Tax Provisions Under the OBBBA (2025–2026)
| Provision | What Changed | Why It Matters for Business Owners |
|---|---|---|
| Qualified Business Income (QBI) Deduction – Permanently Extended | 20% QBI deduction no longer sunsets in 2025; higher income phase-out ranges; specialized service fields (law, healthcare, consulting, finance) benefit more. | More owners now qualify for the deduction, including high-income professionals who were previously phased out. |
| State & Local Tax (SALT) Deduction Increase | SALT deduction raised from $10,000 → $40,000, indexed to inflation. Phases out above $500k MAGI; reverts to $10k cap above $600k MAGI. | Major savings for Californians with high income/property taxes. PTET strategies may still be useful for those near phase-out ranges. |
| Qualified Small Business Stock (QSBS) Exclusion Increase | Tax-free QSBS sale cap raised from $10M → $15M or 10x basis (whichever is larger). | Potentially shields millions from federal + CA capital gains + NIIT (totaling 30–37%). Huge benefit for founders preparing to exit. |
| 100% Bonus Depreciation Restored & Permanent | Full first-year write-off for qualified assets purchased after Jan 19, 2025. | Immediate tax savings when purchasing vehicles, equipment, or property improvements. Boosts cash flow. |
| Section 179 Deduction Increase | Deduction limit increased from $1.6M → $2.5M; phase-out raised from $2.89M → $4M. | Allows larger upfront write-offs for business equipment and property. More accessible for mid-sized businesses. |
| Cash Balance Plan Enhancements | New bill expands value of combining cash balance + profit-sharing plans for tax deferral. | Enables high earners to shelter hundreds of thousands per year tax-deferred while rapidly growing retirement savings. |
| Estate & Gift Tax Exemption Increase | Exemption increased from ~$7M → $15M per person ($30M per couple) starting 2026; indexed annually. | Major estate tax reduction opportunity for wealth transfer, business succession, and family planning. |
Strategic Tax, Business, and Estate Planning
High-net-worth California business owners risk paying more in taxes than they have to if they’re not familiar with their opportunities for savings. The experienced attorneys at NM Law understand the impact of business planning on your potential tax burden and closely follow the evolution of laws at the federal, state, and local levels to ensure that our guidance is timely and accurate. To learn more about how we can help preserve your wealth and protect your business, contact us here to schedule your consultation.
Frequently Asked Questions
With the exemption rising to $15M per person ($30M per couple) in 2026, business owners frequently ask:
Should I accelerate gifting?
Should I wait until 2026?
How does this affect my current trusts or estate plans?
This is the largest estate-planning change in the article and has the biggest long-term tax impact.
Owners commonly ask:
Does the QSBS increase make it more advantageous to sell or gift company shares now?
How do I coordinate business succession with estate tax minimization?
Do these new deductions increase the valuation of my business for estate tax purposes?
The article highlights expanded QSBS exclusion and higher deductions, which directly influence succession planning.
This includes questions like:
Should I use cash balance plans, PTET strategies, bonus depreciation, or Section 179 to reduce taxable income?
How do these savings integrate into estate tools like irrevocable trusts or family partnerships?
What’s the best way to maximize annual tax savings and convert them into long-term estate value?
For any or all of these questions connect with our team today, HERE
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