Cordasco & Company

The One, Big, Beautiful Bill Act provides certainty for estate planning

Ever since the Tax Cuts and Jobs Act (TCJA) was signed into law in 2017, estate planners have had to take into account a looming date: January 1, 2026. While the TCJA effectively doubled the unified federal gift and estate tax exemption to $10 million (adjusted annually for inflation), it also required the amount to revert to its pre-TCJA level after 2025, unless Congress extended it. This caused uncertainty for wealthy individuals whose estates may be exposed to gift and estate taxes if the higher exemption amount were to expire.

The One, Big, Beautiful Bill Act, recently signed into law, provides a great deal of certainty for affluent families. Beginning in 2026, it permanently increases the federal gift and estate tax exemption amount to $15 million ($30 million for married couples). The amount will continue to be adjusted annually for inflation. If your estate exceeds, or is expected to exceed, the exemption amount, consider implementing planning techniques today that can help you reduce or avoid gift and estate taxes down the road.

What if you’re not currently ready to give significant amounts of wealth to the next generation? Perhaps you want to hold on to your assets in case your circumstances change in the future.

Fortunately, there are techniques you can use to take advantage of the higher exemption amount while retaining some flexibility to access your wealth should a need arise. Here are two ways to build flexibility into your estate plan.

1. SLATs

If you’re married, a spousal lifetime access trust (SLAT) can be an effective tool for removing wealth from your estate while retaining access to it. A SLAT is an irrevocable trust, established for the benefit of your children or other heirs, which permits the trustee to make distributions to your spouse if needed, indirectly benefiting you as well.

So long as you don’t serve as trustee, the assets will be excluded from your estate and, if the trust is designed properly, from your spouse’s estate as well. For this technique to work, you must fund the trust with your separate property, not marital or community property.

Keep in mind that if your spouse dies, you’ll lose the safety net provided by a SLAT. To reduce that risk, many couples create two SLATs and name each other as beneficiaries. If you employ this strategy, be sure to plan the arrangement carefully to avoid running afoul of the “reciprocal trust doctrine.”

Under the doctrine, the IRS may argue that the two trusts are interrelated and leave the spouses in essentially the same economic position they would’ve been in had they named themselves as life beneficiaries of their own trusts. If that’s the case, the arrangement may be unwound and the tax benefits erased.

2. SPATs

A special power of appointment trust (SPAT) is an irrevocable trust in which you grant a special power of appointment to a spouse or trusted friend. This person has the power to direct the trustee to make distributions to you.

Not only are the trust assets removed from your estate (and shielded from gift taxes by the current exemption), but so long as you are neither a trustee nor a beneficiary, the assets will enjoy protection against creditors’ claims.

Hold on to your assets

These strategies are just two that you can include in your estate plan to take advantage of the newly permanent exemption amount while maintaining control of your assets. Contact us for more details.

What you still need to know about the alternative minimum tax after the new law

The alternative minimum tax (AMT) is a separate federal income tax system that bears some resemblance to the regular federal income tax system. The difference is that the individual AMT system taxes certain types of income that are tax-free under the regular system. It also disallows some deductions that are allowed under the regular system. If the AMT exceeds your regular tax bill, you owe the larger AMT amount.

Tax law changes

The Tax Cuts and Jobs Act (TCJA) made the individual alternative minimum tax (AMT) rules more taxpayer-friendly for 2018-2025 and significantly reduced the odds that you’ll owe the AMT for those years. But the new One Big Beautiful Bill Act (OBBBA) contains mixed news about your AMT exposure.

AMT rates

The maximum AMT rate is “only” 28% versus the 37% maximum regular federal income tax rate. At first glance, it may seem counterintuitive that anyone would worry about paying AMT. However, while the top AMT rate is lower, it applies to a much larger taxable base with fewer deductions and credits. That’s why people in certain situations still need to worry about it.

For 2025, the maximum 28% AMT rate kicks in when your taxable income, calculated under the AMT rules, exceeds an inflation-adjusted threshold of $239,100 for married joint-filing couples or $119,550 for other taxpayers. Below these thresholds, the AMT rate is 26%.

AMT exemptions

Under the AMT rules, you’re allowed an inflation-adjusted AMT exemption — effectively a deduction — in calculating your alternative minimum taxable income. The TCJA significantly increased the exemption amounts for 2018-2025. The OBBBA made the TCJA increased exemption amounts permanent, with annual inflation adjustments.

For 2025, the exemption amounts are $88,100 for unmarried individuals, $137,000 married joint-filing couples, and $68,500 for married individuals who file separate returns.

Exemption phase-out rule

At high levels of alternative minimum taxable income, your AMT exemption is phased out, which increases the odds that you’ll owe the tax. The TCJA dramatically increased the phase-out thresholds to levels where most taxpayers are unaffected by the phase-out rule. For 2025, the exemption begins to be phased out when alternative minimum taxable income exceeds $626,350 or $1,252,700 for a married joint-filing couple. For 2018-2025, the applicable exemption is reduced by 25% of the excess of your alternative minimum taxable income over the applicable phase-out threshold.

Mixed news in the OBBBA

Starting in 2026, the OBBBA makes the $500,000 and $1 million exemption phase-out threshold permanent. That’s the good news.

The bad news: Starting in 2026, the new law resets the exemption phase-out thresholds to $500,000 and $1 million with annual inflation adjustments for 2026 and beyond. So for 2026, these phase-out thresholds will be lower than the higher thresholds that apply for 2025. More bad news: Starting in 2026, the OBBBA increases the exemption phase-out percentage from 25% to 50%.

Bottom line: For 2026 and beyond, AMT exemptions for higher-income taxpayers can be phased out faster. That means more taxpayers may owe the AMT for 2026 and beyond.

AMT risk factors

Various interacting factors make it difficult to pinpoint exactly who’ll be hit by the AMT and who’ll dodge it. Here are five implications and risk factors.

Substantial income from capital gains or other sources. When you have high income, from whatever sources, it can cause your AMT exemption to be partially or completely phased out. That increases the odds that you’ll owe the AMT.
Itemized state and local tax (SALT) deductions. You can’t deduct SALT expenses under the AMT rules. This can hurt those living in high-tax states.
Exercise of incentive stock options (ISOs). When you exercise an ISO, the bargain element (the difference between the market value of the shares on the exercise date and your ISO exercise price) doesn’t count as income under the regular tax rules, but it counts as income under the AMT rules.
Standard deductions. Standard deductions are disallowed under the AMT rules.
Private activity bond interest income. This category of interest income is tax-free for regular tax purposes but taxable under the AMT rules.

Determine your status

The TCJA significantly reduced the odds that you’ll owe the AMT. But the OBBBA increases the odds for some taxpayers, thanks to unfavorable changes to the AMT exemption rules that will take effect in 2026. Don’t assume you’re exempt from AMT — especially if you have some of the risk factors outlined above. Contact us to determine your current status after the OBBBA changes take effect.

What families need to know about the new tax law

The One, Big, Beautiful Bill Act (OBBBA) has introduced significant tax changes that could affect families across the country. While many of the provisions aim to provide financial relief, the new rules can be complex. Below is an overview of the key changes.

Adoption credit enhanced

Parents who adopt may be eligible for more generous tax relief. Under current law, a tax credit of up to $17,280 is available for the costs of adoption in 2025. The credit begins to phase out in 2025 for taxpayers with modified adjusted gross income (MAGI) of $259,190 and is eliminated for those with MAGI of $299,190 or more.

If you qualify, the adoption credit can reduce your tax liability on a dollar-for-dollar basis. This is much more valuable than a deduction, which only reduces the amount of income subject to tax.

What changed? Beginning in 2025, the OBBBA makes the adoption tax credit partially refundable up to $5,000. This means that eligible families can receive this portion as a refund even if they owe no federal income tax. Previously, the credit was entirely nonrefundable, limiting its benefit to families with sufficient tax liability. The refundable amount is indexed for inflation but can’t be carried forward to future tax years.

Child Tax Credit increased, and new rules imposed

Beginning in 2025, the OBBBA permanently increases the Child Tax Credit (CTC) to $2,200 for each qualifying child under the age of 17. (This is up from $2,000 before the law was enacted). The credit is subject to income-based phaseouts and will be adjusted annually for inflation after 2025.

The refundable portion of the CTC is made permanent. The refundable amount is $1,700 for 2025, with annual inflation adjustments starting in 2026.

The MAGI phaseout thresholds of $200,000 and $400,000 for married joint-filing couples are also made permanent. (However, these thresholds won’t be adjusted annually for inflation.)

Important: Starting in 2025, no CTC will be allowed unless you report Social Security numbers for the child and the taxpayer claiming the credit on the return. For married couples filing jointly, a Social Security number for at least one spouse must be reported on the return.

Introduction of Trump Accounts

We’re still in the early stages of learning about this new type of tax-advantaged account but here’s what we know. Starting in 2026, Trump Accounts will offer some families a way to save for the future. An account can be set up for anyone under age 18 at the end of the tax year who has a Social Security number.

Annual contributions of up to $5,000 (adjusted annually for inflation after 2027) can be made until the year the child turns 18. In addition, U.S. citizen children born after December 31, 2024, and before January 1, 2029, with at least one U.S. citizen parent, may potentially qualify for an initial $1,000 government-funded deposit.

Contributions aren’t deductible, but earnings grow tax deferred as long as they’re in the account. The account generally must be invested in exchange-traded funds or mutual funds that track the return of a qualified index and meet certain other requirements. Employers may make contributions to Trump accounts on behalf of employees’ dependents. Withdrawals generally can’t be taken until the child turns age 18.

Even more changes

Here are three more family-related changes:

The child and dependent care credit. This credit provides parents a tax break to offset the cost of child care when they work or look for work. Beginning in 2026, there will be changes to the way the credit is calculated and the amount of income that parents can have before the credit phases out. This will result in more parents becoming eligible for the credit or seeing an increased tax benefit.

Qualified expenses for 529 plans. If you have a 529 plan for your child’s education, or you’re considering starting a plan, there will soon be more opportunities to make tax-exempt withdrawals. Beginning in 2026, you can withdraw up to $20,000 for K-12 tuition expenses, as well as take money out of a plan for qualified expenses such as books, online education materials and tutoring. These withdrawals can be made if the 529 plan beneficiary attends a public, private or religious school.

Sending money to family members in other countries. One of the lesser-known provisions in the OBBBA is that the money an individual sends to another country may be subject to tax, beginning in 2026. The 1% excise tax applies to transfers of cash or cash equivalents from a sender in the United States to a foreign recipient via a remittance transfer provider. The transfer provider will collect the tax as part of the transfer fee and then remit it quarterly to the U.S. Treasury. Transfers made through a financial institution (such as a bank) or with a debit or credit card are excluded from the tax.

What to do next

These and other changes in the OBBBA may offer substantial opportunities for families — but they also bring new rules, limits and planning considerations. The sooner you start planning, the better positioned you’ll be. Contact us to discuss how these changes might affect your family’s tax strategy.

The One Big Beautiful Bill: How Lower Middle Market M&A Is Entering a Golden Era

Your Guide to Layering QSBS, Opportunity Zones, and M&A Strategy for Unprecedented After-Tax Wealth

The world of mergers and acquisitions (M&A) for lower middle market businesses —those with $5M to $250M in revenue—is in the midst of a seismic transformation. Thanks to the landmark One Big Beautiful Bill (OBBB), the landscape now brims with strategies that can turn “ordinary” deals into extraordinary, multi-layered wealth events. Whether you’re a founder, investor, or advisor, understanding how to stack the new rules around Qualified Small Business Stock (QSBS), Opportunity Zones (OZs), and other incentives is crucial for maximizing after-tax returns and making a genuine impact in underserved communities.

Let’s break down what’s changed, why your M&A dream team matters more than ever, and how you can leverage these new opportunities—despite economic headwinds like interest rates, inflation, and tariffs.

One Big Beautiful Bill: A Catalyst for M&A Creativity

OBBB has supercharged the lower middle market, offering powerful new tools for buyers and sellers:

QSBS Exclusion: For qualifying C Corp stock acquired after July 4, 2025, the gain exclusion jumps from $10M to $15M per taxpayer, per company. The gross assets test rises from $50M to $75M, opening the door for more companies to qualify for federal tax breaks after a five-year holding period. Also, see our blog post on strategies for converting your S Corporation to qualify and giving you more juice.
Bonus Depreciation: 100% expensing of eligible investments means you can write off acquisitions and capital expenditures upfront, supercharging asset-heavy deals and boosting immediate after-tax returns.
Interest Expense Deductions: Old limits are lifted, making leveraged buyouts more attractive. However, high interest rates still factor into deal feasibility—smart structuring remains essential.
Opportunity Zones 2.0: OZs are now permanent, with rolling 10-year windows and expanded rewards for rural investments. Sellers can defer gains and exclude up to 30% after five years in rural deals, while still benefiting from 100% tax-free appreciation after ten years. This applies to starting a business or developable real estate in these zones for both buyers and sellers as long a we adhere to the application of the law.

The New M&A Playbook: Layering Benefits for Maximum Wealth

The savvy dealmaker’s toolkit is richer than ever. Here’s how to layer these strategies:

Stack QSBS and OZ Benefits: A qualifying C Corp based in an OZ can “double-dip”—founders and investors may exclude up to $15M of gain (or more) via QSBS, then layer on OZ perks for even greater after-tax windfalls.
Flexible Deal Structures: Prioritize stock sales to capture QSBS advantages and steer M&A toward eligible OZ locations for added upside.
Family Offices & PE Funds: With more businesses qualifying for QSBS and OZs, family offices and private equity firms can recycle capital through multiple tax-advantaged sales, minimizing friction and maximizing compounding.
Community Impact: Channeling investments into rural or distressed OZs not only unlocks tax savings but also fuels real economic growth in forgotten corners of America—delivering both profit and purpose.

But Wait—The Headwinds Haven’t Left the Room

No M&A journey is without its challenges. Here’s what’s keeping dealmakers up at night:

Interest Rates: While OBBB makes debt-funded deals less taxing, borrowing costs remain elevated. Buyers are choosier, and creative structures like earnouts are back in vogue.
Inflation: Supply chain woes, higher wages, and rising material costs mean sellers expect premiums, and buyers are laser-focused on contingencies and post-merger value realization.
Tariffs: OBBB doesn’t address rising import costs. If your business relies on international supply chains, be prepared for value discounts and tougher negotiations.
Paperwork & Compliance: The flip side of enhanced tax breaks is more stringent IRS oversight, with extra forms, reporting, and attestation requirements—especially for OZ and QSBS deals. Don’t go it alone—partnering with specialists is non-negotiable.

Your M&A Dream Team: The Linchpin Between Good and Great

The complexity of today’s M&A deals means a well-rounded, collaborative, expert team isn’t just a luxury—it’s essential. Here’s who you need in your corner:

Tax Pros: To secure QSBS and OZ eligibility and keep every “i” dotted for the IRS as well as tax modeling and the net amount you keep during and after the deal.
Legal: Both on the M&A Deal side and the estate planning side to make sure you don’t lose during the deal and your wealth effectively passes to your heirs not the government.
Sell Side Quality of Earnings (QofE) Experts: To nail down your EBITDA and defend your numbers during diligence.
Investment Advisors: To model how much need from the transaction to meet your financial goals as well as post-transaction investing and making sure you have enough income after the deal closes.
Investment Bankers: A strong investment banker is essential to not only find the right buyer but to help negotiate the best deal for you and your family.

Final Take: Vision, Discipline, and Energy Win the Day

With OBBB, the future of lower middle market M&A is brighter—and more layered—than ever. By stacking tax incentives, optimizing deal structures, and assembling a powerhouse team, you can seize the extraordinary opportunities now available. Don’t let economic headwinds dim your ambition; with smart planning, discipline, and relentless energy, “ordinary” exits can become life-changing wealth events that benefit you, your company, and communities across the nation.

Get creative, get planning, and build your dream M&A team—your tax-free future is calling!

Opportunity Zones 2.0: OBBBA’s New Era for Tax-Smart Investing

Ready for Opportunity Zones 2.0? The One Big Beautiful Bill Act (OBBBA) has supercharged the program, turning it from what was meant to be a temporary shot of adrenaline for distressed communities into a permanent, rolling tax-shelter-fueled engine for growth. If you like tax-free appreciation and creative timing strategies, you’ll love what’s ahead!

What’s Changed? Rolling Zones, Stricter Targets, and Rural Rockets

No more “get your money in by the 2026 sunset” panic. OBBBA takes Opportunity Zones (OZs) off life support and puts them in the perma-zone—but not without a tune-up:

Permanent Program: The old December 31, 2026, expiration is gone. OZs are now a permanent feature of the tax code. Existing OZ investments remain under the existing rules.
Rolling 10-Year Designations: Governors will redesignate a new slate of qualifying census tracts every decade (first new pick in July 2026, live January 2027). This keeps incentives fresh and zones targeted where they’re needed most.
Stricter Zone Criteria: Now, only really distressed census tracts (≤70% of area median income or ≥20% poverty, with new caps on outliers) can qualify. Gone are “contiguous zone” loopholes…only the toughest neighborhoods will make the cut.
Rural Gets a Turbo Boost: At least 25% of zones per state must be rural. Plus, investors in rural OZs get up to a whopping 30% capital gain reduction after five years ([standard is 10% for other zones]), making rural projects a tax planner’s dream.

Let’s Make It Real: How the New OZ Benefits Work

Here’s the turbo-tax magic for friendly investors:

Step 1: Sell any asset for a gain (stock, real estate, business, crypto—pick your flavor).
Step 2: Invest that gain in a Qualified Opportunity Fund (QOF) that pours capital into an OZ business or property within 180 days.
Step 3: Watch your tax bill (and your investment) morph:

Core Tax Benefits—Now Even Better

Benefit:Old Law
Deferral of original gain: Until 12/31/2026Exclusion on deferred gain: Up to 15% (phased). Non-after 2021Tax-free appreciation: After 10 yearsNew OBBBA RulesDeferral of original gain: 5-year rolling deferral from investmentExclusion on deferred gain: 10% after 5 years (30% if rural)Tax-free appreciation: Still after 10 years, but must act within a 30-year window

So, if you invest $1M gain in a rural QOF property, after five years you can exclude up to $300,000 (30%) of that gain—plus any new appreciation after 10 years is 100% tax-free. Not bad for skipping the city.

Example: Level-Up Your Gains with OZ 2.0

Suppose: You have a $500,000 capital gain in August 2027.

You deposit it into a rural QOF before your 180-day window closes.
Hold for five years: $150,000 (30%) of the original gain becomes tax-free—pay tax only on $350,000.
Let your investment ride for 10 years: your OZ investment’s appreciation, say it grows to $1.1M, is entirely tax-free if you sell after year ten.

Tax strategy unlocked: The capital you save could boost your after-tax IRR by several points—and those rural perks? Golden.

Planning Opportunities with Big-Time Energy

Rebalancing? Crystallize gains and time OZ entries around new tracts and rural incentives.
Family Office Fun: Layer OZ strategies with estate and charitable planning—just remember, OZs are best for big, patient capital.
Rural Renaissance: If you’re a developer or business owner, rural zones are now dripping with extra juice. Creative improvements face a lower “substantial improvement” bar.
Bigger Fund Players: Keep your eye on the bigger real estate players like BlackRock, for readymade OZ investments now that the law is permanent. You give them money for the tax benefit while they get a fee and do all the heavy lifting. This would be ideal for us less real estate savvy investors.
Watch the Maps: With redesignation every decade, keep your eye on where the next “hot” distressed tracts will be—scooping them up early is a game-changer.

New Compliance—And Big Consequences

Don’t let the IRS rain on your parade: OBBBA dials up the reporting, transparency, and penalties. QOFs now report impact, residential doors built, jobs created, and more—with up to $50,000 in penalties looming for slackers. So plan big—but keep your paperwork tight.

Ready, Set, Grow!

Opportunity Zones are no longer a sunset-limited “use it or lose it” toy—they’re a permanent pillar for building tax-smart wealth and revitalizing real communities. With rural deals amped to the max and rolling maps every decade, there’s never been a better time to blend tax savings, growth, and social impact in one savvy strategy.

Cordasco & Company

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