Essential Tax Shifts in 2025 for High-Net-Worth Portfolios

The 2025 tax reform is shaping up to be one of the biggest rewrites in recent memory. Known as the “One Big Beautiful Bill,” the legislation proposes sweeping changes to capital gains treatment, retirement planning, estate taxes, and more. If you work with high net worth investment advisors, are a business owner, or executive with a complex portfolio, you don’t have time to wait for polished summaries. You need the facts now.

Here’s what matters and what to look out for.

Capital Gains Are Changing – And Not in Your Favor

One of the major shifts proposed in the bill is how long-term capital gains are taxed. If passed, the plan would move away from the traditional preferential treatment and instead tax long-term gains as ordinary income for taxpayers with more than $500,000 in taxable income. That’s a big deal.

For high earners used to the 20% max long-term capital gains rate (plus the 3.8% net investment income tax), this could push effective rates into the 37%+ range – nearly doubling the tax liability on large asset sales.

If you’re planning to sell a business, investment real estate, or a sizable stock position, the timing just became critical. Holding off until after 2025 could mean writing a check to the IRS that’s 50% larger than it needed to be.

Practical move: Consider acceleration strategies. Sales in 2024 or early 2025 might save you millions.

New Contribution Rules for Retirement: Roth, Not Traditional

Under the proposed bill, there’s a push toward Rothification of retirement savings. This would mean the end of tax-deductible traditional contributions for many high-income individuals, including business owners funding SEP IRAs or solo 401(k)s.

Instead, new contributions would go into Roth-style accounts – after-tax now, tax-free later. While this might sound neutral, it eliminates the short-term tax deduction, which can hurt cash flow planning for people maxing out employer-sponsored retirement plans.

What this means:
If you’re contributing $66,000+ annually to your plan (and many high-net-worth executives are), you’ll lose the upfront deduction starting in 2025. For high-income households already facing AMT and phase-outs, this is another squeeze.

SALT Cap Relief (Sort Of)

The bill also proposes a gradual increase in the State and Local Tax (SALT) deduction cap, phasing it up to $20,000 for joint filers by 2026. That’s up from the $10,000 limit under the TCJA, but still far from the unlimited deductions high earners used to enjoy.

If you’re in a high-tax state like California, New York, or New Jersey, this is a partial win. But don’t expect to fully deduct your six-figure property tax bill anytime soon.

Heads up: Some versions of the bill include an income-based SALT deduction phaseout. So, if you earn too much, you get nothing – even under the new cap.

The “Trump Account” – A New Retirement Option with a Catch

The proposed bill introduces a new type of retirement account being dubbed the “Trump Account.” This account allows after-tax contributions and grows tax-free, similar to a Roth IRA, but is structured differently for regulatory reasons.

Contribution limits and eligibility are still vague. But the idea is to offer a more flexible savings vehicle – particularly for business owners and independent professionals – while limiting the tax deferral strategies that wealthy people have historically used.

For now, treat this as a curiosity. It may become meaningful, or not.

Estate Tax Exemption Is Getting Slashed in Half

This one’s been coming for years. The estate tax exemption, which currently sits at $13.61 million per person (or $27.22 million for married couples), is scheduled to sunset after 2025 – reverting to around $7 million per person.

The new bill doesn’t stop it. In fact, it proposes letting it fall, and then removes several advanced estate planning strategies commonly used by high-net-worth families – like GRATs, valuation discounts, and certain dynasty trust structures.

If you’ve delayed on estate planning, the clock is running out. Once the exemption drops, more estates become taxable, and fewer options exist for mitigation.

Real impact: If you wait until 2026, you could lose out on protecting $10M+ from federal estate tax.

Charitable Giving Changes Could Hit Private Foundations

The bill proposes new limitations on donor-advised funds and private foundations, especially when it comes to deductibility and minimum distribution requirements.

If you run or contribute to a private foundation, expect increased scrutiny. Loopholes that allowed pass-through contributions to meet minimums without actual distributions may be closed. There’s also talk of a 20-year max life span on certain types of foundations.

For high-net-worth philanthropists, this means: Revisit your giving strategy. Committing funds now may lock in current rules before they shift.

Bonus: Executive Compensation and the “Tips + Overtime” Deduction

High earners in C-suite roles should note the proposed deduction for unclaimed tips and overtime hours. While designed to benefit lower-income hourly workers, the deduction interacts with compensation limits for executives in larger companies. It’s not a direct threat, but it could become one if used as a funding offset for other changes.

If you’re the CFO, your HR and benefits team should be modeling the effects of this across bonus structures and employer match formulas.

If You Want to Read More

Fragasso Financial Advisors, a Pittsburgh-based wealth management firm, has published a high-level breakdown of the One Big Beautiful Bill specifically for business owners and high-net-worth individuals. Their blog outlines the risks, planning windows, and portfolio-specific strategies impacted by the proposed changes. You can read their financial blog here.

Again, this isn’t a pitch. Just pointing to a source that took the time to do a decent job summarizing the bill’s impact.

Final Takeaways

• Don’t assume “I’ll handle it next year” is safe anymore.
• The current draft of the bill makes things more expensive for the top 5% of earners – particularly if your assets include real estate, a private business, or equity comp.
• Many of the most effective tax strategies require action before the end of 2025.
• Estate planning under One Big Beautiful Bill just became urgent.

The best-case scenario? You prepare early, and the bill changes or gets watered down. The worst-case scenario? You ignore it, and 2026 becomes the most expensive tax year of your life.

Investment advice offered by investment advisor representatives through Fragasso Financial Advisors, a registered investment advisor.