OBBBA 2026: What Actually Changed for High-Net-Worth and Entertainment Clients
The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) did something the tax code rarely does: it took a stack of provisions that were scheduled to expire and made them permanent, then layered new deductions on top. For most taxpayers that's a headline. For the two audiences we work with most — high-net-worth individuals and family offices on one side, entertainment industry professionals on the other — it's a planning reset. The exemptions you were racing to use before a sunset are no longer sunsetting. The depreciation you thought was phasing out is back at 100%. And a grip pulling overtime on a Netflix production now has a federal deduction that didn't exist a year ago. Here's what actually changed, with the code sections and the numbers, for the people we serve.
For High-Net-Worth Individuals and Family Offices
The estate and gift tax exemption is locked at $15M — permanently. Under § 2010(c), the basic exclusion amount was $13.99M for 2025 and was scheduled to fall by roughly half at the end of 2025 when the TCJA-era increase sunset. OBBBA removed the sunset and set the exemption at $15M per individual for 2026, indexed for inflation going forward. For a married couple, that's effectively $30M combined, and the generation-skipping transfer tax exemption under § 2631 tracks the same figure.
This changes the tenor of estate planning from urgency to strategy. For years the advice was "use it or lose it" — move assets out before the exemption dropped. That pressure is gone. But gone-pressure is not the same as no-planning. A permanent $15M exemption makes GRATs, IDGTs, and installment sales to grantor trusts more attractive, not less, because you can layer them over multiple years without racing a deadline. The value that appreciates outside your estate after the transfer still escapes estate tax entirely, and the higher exemption gives you more room to seed those structures. Family offices sitting on assets well above $30M should be thinking about multi-year gifting cadences, GST-exempt dynasty trusts, and the interaction with the current AFR curve — not whether to rush a transfer before December.
The SALT deduction cap rose to $40K — but the California PTE election still matters. For 2026 through 2029, § 164(b)(6) raises the state-and-local-tax deduction cap from $10K to $40K, with a phaseout that begins around $500K of modified AGI and fully unwinds the increase at roughly $600K. Above that band, high earners are effectively back to the $10K cap.
That phaseout is the whole story for our clients. A Beverly Hills household paying California's 13.3% top rate plus substantial property tax blows through $40K in state tax on income alone — and most of our HNW clients sit above the $600K phaseout ceiling, which claws the increase back. This is exactly why the California Pass-Through Entity elective tax remains one of the most valuable tools we deploy. The PTE election works around the § 164(b)(6) cap by paying California tax at the entity level, deducting it federally as an ordinary business expense, and passing a credit back to the owner. The raised cap doesn't dull that benefit for anyone with real California-source pass-through income — because they were never going to fit under $40K anyway.
The QBI deduction is now permanent. The 20% qualified business income deduction under § 199A was scheduled to sunset at the end of 2025. OBBBA made it permanent and adjusted the phase-in thresholds. For pass-through owners, S-corp shareholders, and real estate professionals who qualify, this removes a planning uncertainty that had been distorting entity-choice decisions for two years. The reasonable-compensation-versus-QBI optimization is now a permanent feature of S-corp planning rather than a bet on whether the deduction survives — and for rental real estate operators who meet the § 199A trade-or-business standard, the deduction is a durable part of the return, not a temporary one.
100% bonus depreciation is restored. Under § 168(k), first-year bonus depreciation had been phasing down — 60% in 2024, headed to 40% and then 20%. OBBBA restored it to 100% for qualified property placed in service after the signing date. For real estate investors, this is significant. A cost segregation study that carves a property into its 5-, 7-, and 15-year components now lets you expense those components in full in year one again, rather than spreading the benefit across a declining bonus schedule. For anyone acquiring or improving income property, the placed-in-service timing conversation is back on the table in a serious way.
Worth a mention for legacy planning: OBBBA introduced Trump Accounts, a new tax-advantaged savings vehicle for children with a $5K annual contribution limit. For family offices thinking about structured gifting to the next generation, these are a small but useful addition to the toolkit — not a game-changer, but worth folding into a broader legacy conversation alongside 529s and dynasty trusts.
For Entertainment Industry Clients
Overtime is now partly tax-free — up to $12,500 a year. This is the OBBBA provision with the biggest reach into the crew. Qualifying overtime pay is federally deductible up to $12,500 per year (double for joint filers). The mechanics matter: it's a deduction, not an exclusion, so the wages still show up on the W-2 and still count for payroll tax and AGI — but the qualifying overtime premium comes back as a below-the-line deduction. "Qualifying" is defined by reference to the overtime required under the Fair Labor Standards Act, so it's the FLSA-mandated time-and-a-half premium that counts.
Concrete example: a grip working 400 overtime hours at $50 an hour earns $20K in overtime pay. Of that, $12,500 is federally tax-free under the new deduction; the remaining $7,500 is taxed normally. For touring staff, hourly production workers, and IATSE crew pulling long weeks, this is real money — and it's the kind of provision that never makes it into a payroll conversation unless someone is watching for it.
Tip income is deductible up to $25,000 a year. OBBBA created a federal deduction for qualifying tip income, capped at $25K annually. For entertainment clients this reaches musicians who receive tips, certain crew, and hospitality-adjacent talent. Qualifying tips are voluntary customer gratuities in occupations that customarily receive them — reported tips, in other words, not service charges or negotiated fees. As with overtime, it's structured as a deduction against otherwise-taxable income, so the reporting discipline still matters.
§ 174 R&D expensing is restored. Since 2022, § 174 forced businesses to capitalize and amortize research expenditures over five years — a cash-flow drag that hit anyone building technology in-house. OBBBA restored immediate expensing for domestic research costs. For production companies with internal engineering, VFX houses, and streaming platforms structured as pass-throughs, this is a meaningful swing. If your production entity has been capitalizing software or workflow-tech development, the return to immediate deductibility changes your projected taxable income materially — and it's worth a year-end reconciliation to make sure the stale capitalized balances are handled correctly.
How this stacks with the industry's existing rules. None of these OBBBA changes disturbed the mechanics entertainment clients already rely on. Loan-out corporations still qualify for the § 199A deduction. Per-diem allowances are still deductible on the same terms. The § 274 meal-deduction limits are unchanged. In other words, the OBBBA provisions stack on top of the loan-out, per-diem, and meal rules — nothing was made worse for the industry, and the overtime, tip, and § 174 changes are additive.
The California conformity gap — read this twice. California has not conformed to any of these OBBBA provisions. Not the overtime deduction, not the tips deduction, not § 174 immediate expensing, not 100% bonus depreciation. That means every one of these federal benefits produces a federal-versus-California divergence on the return. The grip's $12,500 of tax-free overtime is still fully taxable for California purposes. The production company's immediately-deducted R&D is deducted federally but must be tracked separately for California. This is the planning gotcha that trips up out-of-state preparers, and it's the single best reason for an entertainment professional working in Los Angeles to work with a California-licensed CPA who tracks both sets of books.
The Cross-Applicable Provisions — What Didn't Change
Calibration matters, because not everything moved. The business meal deduction stayed at 50% — some had hoped OBBBA would restore full deductibility, and it didn't, so the § 274 haircut is still in place. The research credit under § 41 remains intact and continues to operate alongside the restored § 174 expensing — the credit and the deduction are separate mechanisms, and you can still claim both where you qualify. And § 1202 qualified small business stock is still working exactly as before: the gain exclusion on qualifying QSBS remains one of the most powerful tools available to founders and early investors, and OBBBA left it untouched. The lesson is that OBBBA was surgical, not sweeping — it changed specific provisions and left long-standing ones in place, which is why blanket "everything changed" advice is as wrong as "nothing changed."
Talk Before Year-End, Not After
Every one of these provisions has planning ramifications that compound over multi-year windows — the permanent exemption, the raised SALT cap, the restored depreciation, the new overtime and tip deductions. If you're a high-net-worth individual, a family office, or an entertainment industry professional in Los Angeles or Beverly Hills, that's a conversation worth having before December, not in April. Book a consultation at laleablack.com/contact or call (866) 222-6060.
— David Meyer, CPA · Partner, Laléa & Black, LLP