How the One Big Beautiful Bill Act – and California’s AB-116 – Impact Estate Planning, Elder Law, Special Needs Planning, and Business-Owning Clients
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA – Pub. L. No. 119-21, 139 Stat. 72 (2025), which makes permanent some provisions included in the 2017 Tax Cuts and Jobs Act and includes many new provisions impacting individuals and businesses.
Taxes.
The OBBBA permanently increases the estate and gift tax exemption amount to $15 million for individuals and $30 million for married couples, indexed annually for inflation using 2025 as the new base year, for the estates of individuals dying and gifts made after December 31, 2025. The OBBBA does not change rules applicable to portability elections, and the lifetime generation-skipping transfer (GST) tax exemption will continue to be equal to the basic exclusion amount.
Other provisions included in the 2017 Tax Cuts and Jobs Act that the OBBBA makes permanent include the following:
The current tax brackets, with a bottom rate of 10 percent and a top rate of 37 percent
- The doubled standard deduction, which will increase to $15,750 for individuals and $31,500 for married couples filing jointly
- The $750,000 limit for the home mortgage interest deduction
The OBBBA temporarily increases the state and local tax (SALT) deduction from $10,000 to $40,000 (indexed for inflation) through tax year 2029, which will then decrease to $10,000. The OBBBA does not impact the availability of pass-through business entity tax workarounds. The temporary increase phases out for taxpayers with incomes exceeding $500,000. This change applies to taxable years beginning after December 31, 2024.
For individuals who itemize, the OBBBA limits the charitable deduction to contributions exceeding 0.5 percent of their taxable income. For individuals who do not itemize and instead take a standard deduction (and who historically have not been able to deduct charitable donations), the OBBBA allows a charitable deduction of up to $1,000 for individuals and $2,000 for married couples filing jointly.
Long-term care Medicaid, ABLE accounts, and Social Security.
The OBBBA includes provisions impacting seniors who may need long-term care in a nursing facility, including the following:
- For applicants seeking Medicaid eligibility for long-term care, the OBBBA amends the home equity exclusion to $1 million, not indexed for inflation, meaning that individuals who would otherwise be eligible for long-term care services under the Medicaid program will not qualify if their home equity exceeds $1 million, effective January 1, 2028. The OBBBA allows states greater flexibility for properties zoned for agricultural use.
- Effective January 1, 2027, the retroactive eligibility period is reduced from three months to two months for traditional Medicaid enrollees.
- The Centers for Medicare & Medicaid Services’ (CMS) Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment final rule, aimed at simplifying Medicaid long-term care enrollment (and other Medicaid processes), is suspended until 2035, effective on the date of enactment.
- The CMS final rule Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting will not be enforced or implemented until September 30, 2034, effective on the date of enactment. Please note that on December 2, 2025, the CMS issued an interim final rule repealing the staffing rule, effective February 2, 2026.
- New funding is provided for home and community-based services and rural hospitals.
In addition, the OBBBA makes the increased limitation on contributions to ABLE accounts permanent and modifies the inflation adjustment to apply to taxable years beginning after December 31, 2025.
The new law also provides an additional standard deduction of $6,000 for individuals aged 65 and older between 2025 and 2028, which begins to phase out for single taxpayers whose modified gross income exceeds $75,000 ($150,000 for married couples filing jointly).
On a related note, many Californians in Medi-Cal programs will be affected by Assembly Bill 116 (AB 116) which was signed into law by Governor Newsome on June 30, 2025 and becomes effective on January 1st, 2026. Unfortunately, some people/families will lose their Medi-Cal benefits because of this law. The new California law will apply to you if you’re on Medi-Cal now, you’re 65 or older, you have a disability, you may need long-term care in the future, or you have parents or relatives who fall into these categories.
For the past few years, most Medi-Cal programs stopped looking at your assets, but in 2026, California will again count your assets for Medi-Cal eligibility if you qualify based on:
- Being 65 or older
- Having a disability
- Living in a nursing home
- Being over income under federal tax rules
New Medi-Cal Asset Limits, effective January 1, 2026)
If you’re over the limit when you renew in 2026, you may lose your Medi-Cal coverage. To keep or qualify for Medi-Cal, your “countable assets” must stay below:
- $130,000 for one person
- + $65,000 for each additional household member (up to 10 people)
Note: Some married couples or domestic partners may qualify for higher amounts under “Spousal Impoverishment” rules.
Countable assets include:
- Bank accounts (checking, savings, CDs)
- Cash
- Second vehicles
- Second homes or investment properties
- Stocks, bonds, mutual funds, and investment accounts
- Any property you own jointly
NOT counted:
- Your primary residence
- One vehicle
- Household items
- Certain retirement accounts (if you’re already withdrawing required minimum distributions)
Starting January 1, 2026, transfers will be subject to a 30-month look-back period. However, transfers or gifts made in 2025 do NOT trigger Medi-Cal penalties for long-term care. Remember, AB-116 applies to ASSETS – what you own – and not income.
Small businesses.
The OBBBA includes provisions that impact small businesses. Specifically, these provisions do the following:
- Make the section 199A pass-through deduction permanent and keep the deduction rate at 20 percent
- Permanently restore the 100 percent bonus depreciation for qualified property acquired and used after January 19, 2025
- Allow a section 179 deduction for investment in qualified business equipment and certain other assets and increase the deduction cap from $1.5 million to $2.5 million
- Increase the amount of business interest expenses that can be deducted by removing depreciation, amortization, and depletion deductions from the calculation of adjusted taxable income
- Permit domestic research and development expenses to be deducted in the year incurred, or costs may be capitalized and amortized over the life of the research (at least 60 months)
- Make the excess business loss limitation permanent
- Expand the exclusion of gain recognition for the sale of qualified small business stock
Takeaways:
The permanent increase in the estate and gift tax exemption amount eliminates the urgency for clients to use the higher exemption amount before the previously scheduled 2026 sunset. Note that on October 9, 2025, the Internal Revenue Service (IRS) released its 2026 exemption and exclusion amounts.
For applicants seeking Medicaid eligibility for long-term care, the change to the home equity limit will have a noticeable short-term benefit for single clients in a supermajority of jurisdictions throughout the country, where the prior limit was between $730,000 and $750,000. The tightening of the retroactive eligibility scheme, however, will impact both applicants and facilities alike.
The new law provides small businesses with additional certainty by making beneficial provisions permanent and providing additional tax advantages designed to encourage investment.
