The “One Big Beautiful Bill,” H.R. 1, was signed into law by President Trump on July 4th, 2025. The Tax Foundation has published a comprehensive analysis of the major tax provisions.
The following are some significant changes that will affect individual and estate taxes, along with their corresponding comments.
Make the expiring rate and bracket changes permanent.
The continuation of lower tax rates provides an additional opportunity for retirement savers to divert their funds into Roth IRA and Roth 401(k) accounts. Although the tax rates are “permanent,” the projected budget deficits of $3.8 to $4.9 trillion indicate that tax rates will eventually need to increase, which is why Roth contributions and conversions have a better chance of paying off overall.
Permanently increase the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers and $30 million for joint filers beginning in 2026.
The increase in the federal estate tax exemption is a benefit to larger estates.
In addition, as of July 1, 2025, the Washington State Estate Tax exemption has been increased from $2.193 million to $3 million and will be indexed for inflation. Starting in 2026, this exemption amount will be adjusted annually for inflation based on the Consumer Price Index (CPI) for the Seattle metropolitan area.
It is also important to note that while the exemption has increased, the new legislation also includes steeper tax rates for larger estates, with a top marginal rate of 35% on estates exceeding $9 million (previously 20%). Therefore, planning around the Washington Estate Tax is still an important consideration.
Temporarily add a senior deduction of $6,000 for each qualifying individual for both itemizers and non-itemizers that phases out when modified adjusted gross income exceeds $75,000 ($150,00 jointly), available from 2025 through 2028.
This deduction will benefit some (65+) middle-income seniors, but will not be a useful benefit for seniors in higher or lower income brackets. This is not an exemption from taxes on Social Security benefits discussed earlier in the legislative process.
Temporarily increase the cap on the itemized deduction for state and local taxes (SALT) to $40,000 for 2025 and increase the cap by 1 percent from that level through 2029, subject to a phaseout for taxpayers with incomes above $500,000, then reduce the cap to a flat $10,000 thereafter.
Most Washington residents are unable to itemize deductions on their federal tax returns because the standard deductions are high, and the previous $10,000 cap on deducting state and local taxes (including property taxes) was low. However, some Washington residents with high property tax bills might be able to itemize deductions on their federal returns, because their property taxes may be fully deductible on their returns.
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