Wealth Accumulation in 2025: New Tax Strategies and Opportunities

The landscape for wealth accumulation in 2025 is being reshaped by significant tax reforms and incentives aimed at rewarding growth, innovation, and disciplined financial planning. For founders, investors, and high-earning professionals, understanding these changes is essential to maximizing opportunities in the year ahead.

Major QSBS Enhancements: A Game Changer for Founders and Investors

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has meaningfully expanded the benefits of Qualified Small Business Stock (QSBS).

Shorter Holding Periods for Tax Exclusion

• 3 years: 50% gain exclusion
• 4 years: 75% gain exclusion
• 5+ years: 100% gain exclusion
  (Previously, a 5-year minimum was required for any exclusion.)
  

Higher Gain Exclusion Cap

• The per-issuer cap rises from $10 million to $15 million for stock issued after July 4, 2025, with future inflation adjustments.
  

Broader Company Eligibility

• The maximum asset threshold for a Qualified Small Business increases from $50 million to $75 million, indexed for inflation. This widens access for high-growth companies – particularly in technology and life sciences – to issue QSBS and attract investment.
  

Faster Liquidity for Investors

• Partial tax-free gains are now possible after just three years, creating more flexibility for early-stage investors and founders planning an exit.
  

Why It Matters

• Founders & Startups: Easier capital raising and greater rewards for early backers.
• Investors: Access to significant tax-free gains sooner and on larger investments.
• Broader Market: More capital directed toward small businesses, supporting innovation, job creation, and economic growth.
  

Income Tax Bracket Changes for 2025

• Lower Rates Made Permanent: The reduced tax rates introduced in 2017 are now permanent.
  
• Bracket Thresholds Increased: All income brackets have been adjusted for inflation, reducing the impact of “bracket creep.” The 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets remain, but with higher dollar thresholds.
  
• Reduced Marriage Penalty: Thresholds for married couples filing jointly are now exactly double those for single filers, except in the top bracket.
  
• Ongoing Inflation Adjustments: All thresholds will continue to be indexed annually.
  

Expanded State and Local Tax (SALT) Deduction

• Higher Cap: For tax years beginning in 2025, the cap increases from $10,000 to $40,000 for joint filers ($20,000 for married filing separately), indexed for inflation through 2029. After 2029, the cap reverts to $10,000.
  
• Phaseout for High Earners: Begins at $500,000 MAGI ($250,000 for married filing separately) but never drops below $10,000.
  
• Eligible Taxes: State and local income, sales, and property taxes qualify.
  

New Deductions for Tips and Overtime (2025–2028)

• Tips Deduction: Up to $25,000 annually (phaseouts apply) for qualified cash tips in occupations that customarily receive tips.
  
• Overtime Deduction: Up to $12,500 annually ($25,000 for joint filers) for qualified overtime pay.
  
• Both deductions require proper reporting, remain subject to FICA taxes, and have specific phaseout thresholds.
  

Auto Loan Interest Deduction (2025–2028)

• Deduct up to $10,000 annually in interest on new personal auto loans (restrictions apply on income, vehicle type, and use).
  

Key Questions to Consider

• How might the new QSBS provisions affect your exit planning or investment strategy?
  
• Could the expanded asset threshold or higher exclusion cap influence your next business or funding decision?
  
• Are you positioned to take advantage of new deductions for tips, overtime, or auto loan interest?
  
• What proactive tax planning steps can you take today to benefit from these changes?
  

Looking Ahead‍

The new tax landscape offers a rare blend of enhanced flexibility, increased incentives, and expanded opportunities. Whether you are building a business, investing for growth, or planning for long-term wealth, understanding these provisions – and acting strategically – can make a meaningful difference in your financial outcomes.

Your advisor is here to help you interpret these changes in the context of your broader wealth plan, identify strategies that align with your goals, and ensure you are well-positioned to benefit from every available advantage. We welcome the opportunity to discuss how these developments may apply to your situation and explore the right path forward together.