The One Big Beautiful Bill Act of 2025 (OBBBA) has reshaped the federal tax landscape—and for New Yorkers, the updates are especially significant. The new law brings sweeping changes that affect how families plan, invest, and protect their estates.
If you live or work in New York, this guide breaks down what’s changing, what it means for your taxes and estate plan, and how to prepare. From the return of the full SALT deduction to an expanded estate tax exemption, these reforms could offer meaningful relief—but also new planning challenges for high earners and families with complex assets.
What Are the Key Federal Tax Changes for New Yorkers in 2025?
The OBBBA touches nearly every aspect of federal taxation, but New Yorkers will feel its effects most in a few specific areas.
1. The SALT Deduction Returns—And It’s Bigger Than Before
The biggest news for many is the restoration of the state and local tax (SALT) deduction.
Under the 2017 Tax Cuts and Jobs Act (TCJA), taxpayers could deduct only up to $10,000 in state and local taxes—a major burden for residents of high-tax states like New York.
The OBBBA raises that limit to $40,000, dramatically reducing the “double taxation” effect. This change offers real relief for professionals and families paying steep city and state taxes. It’s especially relevant for homeowners and business owners in New York City and surrounding areas.
2. A Higher Estate Tax Exemption—And It’s Staying That Way
The New York estate tax changes in 2025 are a major win for long-term planners.
The heightened federal estate tax exemption, which was previously set to expire at the end of 2025, will now continue and increase to approximately $15 million per person in 2026, indexed for inflation going forward.
This change gives New Yorkers more flexibility in transferring wealth, supporting charitable causes, and maintaining intergenerational assets—without the urgency of year-end planning that many expected.
Still, the New York State estate tax exemption remains lower than the federal level, which means advanced planning strategies are still essential. Tools such as trusts or gifting plans can help minimize exposure at both levels. Families who want to better understand the impact of probate on these strategies may find insight in Reasons to Avoid Probate.
3. Income Tax Rates and Deductions Get Locked In
The OBBBA permanently extends several provisions from the TCJA:
- Income tax brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are now permanent.
- The increased standard deduction also becomes permanent, simplifying filing for many households.
- Charitable deduction limits change: starting in 2026, itemizers can only deduct donations that exceed 0.5% of adjusted gross income. Those who don’t itemize can deduct up to $1,000 per person in cash contributions.
If you give regularly to charity, consider “bunching” your donations—making larger contributions every few years instead of smaller ones annually—to maximize the deduction.
4. New Benefits for Seniors
For tax years 2025 through 2028, taxpayers aged 65 and older can claim a new $6,000 deduction for single filers or $12,000 for married couples. This is in addition to the existing “additional standard deduction” already available to seniors.
The deduction phases out completely for incomes above $175,000, so retirees with moderate to high incomes should review how this benefit interacts with their broader estate and income strategies.
5. Business Owners See Long-Term Stability
Business owners, professionals, and entrepreneurs will also benefit from the new law:
- The 20% Qualified Business Income (QBI) deduction for pass-through entities is now permanent.
- The Qualified Small Business Stock (QSBS) cap increases from $10 million to $15 million, with a reduced holding period of 3–5 years for eligible gains.
This change incentivizes investment and entrepreneurship in high-value markets like New York City, while also rewarding business continuity and long-term planning.
If your business is structured as an LLC, partnership, or S corporation, this stability could make tax planning more predictable and potentially more favorable over time.
6. Education Planning Sees Expanded 529 Flexibility
The OBBBA raises the limit on 529 plan withdrawals for K–12 education from $10,000 to $20,000, and broadens the definition of “qualified education expenses.”
However, New York’s tax rules haven’t caught up. Withdrawals for K–12 expenses will still trigger state and local taxes, and any state deduction you claimed for those contributions could be recaptured.
Families using 529s for private school tuition should coordinate with both their financial advisor and estate attorney to avoid unexpected tax consequences. As families consider how education fits into their overall legacy plan, it’s worth reviewing Financial and Legal Planning to Prepare Your Child for College, which explores how 529s and other tools align with long-term protection goals.
What Do These Changes Mean for Estate Planning in New York?
For high-net-worth families, professionals, and small business owners, these tax updates present new opportunities—and potential pitfalls.
- The federal estate exemption increase means you may be able to transfer more wealth tax-free, but the state-level gap in New York requires careful coordination.
- The SALT deduction expansion could affect your overall tax bracket and charitable strategies.
- Charitable giving limits may influence the structure of donor-advised funds or planned gifts.
Reviewing your trusts, wills, and tax strategies now—before these provisions fully take effect—can help ensure you take advantage of every available benefit.
Frequently Asked Questions
1. Will my New York estate still be taxed even with the new federal exemption?
Yes. New York State imposes its own estate tax, with an exemption that’s lower than the federal level. Strategic trust planning can help reduce the state burden.
2. Should I change my charitable giving strategy?
Possibly. Because of the new limits, “bunching” donations or setting up a donor-advised fund may help maintain deductibility.
3. When do these new tax rules take effect?
Most provisions begin in 2025, with the new estate tax exemption applying in 2026 and indexing for inflation thereafter.
Next Steps: Secure Your Estate and Tax Strategy
The One Big Beautiful Bill Act of 2025 reshapes the landscape for New Yorkers managing significant assets, family wealth, and business income. Understanding these changes now can help you plan wisely for the years ahead.
If you’d like to discuss how the New York estate tax changes in 2025 impact your specific situation, contact The Village Law Firm for a comprehensive estate review.
Schedule a consultation today.
