Tax Planning Opportunities for Midwestern Millionaires Under OBBBA

The One Big Beautiful Bill Act (OBBBA) introduces tax provisions that could significantly impact financial planning for high-net-worth individuals in the Midwest. While much of the national conversation has focused on corporate impacts, the Act reveals advantages for millionaires with $1 million or more in investable assets. Many have built their wealth through small businesses and diversified portfolios.

Extended Lower Tax Rates

The OBBBA extends current marginal tax rates beyond previous sunset dates. This creates a multi-year window for income-shifting strategies like Roth IRA conversions or harvesting long-term capital gains in lower tax brackets. "The extension of these rates is a cornerstone of many tax minimization plans we've been recommending," said Clara Hovde, a certified financial planner in Des Moines, Iowa. "Locking in gains or shifting income now can reduce tax burdens later, when rates might rise again."

Expanded Deduction for Pass-Through Entities

For those with business income, the OBBBA increases the deduction under Internal Revenue Code Section 199A. Previously capped at 20% of qualified business income (QBI), the threshold has risen to 22.5% through 2030. Beneficiaries include owners of family farms, dental practices, and engineering firms prevalent in the Midwest.

However, the expanded deduction remains subject to phase-outs based on taxable income levels. "Without diligent modeling, taxpayers risk missing out on substantial savings or triggering phase-outs," cautioned Hovde.

Generational Wealth: New Estate Planning Tools

The OBBBA raises the federal estate tax exemption to $14 million per individual ($28 million for married couples) through 2029. This higher threshold allows for greater flexibility in gifting strategies and irrevocable trusts, enabling families to transfer wealth while minimizing estate tax exposure.

Wealth managers report increased interest in spousal lifetime access trusts (SLATs) and other irrevocable structures. "The Midwest’s wealth transfer needs are unique because they often involve land," explained Jide Omisore, an estate attorney in Minneapolis. "The higher exemption can help families protect legacy properties from forced sales triggered by estate taxes."

Charitable Contributions and Donor-Advised Funds

The OBBBA enhances incentives for charitable giving, raising the adjusted gross income (AGI) limit for cash contributions. Individuals can now deduct cash donations up to 70% of AGI, up from 60%. This provision could benefit Midwestern philanthropists who often prefer donor-advised funds (DAFs) for tax-efficient giving.

"The higher AGI limit broadens the appeal of direct cash donations, especially for higher earners who have already maxed out other deductions," remarked Omisore. "But the impact varies—DAFs still offer unmatched timing flexibility."

Implications for SALT Cap Workarounds

Finally, the OBBBA introduces limited state and local tax (SALT) deduction cap workarounds for residents in states with lower income tax rates, including much of the Midwest. By allowing passthrough businesses to elect taxation at the entity level, some taxpayers may restore SALT deductions otherwise capped at $10,000. However, these workarounds are state-dependent, requiring consultation with tax professionals.

Recommendations and Next Steps

Navigating these provisions requires collaboration among tax advisors, estate planners, and investment managers. "Our role is to ensure clients understand not just the opportunities but also the caveats," said Hovde. Those considering Roth conversions must weigh near-term tax costs against potential future savings under different legislative scenarios.

The clock is ticking on some measures, with sunset dates set for 2029 and 2030. Whether further extensions will materialize depends on political and economic conditions. Midwestern millionaires must act decisively to leverage the tools now available under the OBBBA.