As we begin a new year and consider the opportunities ahead, reflecting on the past year helps put today’s financial landscape into perspective and informs the strategies that can move us closer to our goals.
2025 was a year marked by policy changes that set long-standing assumptions in motion. These changes could have short-term, medium-term, and long-term effects on savers and investors.
To understand what may be ahead, we examined the past 12 months to see how the landscape has changed. Below are some of the areas where we observed movement and potential economic effects for the country.
What Tax Changes Came from The One Big Beautiful Bill Act?
The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, represents the most significant update to federal tax policy since the 2017 Tax Cuts and Jobs Act (TCJA). It made many TCJA provisions permanent and helped reduce some uncertainty about future tax rates. In addition to extending existing measures, OBBBA introduced new deductions and adjustments that could impact how individuals, families, and businesses structure their finances in the years ahead.1,2,3,4
Here are 7 Changes You Should Be Aware of:
- Standard Deduction: The law permanently increased the TCJA’s higher standard deduction, setting it at $15,750 for single filers, $23,625 for heads of household, and $31,500 for married couples filing jointly. These figures will continue to adjust for inflation, providing some clarity for filers looking ahead.1
- Bonus Deduction for Older Adults: Beginning in 2025, Americans aged 65 and older may claim a temporary $6,000 “senior bonus” deduction. The full deduction applies to individuals with modified adjusted gross income (MAGI) up to $75,000, or $150,000 for married couples filing jointly, and phases out above those levels. This benefit is scheduled to sunset after 2028.2
- State and Local Tax (SALT) Deduction: The OBBBA temporarily lifted the $10,000 SALT cap introduced by the TCJA to $40,000 starting in 2025. The deduction phases out for taxpayers with incomes exceeding $500,000, with both figures increasing by one percent annually through 2029. If Congress does not extend the higher limit, the cap will revert to $10,000 in 2030.
- Auto Loan Interest Deduction: For the first time, households may deduct interest on qualifying new car loans, up to $10,000 annually. Eligibility requires vehicles assembled in the United States and phases out at incomes above $100,000 for individuals or $200,000 for married couples filing jointly. This deduction is temporary, effective through 2028.2
- Qualified Business Income (QBI) Deduction: The OBBBA made the 20 percent deduction for qualified business income permanent. This benefit applies to pass-through entities, such as sole proprietorships, LLCs, and S corporations.3
- Increased Expensing Limits: The maximum amount a small business can expense for qualifying property has risen to $2.5 million, accompanied by higher phaseout thresholds and inflation adjustments.3 These provisions aim to help improve cash flow, enabling businesses to reinvest in equipment and growth.
- Restored Bonus Depreciation: The legislation reinstated 100 percent bonus depreciation, allowing businesses to deduct the full cost of new equipment and facilities immediately rather than over time.4 This change may encourage additional capital investment and productivity improvements.
This high-level summary is for informational purposes only. Consult your tax, legal, or accounting professionals before modifying your tax strategy based on the tax law changes.
How Did the New Law Change Estate and Gift Tax Rules?
The OBBBA permanently increased the federal estate and lifetime gift tax exemptions to $15 million per individual and $30 million per married couple, indexed annually for inflation beginning in 2026.5 This change provides some clarity for multigenerational wealth transfer and business succession strategies.
Under the TCJA, the exemption had doubled temporarily in 2018 from $5 million to roughly $11.2 million per individual. That provision was set to expire in 2026, which would have reduced the exemption to about $7 million for individuals and $14 million for couples, exposing many more estates to taxation.5 By preventing that reversion, the new law may help more family enterprises, farms, and privately held businesses manage their estate-tax exposure.
However, “permanent” in tax law rarely means forever. Future administrations could revise the exemption thresholds, so individuals may want to act within the current environment. Additionally, several states impose their own estate or inheritance taxes, meaning families should evaluate both federal and state rules when structuring their estate goals.5
What Happened to Federal Climate and Energy Policy in 2025?
In 2025, the Administration declared a “national energy emergency,” authorizing expanded domestic exploration, production, and infrastructure development across fossil fuel sectors. Federal agencies were directed to expedite project approvals and streamline the permitting process.6 The Administration also withdrew from the Paris Agreement for the second time and cut funding for large-scale renewable initiatives, shifting focus toward energy affordability and reliability.
Supporters argue these policies lower fuel costs for consumers and improve U.S. energy independence, while critics see them as a retreat from climate commitments. Court challenges are ongoing, and their outcomes could affect which sectors—traditional energy or renewables—may see changes in the coming years.6 Investors should remain aware of these developments when reviewing energy and industrial markets.
How Have New Trade Policies and Tariffs Affected Markets?
Trade and tariff policy underwent a significant shift in 2025. On April 2, known as “Liberation Day,” the U.S. implemented broad tariffs aimed at incentivizing domestic production. Investors initially reacted sharply, with the S&P 500 dropping in the days following the announcement. However, the market recovered as investors looked past the tariff issues.7
Early tariffs targeted autos, steel, and aluminum, later expanding to branded pharmaceuticals, heavy trucks, and household furnishings. Companies that began onshoring production qualified for exemptions, aligning the policy with broader manufacturing goals.8
New trade agreements are underway with the U.K., European Union, Japan, South Korea, and Vietnam, which could lock in reciprocal tariffs of around 15 percent. Meanwhile, discussions continue with China, Canada, Mexico, India, Brazil, and Taiwan.8
The Administration also announced dozens of major U.S. manufacturing projects tied to these policies, including factories, data centers, and an LNG facility.9 Most projects will take years to complete, so the short-term impact on GDP may be limited.
How Did the Economy and Markets Perform in 2025?
Markets managed a wide variety of issues in 2025, including tariff-driven volatility early in the year. Here’s a snapshot of 2025 through September 30.10
Equity Index Performance (YTD as of September 30, 2025):
- S&P 500: 14.83 percent
- DJIA: 10.47 percent
- NASDAQ Composite: 17.93 percent
- Russell 2000: 10.39 percent
- MSCI ACWI ex U.S.: 26.02 percent
- MSCI Emerging Markets Net: 27.53 percent
Much of the U.S. market’s performance was concentrated in the “Magnificent Seven,” a group of large technology companies shaping AI, cloud computing, and automation.11 Their outsized gains helped propel indexes to record levels, though such concentration heightens some concerns should growth expectations moderate.12
Fixed-income markets also fared well. As job-market data softened and inflation eased, investors anticipated that the Federal Reserve would resume rate cuts in 2026. The 10-year U.S. Treasury yield fell to 4.16 percent by the end of September.10
GDP growth remained solid. After a 0.6 percent contraction in the first quarter, the U.S. economy expanded at a 3.8 percent annualized pace in Q2 2025, its strongest showing since late 2023, primarily driven by robust consumer spending.13 Inflation ticked up slightly to 2.9 percent in August, compared with 2.7 percent in July, reflecting modest tariff-related cost pressures.14, 15
What Economic and Political Factors Should Investors Watch in 2026?
Several key themes are expected to influence the economic landscape this year.
Economic Outlook: Trade negotiations and finalized agreements, particularly with China, could impact inflation, employment, and interest rates. Tariff-related revenue may help narrow the federal deficit. According to the National Association for Business Economics (NABE), a recession is unlikely; most surveyed economists put the odds of two consecutive quarters of negative GDP growth at between 20 and 40 percent.¹⁶ NABE forecasts 1.7 percent GDP growth for 2026, up from a prior 1.4 percent estimate, and expects the Federal Reserve to lower borrowing costs by about 0.75 percent over the year.16
It’s important to point out that forecasts are based on assumptions and are subject to revisions over time. Financial, economic, political, and regulatory issues may cause the actual results to differ from the expectations expressed in the forecast.
Political Environment: Midterm elections on November 3, 2026, will help shape control of Congress. All 435 House seats and roughly one-third of Senate seats will be contested, along with multiple governorships and local offices.17 While election outcomes can drive short-term market volatility, long-term performance historically shows minimal correlation with which party controls government. Of course, past performance is no guarantee of future returns.18
Sunset Provisions: Some OBBBA provisions, such as the expanded SALT deduction, are set to expire in the coming years unless extended. Taxpayers should prepare for potential reversion to prior levels.
Estate and Gift Strategies: The elevated exemptions present an attractive but temporary opportunity.19 Even though the OBBBA labeled these limits “permanent,” future legislative changes are always possible. Individuals with sizable estates might consider strategies such as Grantor Retained Annuity Trusts (GRATs), Spousal Lifetime Access Trusts (SLATs), or dynasty trusts to lock in benefits while they remain available.19 Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the relevant rules and regulations.
Housing Market: Housing contributed 16.3 percent to GDP in Q2 2025.20 Falling mortgage rates have spurred activity, though analysts project an 8 percent average home-price decline in 2026 due to affordability pressures and inventory adjustments.21 Many economists see this as a correction that could set the stage for renewed growth in 2027.21
The housing market outlook is based on assumptions and is subject to revisions over time. A variety of factors, including financial, economic, political, and regulatory issues may cause the actual results to differ from the expectations expressed in the forecast.
What Financial Goals Make Sense in 2026?
At the start of each year, reviewing your personal finances can help bring them into alignment with new tax laws, trends, and long-term objectives. In 2026, focus areas may include:
- Accelerating lifetime gifts while the higher exemption remains available, especially for appreciated assets.
- Reviewing and updating estate documents, trusts, wills, beneficiary designations, and powers of attorney.
- Evaluating strategic trust structures, including GRATs, SLATs, and grantor-trust sales, to secure favorable tax treatment.
- Reassessing charitable strategies such as Qualified Charitable Distributions or bunching contributions.
- Coordinating with your financial professional to review capital-gains, loss harvesting, and potential retirement-plan actions.
Why Is Early 2026 a Pivotal Moment for Strategizing?
2026 marks more than a new calendar year; it’s a period of policy transition. The economic, tax, and trade reforms initiated in 2025 are now taking effect, shaping both short-term and long-term opportunity. For individuals and families with complex financial situations, acting early in the year may give more opportunities.
At our firm, we focus on helping clients make proactive, informed decisions at key inflection points, such as this one. If you’d like to review how new tax provisions, estate thresholds, or market trends could affect your financial goals, we welcome the opportunity to help.
Sources:
1. Journal of Accountancy, July 7, 2025
https://www.journalofaccountancy.com/news/2025/jun/tax-changes-in-senate-budget-reconciliation-bill/
2. CNBC, July 4, 2025
https://www.cnbc.com/guide/what-trumps-one-big-beautiful-bill-means-for-your-money/#trumps-2017-tax-cut-extensions
3. Fortune, July 2025
https://www.msn.com/en-us/money/smallbusiness/how-the-big-beautiful-bill-is-rewriting-the-rules-for-small-business-success/ar-AA1IcHJM?ocid=BingNewsVerp
4. USA Today, July 1, 2025
https://www.usatoday.com/story/graphics/2025/07/01/winners-losers-trump-big-tax-bill-senate/84391469007/
5. Sherwood & Roberts, July 14, 2025
https://www.smr-law.com/insights/the-one-big-beautiful-bill-act-obbb-has-major-benefit-for-estate-and-gift-taxes-here-s-what-you
6. Power Magazine, March 3, 2025
https://www.powermag.com/trump-energy-policy-changes-signal-major-industry-shifts-in-2025-and-beyond/
7. Yahoo Finance, May 12, 2025
https://finance.yahoo.com/news/official-us-stocks-now-recovered-221453494.html
8. Wall Street Journal, October 2025
https://www.wsj.com/economy/trade/trump-tariffs-countries-trade-explained-7f826419?mod=trade_news_article_pos5
Website screenshot: What to Know About Trump’s Latest Tariffs
9. Wall Street Journal, August 6, 2025
https://www.wsj.com/economy/trump-pledged-to-bring-back-manufacturing-the-sector-is-sputtering-c6344630?mod=article_inline
Website screenshot: Trump Pledged to Bring Back Manufacturing. The Sector Is Sputtering.
10. Clark Capital, October 6, 2025
https://ccmg.com/benchmark-review-monthly-recap-september-2025/
WSJ.com, September 30, 2025. The Dow Jones Industrial Average is an unmanaged index generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
MSCI ACWI ex U.S. and MSCI Emerging Markets are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.
11. Investopedia, August 29, 2025
https://www.investopedia.com/magnificent-seven-stocks-8402262
12. Investopedia, September 10, 2024
https://www.investopedia.com/ask/answers/what-is-gdp-why-its-important-to-economists-investors/
13. Trading Economics, October 2025
https://tradingeconomics.com/united-states/gdp-growth
14. CPI Inflation Calculator, October 2025
https://cpiinflationcalculator.com/2025-cpi-and-inflation-data-for-the-united-states/
15. Federal Reserve of St. Louis, October 16, 2025
https://www.stlouisfed.org/on-the-economy/2025/oct/how-tariffs-are-affecting-prices-2025
16. CBS News, October 13, 2025
https://www.cbsnews.com/news/economists-nabe-forecasts-2025-gdp-growth/
17. The Next Presidential Election, October 2025
https://www.nextpresidentialelection.us/events/2026-united-states-mid-term-elections
18. Investopedia, January 28, 2025
https://www.investopedia.com/us-election-and-stock-market-6822056
19. Manatt, July 18, 2025
https://www.manatt.com/insights/newsletters/key-estate-planning-implications-following-passage-of-the-one-big-beautiful-bill-act
20. National Association of Home Builders, July 31, 2025
https://eyeonhousing.org/2025/07/housing-share-of-gdp-second-quarter-2025/
21. Housing.info, October 2025
https://www.housing.info/blog/why-the-housing-market-will-reset-in-2026-and-begin-a-new-recovery-in-2027
