Your 2025 Year in Review and Strategic Opportunities for 2026

As we begin a new year, we wanted to take a moment to reflect on the developments of 2025 and share what we're watching as we move into 2026. This past year brought policy changes that are reshaping the financial landscape and creating important opportunities for those who act strategically.

The Big Picture: What Changed in 2025

2025 was a year marked by changes, from sweeping tax reform to trade policy shifts and strong market performance. The policy moves made last year might have ripple effects for years to come.

Here's what stood out:

1. Historic Tax Reform Is Now Law

In July 2025, the One Big Beautiful Bill Act (OBBBA) became the most significant update to federal tax policy since 2017. This legislation made many temporary provisions permanent and introduced several new benefits that could impact your financial strategy.^{1, 2, 3, 4}

Key changes include:

• Permanent Higher Standard Deduction: The law locked in increased deductions—$15,750 for single filers, $23,625 for heads of household, and $31,500 for married couples filing jointly, with annual inflation adjustments going forward.¹
  
  
• New Senior Bonus Deduction: Americans 65 and older can now claim a temporary $6,000 deduction (through 2028), with income-based phaseouts starting at $75,000 for individuals and $150,000 for married couples.²
  
  
• Expanded SALT Deduction: The $10,000 state and local tax cap has been increased to $40,000 through 2029, although it phases out for higher earners and will revert to $10,000 in 2030 unless extended.
  
  
• Auto Loan Interest Deduction: For the first time, interest on qualifying U.S.-assembled vehicle loans is deductible up to $10,000 annually through 2028, with income limits.²
  
  
• Permanent QBI Deduction: The 20 percent qualified business income deduction for pass-through entities is now permanent, providing long-term guidance for business owners.³
  
  
• Enhanced Business Expensing: Small businesses can now expense up to $2.5 million in qualifying property. Additionally, 100 percent bonus depreciation has been reinstated, allowing for the immediate deduction of equipment costs.^{3, 4}
  
  
• 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.
  
  

These changes might create opportunities, but also complexity. 

2. Estate and Gift Exemptions Reached Historic Levels

The OBBBA “permanently” increased federal estate and gift tax exemptions to $15 million per person ($30 million per couple), indexed for inflation starting in 2026.⁵ This is an increase from the roughly $7 million per person we would have faced had the prior law expired as scheduled.

While labeled as "permanent," tax laws can always be amended or changed by future legislation. For families with significant estates, this creates a window of opportunity. Strategies like Grantor Retained Annuity Trusts (GRATs), Spousal Lifetime Access Trusts (SLATs), and dynasty trusts can help you take advantage of these elevated limits while they're available.^{5, 6}

Using a trust is complex, so we encourage you to work with a professional who is familiar with the relevant rules and regulations.

3. Trade Policy Created Volatility—Then Opportunity

"Liberation Day" on April 2, 2025, marked the implementation of broad new tariffs aimed at spurring domestic manufacturing. Markets initially reacted sharply, with the S&P 500 dropping approximately 12 percent over the course of several days. However, the market recovered within a month and continued climbing through year-end. Past performance does not guarantee future results.⁷

These policies have spurred commitments to U.S. manufacturing by companies who plan to build factories, data centers, and energy infrastructure.^{8, 9} While most projects will take years to complete, this represents a shift toward domestic production.

Trade negotiations continue with major partners, including the U.K., EU, Japan, and others, while a Supreme Court case in 2026 could reshape the legal framework for tariff authority.⁸ We're monitoring these developments closely as they'll influence inflation, interest rates, and sector performance.

4. Markets Delivered Strong Returns Despite Uncertainty

Technology and AI-related companies led U.S. performance, with much of the gains concentrated in the "Magnificent Seven" mega-cap stocks.¹⁰ While this concentration has driven strong returns, it also presents valuation considerations we're actively managing in portfolios. Past performance does not guarantee future results.

5. The Economy Remained Resilient

After a modest first-quarter contraction, the U.S. economy rebounded with 3.8 percent annualized gross domestic product (GDP) growth in Q2 2025—the strongest showing since late 2023.¹¹ Consumer spending remained robust, and inflation ticked up modestly to 2.9 percent in August, reflecting some tariff-related cost pressures but remaining relatively contained.^{12, 13, 14}

What We're Watching in 2026

This year presents both opportunities and important deadlines:

• Near-Term Expiration Dates: Several OBBBA provisions—including the expanded SALT deduction and the senior bonus deduction—are temporary. Preparing now might allow you to take advantage of these benefits before they sunset.
  
  
• The Midterm Elections: November 3, 2026, will reshape Congressional control, with all 435 House seats and roughly one-third of Senate seats contested.^{15, 16} While elections create short-term volatility, long-term market performance historically shows minimal correlation with which party governs. Of course, past performance is no guarantee of future returns.¹⁷
  
  
• Estate Window: While the $15 million exemption is labeled permanent, political winds can shift. The elevated exemptions present an attractive but temporary opportunity.¹⁷
  
  
• Housing Market Reset: Analysts project an 8 percent average decline in home prices in 2026 due to a variety of factors, but many view this as a correction that may set the stage for renewed growth in 2027.^{18, 19}
  
  
• Economic Outlook: The National Association for Business Economics forecasts 1.7 percent GDP growth for 2026 and puts recession odds at just 20-40 percent.¹⁶ Trade negotiations, particularly with China, may be a key variable affecting inflation and employment.
  
  

What We're Actively Managing

Given this landscape, here are the strategic areas we're monitoring:

• Estate and Gift Strategies: We're evaluating opportunities to accelerate lifetime gifts of appreciated assets while elevated exemptions remain available.
  
  
• Document Alignment: We're reviewing whether estate documents, trusts, wills, beneficiary designations, and powers of attorney align with the new tax provisions.
  
  
• Tax Efficiency: We're assessing strategic trust structures (GRATs, SLATs, grantor-trust sales) and coordinating on capital-gain timing and tax-loss harvesting opportunities throughout the year. 
  
  
• Charitable Gifts: We're examining whether Qualified Charitable Distributions or contribution bunching strategies can maximize philanthropic impact while offering tax incentives.
  
  
• Working Together: We would want to consult your tax, legal, or accounting professionals as we consider changes based on the tax law changes.
  
  

Why This Matters Now

2026 isn't just another year; it's a period of policy transition. The reforms initiated in 2025 are now taking effect, and for many families, these changes create opportunities that benefit from early attention.

Our focus remains on making proactive, informed decisions at exactly these kinds of inflection points. We're actively monitoring how new tax provisions, estate thresholds, and market trends affect your specific situation.

Let's Connect

If you'd like to discuss any of these developments in more detail or have questions about how they relate to your personal circumstances, we welcome the conversation. Please don't hesitate to reach out.

Wishing you and your family a healthy and prosperous 2026.

^{1. Journal of Accountancy, July 7, 2025}

^{2. CNBC, July 4, 2025} 

^{3. Fortune, July 2025} 

^{4. USA Today, July 1, 2025} 

^{5. Sherwood & Roberts, July 14, 2025}

^{6. Power Magazine, March 3, 2025}

^{7. Yahoo Finance, May 12, 2025} 

^{8. Wall Street Journal, October 2025} 

^{9. Wall Street Journal, August 6, 2025}

^{10. Investopedia, August 29, 2025} 

^{11. Trading Economics, October 2025} 

^{12. CPI Inflation Calculator, October 2025} 

^{13. Federal Reserve of St. Louis, October 16, 2025}

^{14. CBS News, October 13, 2025}

^{15. Investopedia, January 28, 2025}

^{16. The Next Presidential Election, October 2025} 

^{17. Manatt, July 18, 2025}

^{18. National Association of Home Builders, July 31, 2025}

^{19. Housing.info, October 2025}