By Rebecca McElroy, CPA and Jennifer Youngblood, CPA, MTA
One of the most common questions we hear from clients is: “Why do I owe tax?” It’s a fair question, especially if you expected a refund or assumed that withholding throughout the year would keep you even. The truth is, owing tax doesn’t necessarily mean you did anything wrong. It usually comes down to how your income, withholdings, and credits balance out across the year.
Several 2025 tax law changes, including those stemming from the “One Big Beautiful Bill Act,” are reshaping the tax landscape for high net worth individuals. Rebecca McElroy and Jennifer Youngblood at MTA offer the following updated perspective.
Why Do I Owe Tax?
By Rebecca McElroy, CPA and Jennifer Youngblood, CPA, MTA
For high-net-worth individuals, the perennial question—“Why do I owe tax?”—takes on new complexity this year. The evolving tax code, investment returns, and estate planning rules have introduced new variables for 2025. Owing tax often highlights how key regulatory shifts and income events intersect.
Key Shifts Impacting 2025 Tax Liability
Permanence of Top Income and Estate Tax Rates
The “One Big Beautiful Bill Act” (OBBBA) solidified several favorable provisions from the Tax Cuts and Jobs Act (TCJA). The top marginal federal income tax rate for individuals is now permanently set at 37%, rather than reverting to the higher pre-2018 rate. Federal estate and gift tax exemptions have also been permanently increased to $15 million per person ($30 million for married couples), providing a broader shield for multigenerational wealth and legacy planning.
Changes to Deductions for High Earners
While the permanence of lower rates may bring some stability, the OBBBA introduces other limitations:
- The benefit of itemized deductions is now capped at 35% for those in the highest bracket (37%).
- Charitable deduction benefits face ceilings for top earners, changing prior assumptions about strategy and timing of large gifts.
- The State and Local Tax (SALT) deduction cap has been raised to $40,000, but the deduction phases out for those with incomes above $500,000.
Multiyear Wealth Transfer & Planning Opportunities
Multiple planning avenues are shifting:
- For estates and gifts, the higher exemption allows for accelerated generational transfers and philanthropic strategies—now with less risk of post-2025 “clawbacks.”
- The 20% qualified business income (QBI) deduction for pass-throughs and REITs is now permanent, offering sustained benefits for business owners and investors.
- 100% Bonus Depreciation was reinstated for qualifying property acquired after January 19, 2025, potentially accelerating deductions on capital investments.
Practical Strategies and Planning Takeaways
In the wake of realized gains, business income, or major life events, owing tax this year may be the outcome of a highly dynamic tax climate. For high-net-worth individuals, the paradigm has shifted:
- Annual and multiyear planning can optimize new deduction phaseouts, wealth transfer thresholds, or bonus depreciation.
- Charitable giving, estate planning, and even the basic review of W-4 and estimated payment schedules must be recalibrated to reflect the 2025 reality.
2025 is truly a turning point for high net worth families. At MTA, our focus is to partner with our clients to decode these shifts to avoid surprises.
Rebecca McElroy
Maddox, Thomson