Decoding the One Big Beautiful Bill Act for Tech Workers
The One Big Beautiful Bill Act (OBBBA), which passed July 4, 2025, makes permanent many provisions from the 2017 Tax Cuts and Jobs Act. For tech workers with incentive stock options, those in high-tax states like California or New York, or those planning career breaks, significant implications exist.
A Continuation of the (2018+) Status Quo - Mostly
Many tax provisions that were set to expire have been extended. But several changes are worth paying attention to, especially if you hold equity compensation or live in a high-tax state.
Changes to the State and Local Tax (SALT) Deduction Cap
The SALT deduction cap increases from $10,000 to $40,000 through 2029, but phases out at 30% for high earners earning above $500,000 Modified Adjusted Gross Income ($250,000 for married filing separately).
Impact: High-earners in high-tax states may see reduced tax bills, though very high earners may not benefit due to phaseout limitations. The phase-out structure creates incentive to shift income outside this threshold range.
Alternative Minimum Tax (AMT) Complications with SALT Deductions
A critical nuance: SALT deductions reduce regular tax liability but not AMT liability. This creates a problematic dynamic - larger SALT deductions widen the gap between regular and AMT calculations, potentially triggering AMT exposure.
For ISO holders: This proves especially significant. ISO exercises already trigger AMT; enlarged SALT deductions could deepen AMT exposure, negating deduction benefits.
Planning consideration: Model both regular and AMT outcomes before large ISO exercises in high-tax jurisdictions. For informational purposes an estimated AMT calculator is available here.
AMT Exemption: Steeper Phaseout Starting 2026
The TCJA raised AMT exemptions and phaseout thresholds, benefiting many households. The OBBBA steepens the phaseout rate beginning in 2026:
- Phaseout rate increases from 25% to 50%
- Exemptions disappear twice as fast above phaseout thresholds
- More income becomes exposed to AMT
For tech workers with substantial equity exercises or liquidity events, careful AMT modeling becomes essential.
Qualified Small Business Stock (QSBS) Updates
QSBS enables potential exclusion of up to 100% of federal income tax on capital gains for qualifying startup stock sales, subject to a five-year holding period.
Key changes for stock acquired after July 4, 2025:
- Exclusion limit: $10 million to $15 million
- Tiered exclusion structure:
- 3+ years holding: 50% exclusion
- 4+ years holding: 75% exclusion
- 5+ years holding: 100% exclusion
- Eligibility threshold: Assets up to $75 million (previously $50 million)
Outcome: Future startup equity qualifies for increasingly favorable treatment.
ACA Health Insurance Cost Changes
For those between jobs relying on ACA marketplace coverage:
- Expanded subsidies from ARPA and IRA sunset
- Premiums return to 9.6% of income cap (down from 8.5%)
- Premium Tax Credit eligibility reverts to 100%-400% Federal Poverty Level only
Effect: Self-insured individuals face substantial premium increases. This is particularly relevant for tech workers planning career breaks or transitions.
PMI Deduction
While the proposed first-time homebuyer tax credit didn’t survive to final legislation, the OBBBA newly permits PMI deductions on mortgages beginning 2026 (with AGI phaseouts).
Additional Resources
I hosted a webinar on these changes:
For more on ISO exercise strategies, check out Why You Might Want to Exercise Your Incentive Stock Options Early in the Year.