Talking Taxes: Uncle Sam Can Be a Coach, Not Simply a Referee

With the One Big Beautiful Bill Act signed into law on July 4, we now have far more clarity regarding the backdrop for client planning conversations. We turned to Brian Smith, co-head of the Eaton Vance Wealth Strategies Group and contributor to The BEAT, covering the T—taxes—for his insights on what the bill means for investors navigating a changing macro and market landscape.

David: When it comes to taxes, the Advisor Institute has long held the belief that “Uncle Sam can be a coach, not simply a referee.” Coaches instruct players on how to apply the rules to win a game, while referees enforce the rules and penalize players who don’t follow them. Seeing Uncle Sam’s value as a coach requires recognizing the tax code for what it is: A set of rules designed to encourage some behaviors and discourage others.

Brian: I love this way of thinking about the tax code. The tax code serves as guardrails within which you can play. Now that we have some clarity as to where the new lines are drawn, it’s an opportune time to discuss how clients can capitalize on the law’s provisions.

David: With greater clarity that marginal tax rates will remain at Tax Cut and Jobs Act (TCJA) levels, should clients avoid thinking clarity means “all clear”?

Brian: Absolutely. Even though tax rates didn’t go up, tax management remains paramount. Making smart investment recommendations requires an understanding of the tax consequences for different types of investment returns, proceeds or profits—such as realized capital gains or dividend income. Determining a client's total tax rate can help advisors identify an investment approach that can minimize their portfolio’s tax exposure while maximizing potential after-tax returns.

David: When there was less clarity, you were talking to advisors about the potential for many of the provisions of TCJA to sunset at the end of 2025. Given the clarity that a vast majority were made permanent, what themes remain evergreen?

Brian: Systematic tax-loss harvesting. Advisors can help clients create a reserve of tax losses that can be used in the current year or in years to come to reduce the amount of gains that might be subject to taxes. There are opportunities for year-round tax-loss harvesting in all kinds of markets. Look at the year we’ve had so far: The volatility we experienced in April and May is a perfect example of why it's important to harvest losses systematically and often. Consider asking clients, “What are your thoughts on making volatility work for you by building up a reserve of tax losses to help offset taxes on future capital gains?”

David: How about one advanced planning idea for advisors to consider right now?

Brian: Another point of clarity from the One Big Beautiful Bill Act is the gift and estate tax limits remaining at a much higher threshold—$15 million for single filers, $30 million for married–filing jointly in 2026. With that clarity, households and families who exceed those thresholds can look to maximize annual exclusion gifts, leverage the lifetime exemption gifts and potentially utilize charitable giving to help reduce current-year income and the size of their taxable estate with the most appreciated assets in their portfolios.

When implemented thoughtfully, a donor-advised fund can serve as a powerful tax-planning tool while supporting philanthropic initiatives and allowing donor control in managing the timing, distribution and even the growth of their gifts.

Clients contributing appreciated stock directly to a qualified charity or planned giving vehicle can benefit from avoiding federal capital gains taxes on the asset contributed. They may also be eligible to receive a charitable-income tax deduction for the full fair-market value of the gift, subject to an annual limit of 30% of adjusted gross income, with a five-year carry-forward on unused deductions.

On the topic of charitable giving, some changes introduced in the One Big Beautiful Bill Act may incentivize clients to accelerate charitable donations prior to year-end. Starting in 2026, donations will face a 0.5 % AGI floor and a maximum deduction value of just 35%, even for top-bracket donors (in a 37% tax bracket). Gifts made in 2025 avoid these newly introduced limits—so donating before year end could maximize deduction amount under the current more favorable rules.

Bottom line: Inspire proactive decision-making by reframing Uncle Sam as a coach and the tax code as a rule book for clients to use to help build better after-tax outcomes.