The estate tax exemption big beautiful bill recently signed by President Trump on July 4, 2025 delivers unprecedented relief for American families and businesses. The One Big Beautiful Bill Act (OBBBA) permanently increases the federal estate tax exemption to $15 million per person starting in 2026, providing long-term certainty for estate planning strategies nationwide.
The current 2025 estate and gift tax exemption stands at $13.99 million per individual, up from $13.61 million in 2024. This means married couples can currently shield $27.98 million from federal estate taxes. However, the new legislation transforms this temporary relief into a permanent fixture of the tax code.
Permanent Relief Replaces Uncertainty
Before this landmark legislation, the enhanced exemptions from the Tax Cuts and Jobs Act of 2017 were scheduled to revert to lower levels in 2026. The impending cliff created urgency among wealthy families to execute gift transfers before potential reductions took effect.
The OBBBA permanently increases the maximum lifetime exclusion amount that any U.S. citizen or resident can use to shelter gifted assets or estate assets. Starting in 2027, the exemption will be indexed for inflation measured from 2025, ensuring the benefit grows with economic conditions.
Key Points Summary
- Current Exemption: $13.99 million per person ($27.98 million for couples) in 2025
- New Permanent Level: $15 million per person starting 2026
- Inflation Adjustment: Annual increases beginning 2027
- Tax Rate: Remains 40% on amounts exceeding exemption
- Portability: Surviving spouses can use deceased spouse’s unused exemption
Impact on Family Businesses and Farms
The legislation makes permanent and increases the doubled Death Tax Exemption for 2 million family-owned farms. This provision addresses longstanding concerns about generational wealth transfer within agricultural communities and small businesses.
The 40% federal estate tax rate continues to apply to assets exceeding the exemption threshold. However, the rate on gifts or estates in excess of the exemption amount stays a flat 40% of such excess, maintaining consistency with current tax treatment.
Planning Implications for High-Net-Worth Families
Estate planning professionals anticipate significant shifts in strategy recommendations. Previously, spouses could transfer $27,980,000 tax-free during lifetime or at death in 2025. The permanent nature of enhanced exemptions reduces pressure for rushed gift transactions before year-end deadlines.
State-level considerations remain important, with New York’s estate tax exemption set at $7,160,000 as of January 1, 2025. Unlike federal exemptions, state estate tax exemptions vary significantly and lack portability between spouses in many jurisdictions.
Economic Growth Projections
The legislation is projected to generate $284 billion of new economic growth through various provisions including the enhanced estate tax relief. Supporters argue permanent exemption levels provide certainty for business succession planning and encourage entrepreneurial investment.
The estate tax exemption big beautiful bill represents the most significant estate tax reform in decades. By eliminating the 2026 sunset provision and establishing higher permanent thresholds, Congress has fundamentally altered the landscape for multigenerational wealth transfer.
FAQs
Q: When does the $15 million exemption take effect? A: The permanent $15 million per person exemption begins in 2026, with annual inflation adjustments starting in 2027.
Q: What happens to current 2025 exemptions? A: The 2025 exemption remains $13.99 million per person, with the increase applying to subsequent years under the new law.
Q: Are state estate taxes affected? A: No, the federal changes don’t impact state estate tax exemptions, which vary by jurisdiction and require separate planning consideration.
Key Takeaways
- Estate tax relief becomes permanent rather than expiring in 2026
- Exemption increases to $15 million per person starting next year
- Married couples can shield up to $30 million from federal estate taxes
- Family farms and businesses receive enhanced generational transfer protection
- Annual inflation adjustments begin in 2027 to maintain buying power
- Planning strategies can shift from urgency-driven to long-term optimization