The Estate and Gift Tax Exemption Amounts Are Changing: What You Need to Know About the OBBBA
- Jul 8
- 3 min read
If you’re thinking about your legacy or planning to transfer wealth to your loved ones, you may have heard about the “One Big Beautiful Bill Act” (OBBBA) and its impact on estate and gift taxes. Here’s a straightforward explanation of what’s changing, why it matters, and what you should consider as you plan for the future.
What Is the Estate and Gift Tax Exemption?
The estate and gift tax exemption is the amount you can transfer to others—either during your lifetime (gifts) or at death (your estate)—without incurring federal estate or gift taxes. This exemption is sometimes called the “basic exclusion amount.” If your total gifts and estate are below this threshold, you won’t owe federal estate or gift tax.
How Has the Exemption Changed in Recent Years?
Before 2018: The exemption was $5 million per person, adjusted for inflation.
2018–2025 (TCJA): The Tax Cuts and Jobs Act (TCJA) temporarily doubled the exemption to $10 million per person, adjusted for inflation. For 2025, the inflation-adjusted exemption is $13.99 million per person.
2026 and Beyond (Pre-OBBBA): The exemption was scheduled to revert to $5 million per person (plus inflation adjustments) starting in 2026.
What Does the OBBBA Change?
The OBBBA makes a major change to the estate and gift tax exemption:
Starting in 2026, the basic exclusion amount will increase to $15 million per person, adjusted for inflation going forward. This is a significant increase from the previously scheduled $5 million (plus inflation) that would have applied after 2025.
How Does the Inflation Adjustment Work?
The $15 million exemption will be indexed for inflation, using 2026 as the base year for future adjustments. This means the exemption will likely increase each year to keep up with the cost of living.
What About Portability?
The law continues to allow “portability,” which means if one spouse dies and doesn’t use all of their exemption, the surviving spouse can add the unused amount to their own exemption—provided a timely estate tax return is filed.
What About the Gift Tax?
The gift tax exemption is unified with the estate tax exemption. This means you can use your $15 million exemption for gifts during your lifetime, for transfers at death, or a combination of both. The annual gift tax exclusion (the amount you can give to any one person each year without using up your lifetime exemption) is also indexed for inflation and will be $19,000 in 2025.
Why Does This Matter?
More Wealth Can Be Transferred Tax-Free: With a $15 million exemption per person (or $30 million for a married couple), most families will not owe federal estate or gift tax.
Certainty for Planning: The OBBBA removes the uncertainty about what would happen after 2025, when the exemption was set to drop sharply.
Planning Opportunities: If you have significant assets, you may want to review your estate plan to take advantage of the higher exemption, especially if you made large gifts in recent years.
What Should You Do Now?
Review Your Estate Plan: Make sure your will, trusts, and beneficiary designations reflect your wishes and take advantage of the new exemption amounts.
Consider Gifting Strategies: With the higher exemption, you may want to make additional gifts to family members or others.
Consult a Professional: Estate and gift tax laws are complex, and state laws may differ. Talk to your tax advisor or estate planning attorney to make the most of these changes.
In Summary
The OBBBA increases the estate and gift tax exemption to $15 million per person (plus inflation) starting in 2026, providing more flexibility and certainty for families planning to transfer wealth. This is a significant opportunity for tax-efficient wealth transfer, but it’s important to review your plans and consult with professionals to ensure you’re making the most of the new rules.
If you have questions or want to discuss how these changes affect your situation, please reach out—we’re here to help!
