Frankfurt Kurnit Klein & Selz

August 15th, 2025

2025-2026 Estate & Tax Planning Update: One Big Beautiful Bill Act

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act, with notable changes for individuals, businesses and charitable organizations, including permanent increases to the Federal estate, gift and generation-skipping transfer tax exemption amounts and increases to the caps on deductions for state and local taxes.

Transfer Tax Exemptions

Estate, Gift and Generation-Skipping Transfer (“GST”) Tax

In 2017, the Tax Cuts and Jobs Act (“TCJA”) temporarily doubled the Federal estate, gift and GST tax exemption amounts (the “Exemption Amount”) from $5 million to $10 million per person. Under the TCJA, the Exemption Amount increased annually (adjusted for inflation), reaching $13.99 million per person ($27.98 million for a married couple) in 2025, and was set to sunset after 2025. However, with the recent passage of the One Big Beautiful Bill Act (“OBBBA”), effective January 1, 2026, the Exemption Amount has been permanently (not scheduled to expire or "sunset") increased to $15 million per individual ($30 million for married couples), indexed for inflation in future years. This means that, beginning in 2026, an individual may transfer a total of $15 million free of Federal estate, gift and GST taxes, and married couples may transfer a total of $30 million. Taxable lifetime transfers will still reduce an individual’s Exemption Amount available at death.

Note however that OBBBA does not modify the annual gift tax exclusion amount, which is currently $19,000. An individual may make gifts of any amount up to the annual exclusion to an unlimited number of recipients each year without using up any part of such individual’s Federal gift tax exemption. Estate tax portability between spouses also remains in place, allowing a surviving spouse to utilize the unused Exemption Amount of the predeceased spouse.

Estate Planning Strategies in Light of OBBBA

The permanent increase of the Exemption Amount offers valuable opportunities to transfer wealth, during life or at death, without triggering Federal estate, gift or GST taxes. While OBBBA significantly reduces the pressure to engage in “use it or lose it” gifting strategies that were driven previously by the anticipated sunset, it should not deter individuals who were considering making lifetime gifts from reviewing their estate planning to lock in current benefits.

Key Income Tax Changes

Key TCJA Provisions Made Permanent

• No Change to Federal Income Tax Rates. OBBBA permanently maintains the current seven-bracket tax system, with the top marginal individual tax rate remaining at 37%.
• No Change to Qualified Business Income. OBBBA makes permanent the 20% deduction for qualified pass-through business income, preserving tax benefits for owners of partnerships, LLCs taxed as partnerships or S corporations, sole proprietorships (including single-member LLCs) and certain trusts and estates that generate qualified business income.

Other Key OBBBA Modifications

• Expansion of State and Local Tax (“SALT”) Deduction Cap. Beginning in 2025 and continuing through 2029, the cap on SALT deductions is increased from $10,000 to $40,000 for joint filers and from $5,000 to $20,000 for separate filers. The availability of this increased SALT deduction is subject to a phase-down – though not below $10,000 – starting at taxable income between $500,000 and $600,000 for joint filers and $250,000 to $350,000 for separate filers, which may significantly diminish the benefit of the increased deduction for high-income individuals.
• New 0.5% Floor on Charitable Deductions. Beginning in 2026, charitable deductions for a taxpayer who claims itemized deductions will be allowable only to the extent that the charitable deductions exceed 0.5% of the taxpayer’s “contribution base” (effectively, such taxpayer’s adjusted gross income).
• QSBS Expansion. OBBBA expands the benefits potentially available with respect to gains realized upon disposition of qualified small business stock (“QSBS”). OBBBA provides a tiered exclusion of the gain realized upon disposition of QSBS beginning after a three-year holding period rather than the pre-OBBBA five-year holding period requirement. Non-corporate taxpayers may now exclude from gross income: (i) 50% of the gain from the sale or exchange of QSBS held for at least three years, (ii) 75% of the gain from the sale or exchange of QSBS held for at least four years and (iii) 100% of the gain from the sale or exchange of QSBS held for at least five years. In addition, OBBBA increases the total amount of gain that may be excluded from gross income by a taxpayer upon a sale or exchange of QSBS. Pre-OBBBA, the exclusion was limited to the greater of $10 million or 10 times the taxpayer’s adjusted tax basis in the QSBS. OBBBA retains the “greater of” test, but increases the limit on excludible gain from $10 million to $15 million.

Conclusion
OBBBA has implemented other changes to the federal tax law which will affect individuals and entities in meaningful ways. While the permanent extension of certain TCJA provisions provides welcome certainty, many of OBBBA’s changes will require IRS and Treasury Department interpretive guidance. We will be monitoring these developments closely. In the meantime, if you have questions about these recent changes, or about other estate, income and tax planning matters, please contact Linda J. Wank at (212) 826-5546 or lwank@fkks.com, Barbara E. Shiers at (212) 826-5526 or bshiers@fkks.com, Jeffrey Marks at (212) 826-5536 or jmarks@fkks.com, Adam J. Osterweil at (212) 785-4861 or aosterweil@fkks.com, or any other member of the Frankfurt Kurnit Estate Planning & Administration Group or Tax Group.