Breaking Down the OBBBA: Impacts on Federal Estate and Gift Taxes

President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025, after strong debate about certain sunsetting provisions in the 2017 Tax Cuts and Jobs Act (TCJA).

The permanent extension of the unified lifetime estate and gift tax exemption is one of the new law’s most notable changes. Starting in 2026, the exemption rises to $15 million per person (indexed for inflation). The deceased spousal unused exclusion (DSUE), also known as “portability,” remains available, giving married couples a combined $30 million exemption. The tax rate remains flat at 40% on amounts above these limits.  

The generation-skipping transfer tax (GSTT) exemption also rises to $15 million per person in 2026. No changes were made to the step-up in basis at death or the annual gift tax exemption of $19,000 per donee (as of 2025, indexed for inflation).

These changes significantly benefit high-net-worth individuals and families. Under the TCJA, the estate and gift tax exemption rose to $10 million per person as of January 1, 2018 (indexed for inflation). It grew to $13.99 million per person and $27.98 million per couple by 2025 – but the TCJA’s estate tax exclusion was set to expire on December 31, 2025. Without the OBBBA, the exemption would have dropped to roughly $7 million per person and $14 million per couple in 2026.

While urgency to make large gifts by year-end has eased, post-gift asset appreciation stays out of the donor’s estate and leverages the time value of money.

Note: Although the law is “permanent,” this just means that there’s no sunsetting provision. A future Congress and president can always revise these rules. 

Estate planning is still essential for almost all estates. Documents like wills and trusts prevent government-controlled asset distribution upon death. Other traditional strategies are still important, including the unlimited marital deduction, charitable gifts, lifetime gifts and transfers to specialized trusts.

Potential State Estate/ Inheritance Tax Impacts

Though federal rules favor taxpayers, eighteen states and Washington D.C. impose estate and/or inheritance taxes, making residency a key estate planning factor. 

In Illinois, there is an estate tax with a $4 million exclusion per person. It triggers a “cliff tax” if over the exclusion, requiring taxation on the full estate value after the exclusion is deducted. Separately, complex adjustments are needed for non-residents transferring property and prior taxable gifts in Illinois. Threshold changes are unlikely to come soon, even though proposals have been made. There is no portability for the Illinois estate tax, in contrast to the federal level.

Maryland is the only state that has both an estate tax and an inheritance tax. On a positive note, it’s also the only state that allows state-level portability. The estate tax exemption is currently $5 million per person. Unlike Illinois, only amounts above that are subject to state estate taxes. Earlier this year, Maryland’s governor proposed lowering the exemption to $2 million, but the proposal did not pass.

This article is part of our continued analysis of the OBBBA. Find all of our coverage here.

About our Authors

Ken Simon, CPA, JD, is a Tax Director on the Sikich national estate and trust team. He has extensive experience with high-net-worth individuals, families and their closely held businesses, as well as all varieties of estates, gifts, trusts, related charitable entities and multi-generational tax planning. His background also includes international estate and trust planning, cross-border transactions, and income and estate tax treaties.

Daniel Lutz, CPA, MPA, has nearly 15 years of experience as a tax principal who advises private companies, tax-exempt organizations and high-net-worth families on tax strategies, helping them to make sound financial decisions. Dan provides tax compliance, planning, consulting and related wealth management services. He also has expertise in trust and gift taxation.