The uncertainty at the start of 2025 as to the United States transfer (gift and estate) tax exemption has been resolved with the passage of the One Big Beautiful Bill Act (the “Act”) signed into law on July 4, 2025. The increased exemption ($13.99 million per person in 2025), established under the 2017 Tax Cuts and Jobs Act, was scheduled to expire at the end of this year, reverting back to $5 million per person as of January 1, 2026.
The Act has made the following changes:
- The United States estate and gift tax exemption will increase to $15 million per person on January 1, 2026, with annual increases for inflation each year beginning in 2027. Consider utilizing the increase in your current estate planning.
- For spouses, portability of the first to die unused exemption in favor of the survivor will continue.
- The United States generation-skipping tax (“GST”) exemption also will increase to $15 million.
- Portability of unused GST exemption between spouses will continue to be unavailable.
- The top marginal bracket for United States gift, estate and GST will remain at 40%.
- The increase in the United States gift, estate and GST exemption does not have an expiration date.
- The United States gift tax annual exemption amount will remain at $19,000 per donee ($38,000 for gifts by a married couple) for 2026.
The Act also establishes changes with respect to the deduction of charitable contributions beginning January 1, 2026.
- For non-itemizers who take a standard deduction ($16,100 for single filers, $32,200 for joint filers in 2026), a $1,000 deduction ($2,000 for married couples filing jointly) will be available for direct contributions to charities.
- Contributions by non-itemizers to donor advised funds or similar intermediaries will not qualify.
- For those who itemize their deductions, two limitations on charitable deductions will go into effect on January 1, 2026.
- Charitable deductions will be available only to the extent that charitable deductions exceed, in the aggregate, 0.5% of the donee’s adjusted gross income. Charitable donations totaling less than the floor of 0.5% of adjusted gross income will not qualify for a deduction.
- A cap also will go into effect on January 1, 2026, on deductions for charitable contributions made by filers in the top United States income tax bracket (37%). Those in the top tax bracket (in 2026, individuals with income over $640,600, or joint filers with income above $768,700) will be limited to tax savings at a computed rate of 35%, rather than 37%.
For those who are New York residents, the New York estate tax exclusion will increase to $7,350,000 on January 1, 2026, however, for those who die with an estate valued at more than 105% of the $7,350,000 exclusion, the New York estate tax will be applied to the full value of the estate, without application of any exclusion. No portability in favor of surviving spouses is allowed.
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