President Trump's July 4th signing of the Opportunity, Balance, and Better Budget Act sets an increased $15 million federal estate and gift tax exclusion and generation-skipping transfer tax exemption per individual, eliminating the uncertainty surrounding the previously scheduled reduction in 2026 under the TCJA. This landmark change provides high-net-worth individuals and families with greater clarity and flexibility for long-term wealth transfer strategies. The Act also introduces new limitations and incentives for charitable giving, including AGI floors for deductibility, a permanent 60% limit for cash gifts, a reinstated nonitemizer deduction, and a cap on itemized deductions for top earners.
Estate, Gift and GST Tax Changes
On July 4, 2025, President Trump signed the Opportunity, Balance, and Better Budget Act (publicly presented as the One Big Beautiful Bill Act) ("OBBBA") into law. Among its most significant provisions for estate planning, the legislation permanently sets the federal unified estate and gift tax exclusion amount at $15,000,000 per individual, or $30,000,000 for married couples, effective for calendar year 2026, with subsequent inflation indexing beginning in 2027, using 2025 as the base year. OBBBA also increased the generation-skipping transfer (GST) tax exemption to match the new $15,000,000 estate and gift tax exclusion.
Previously, the 2017 Tax Cuts and Jobs Act ("TCJA") had temporarily doubled the federal exclusion amount, increasing it from $5 million to $10 million per person, with annual inflation adjustments. In 2025, the inflation-adjusted exclusion stands at $13,990,000. This higher exclusion amount, however, was subject to a scheduled reduction on January 1, 2026, reverting to an estimated $7 million per individual. With the passage of the OBBBA, the scheduled reduction has been eliminated, and the exclusion is now fixed at this higher level, offering some certainty for long-term planning (unless and until a future Congress passes a bill that again overhauls these provisions of the Tax Code).
In addition, the OBBBA retains several key features of current law. Notably, portability between spouses remains in place, allowing a surviving spouse to utilize any unused exclusion from the deceased spouse. The annual gift tax exclusion also remains the same, currently set at $19,000 per recipient for 2025, with continued annual inflation adjustments.
For individuals with estates below the new exclusion amount, this legislative change significantly reduces the pressure to engage in "use it or lose it" gifting strategies that were previously driven by the anticipated scheduled reduction of the higher exclusion. With the higher exclusion now made permanent and indexed for inflation, many clients can strategically approach their wealth transfer planning on an individualized timeline without the pressure of a looming reduction in the exclusion amount. For clients with estates approaching or exceeding these thresholds, however, now remains an opportune time to review your estate plan, evaluate your use of the exclusion to date, and consider whether additional gifting, trust planning, or charitable giving strategies could further your ability to meet your estate and tax objectives.
For your reference, here is a quick snapshot of the relevant tax thresholds:
| Category | 2017 TCJA |
2026 and Beyond (OBBBA) |
| Estate & Gift Tax Exclusion | $10 million, indexed annually (13,990,000 in 2025) |
$15 million, indexed annually |
| GST Tax Exemption | $10 million, indexed annually (13,990,000 in 2025) |
$15 million, indexed annually |
| Portability Between Spouses | Yes | Yes |
| Top Estate & Gift Tax Rate | 40% | 40% |
Charitable Giving Changes Under the OBBBA
The OBBBA makes several significant changes to the rules governing charitable contribution deductions under Code section 170. All provisions are effective for tax years beginning after December 31, 2025.
Individuals who itemize deductions will only be able to deduct charitable contributions that exceed 0.5% of their adjusted gross income ("AGI").
The 60% AGI limit for cash gifts to public charities is now permanent (barring further legislative changes). The law clarifies that donors may combine cash and noncash gifts to reach the 60% limit, resolving prior ambiguity.
Non-itemizers will now be able to deduct up to $2,000 (married filing jointly) or $1,000 (all others) for cash gifts to 501(c)(3) public charities. This deduction excludes contributions to supporting organizations, donor-advised funds, and private foundations.
Lastly, effective for tax years beginning after December 31, 2025, the OBBBA introduces a new limitation on itemized deductions for individuals with taxable income exceeding the 37% bracket threshold. Under revised Code section 68, allowable itemized deductions are reduced by 2⁄37 of the lesser of (i) total itemized deductions or (ii) the excess of taxable income (inclusive of deductions) over the 37% threshold. The limitation applies after all other deduction caps and does not apply to the Code section 199A qualified business income deduction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
