Big, Beautiful Exemptions

Posted on Sep 2, 2025 by

In previous blog articles, we explored how the One Big Beautiful Bill Act (OBBBA) made significant cuts to several federal programs, especially Medicaid.  

Another monumental change under OBBBA was the permanent increase to the estate tax exemption. Starting on January 1, 2026, the estate tax threshold will be increased to $15 million per individual, which equates to $30 million for a married couple. It will increase on an annual basis with inflation. 

Prior to the OBBBA’s passage, the most recent exemption threshold was $13.99 million per person. This amount was determined pursuant to the Tax Cuts and Jobs Act (TCJA) of 2017, which was passed under President Trump during his first term. When he took office, this amount was $5.49 million per person. The TCJA increased the estate tax exemption to $11.18 million in 2018, with the amount adjusted annually for inflation.  

However, the TCJA included what is known as a “sunset clause,” meaning that without Congressional reauthorization, TCJA would automatically expire after a certain period. The expiration date was December 31 of this year and had the OBBBA not passed, the exemption threshold would have been reduced to $7 million per person. 

President Bush did something similar with the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. EGTRRA gradually increased the estate tax exemption from $600,000 to $3.5 million per person. It was set to expire on December 31, 2010, and the exemption would have been reduced to $1 million.  

Signed by President Obama, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (TRUIRJC) of 2010 avoided this. TRUIRJC actually inflated the exemption to $5 million per person. Obama later signed the American Taxpayer Relief Act (ATRA) of 2012, which indexed the exemption each year for inflation, landing at $5.49 million when Trump was inaugurated. 

Like OBBBA, these increases to the estate tax exemption were included in budget reconciliation bills. Under budgeting rules, a permanent tax cut can only occur if there is a corresponding cut in spending. EGTRRA, TRUIRJC, ATRA and TCJA each featured increase to the estate tax exemption (which results in a reduction of taxes). Because each act did not have corresponding cuts in spending, they were required to include a sunset provision. 

OBBBA, however, did include spending reductions in federal programs, most significantly Medicaid; therefore, the increase to the estate tax exemption was not required to have a sunset clause. As a result, the new $15 million limit is permanent and can only be changed by an act of Congress. 

With the new exemption, people can plan for their future and the future of their loved ones with greater certainty and confidence. Consequently, high-net-worth individuals and couples should review their estate plans to ensure they align with the increased thresholds. Our team of estate planners are here to help make sure you take advantage of the new big, beautiful exemptions.  

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Reg P. Wydeven

Elder Law and Estate Planning Attorney at McCarty Law LLP
Hoping to follow in his father’s footsteps from a young age, Reg’s practice primarily consists of advising individuals on estate planning, estate settlement and elder law matters. As Reg represents clients in matters like guardianship proceedings and long-term care admissions, he feels grateful to be able to offer families thorough legal help in their time of need.
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