Insight Into Estate and Gift Tax For 2025 and Beyond
The Tax Cuts and Jobs Act (TCJA) significantly increased the unified federal estate and gift tax exemption through the end of 2025. However, for 2026, it’s currently scheduled to revert back to the pre-TCJA level with a cumulative inflation adjustment for 2018 through 2025. If it reverts back to previous levels, it’s estimated to be roughly $8 million.
Will Congress pass legislation to extend the larger TCJA exemption — or possibly make it permanent? Here are some possible post-election insights for high-net-worth individuals to consider.
Lowdown on the Current Rules
For 2018 through 2025, the TCJA temporarily raised the unified federal estate and gift tax exemption to an inflation-adjusted $10 million (up from $5.49 million for 2017). For 2025, the inflation-adjusted exemption amount is $13.99 million (up from $13.61 million for 2024). If you’re married, your spouse is entitled to a separate exemption of the same amount.
If you make cumulative lifetime taxable gifts above the exemption amount, the excess is taxed at a flat 40% rate. If you pass away with an estate valued at more than the exemption amount, the excess is taxed at the same flat 40% rate.
Taxable gifts are those made in one year to one individual that exceed the annual federal gift tax exclusion. The annual exclusion for 2025 is $19,000 (up from $18,000 for 2024). You won’t owe any federal gift tax on taxable gifts made during your lifetime until the cumulative amount of taxable gifts exceeds the unified federal estate and gift tax exemption. While such “excess gifts” reduce your unified exemption dollar-for-dollar, only a few very generous individuals will owe the federal gift tax as long as the unified exemption is so large.
Estate Planning Isn’t Just for the Wealthy
Most people aren’t currently exposed to the federal estate tax, thanks to today’s ultra-generous $13.99 million unified federal estate and gift tax exemption (effectively $27.98 million for a married couple). However, you still should establish a formal estate plan. This is especially true if you have minor children and own a modest amount of assets — even if it’s just a house, a retirement plan, some vehicles and expensive jewelry. Why? If you die intestate (without a will), the laws of your state determine the fate of your minor children and assets. A written will clarifies your wishes and provides some peace of mind.
Also, consider setting up a living trust. Assets held in a living trust can be passed to your heirs without going through the potentially lengthy, expensive probate process.
If you’ve already executed an estate plan, review it periodically and update it as needed to reflect your current wishes. Contact your financial and legal advisors for more information.
Under the federal estate and gift tax portability exemption privilege, if one spouse dies without using up his or her exemption, the surviving spouse can inherit the deceased spouse’s unused exemption.
Important: The IRS issued a final “anti-clawback” regulation in 2019. It allows post-2025 estates to calculate taxes based on the unified exemption in effect at the time large gifts were made if they’re made from 2018 through 2025, rather than using the smaller limit that may be in effect at the time of death in some later year.
Post-Election Clarity
The outcome of the 2024 election should alleviate taxpayers’ concerns about a looming sunset of the favorable federal estate and gift tax rules. With Republicans controlling the White House and Congress starting in January 2025, the generous unified federal estate and gift tax exemption under the TCJA will likely be extended until after the 2028 election, possibly longer. The larger exemption could even be made permanent — or increased beyond what’s allowed under current law.
Moreover, it’s unlikely that the new Congress will pass legislation to eliminate the portability privilege or the clawback provision — or increase the federal estate and gift tax rate. (For historical context, back in 2009, estates were subject to a 45% maximum tax rate with no portable exemption privilege.)
What happens if Democrats take control of one or both chambers of Congress after the 2026 mid-term election? President Trump has repeatedly expressed support for extending the TCJA breaks and would likely veto any bill containing less favorable estate and gift tax provisions.
Important: Some states impose death or inheritance taxes that kick in at thresholds below the unified federal gift and estate tax exemption amount. So, it’s essential to understand the rules in your state in order to do a thorough job of estate planning. Consult your tax advisor about whether you may be exposed to state death or inheritance taxes.
Wait and See
The outcome of the November elections provides more estate planning clarity. Extending many favorable TCJA provisions will be a top priority for congressional Republicans in 2025. Stay in touch with your tax advisor for the latest developments. Be prepared to make estate planning moves to take advantage of any favorable changes in the year ahead to minimize adverse federal estate and gift tax outcomes now and in the future.
Copyright 2025
This article appeared in Walz Group’s January 13, 2025 issue of The Bottom Line e-newsletter, produced by TopLine Content Marketing. This content is for informational purposes only.
