OBBBA Solidifies High Estate Tax Exemptions and Charitable Giving Changes

Estate, Gift, and GST Tax Changes

On July 4, 2025, President Trump signed the recent reconciliation bill, commonly referred to 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 million per individual, or $30 million for married couples, effective for calendar year 2026, with subsequent inflation indexing beginning in 2027, using 2025 as the base year. The OBBBA also increases the generation-skipping transfer (GST) tax exemption to match the new $15 million 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 $13.99 million. 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 Internal Revenue Code, or the Code). 

In addition, the OBBBA retains several key features of current law. Notably, portability between spouses remains in place, allowing a surviving spouse to use 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:

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 5.41% 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 it does not apply to the Code section 199A qualified business income deduction. 

If you have any questions about how these changes could affect your estate plan, please reach out to your Goodwin estate planning lawyer to discuss.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.