New Tax Worry for the Rich: 4 Possible ‘Estate Tax’ Changes in 2025
Written by
Angela Mae
Edited by
Gary Dudak
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When it was passed in 2017, the Tax Cuts and Jobs Act (TCJA) brought significant changes to tax code for individuals and businesses alike. For the latter, there was a permanent reduction in the corporate tax rate to 21%. For individuals, the changes were a bit more nuanced and temporary.
The TCJA introduced a federal lifetime estate and gift tax exemption of up to $13.61 million for single taxpayers in 2024 ($27.22 million for joint filers). This was more than double the previous amount. It’s also adjusted every year for inflation.
While this exemption has made it easier for wealthy families to pass on a substantial estate, it’s set to expire at the end of 2025. Unless Congress does something to preserve it, the maximum estate and gift tax exemption will revert to what it was previously. Effective January 1, 2026, the estate tax exemption will be closer to $7 million (adjusted for inflation).
It’s too soon to say with certainty what will happen with the federal estate tax going forward. It ultimately depends on the results of the presidential election and what lawmakers do to address it — if anything. That said, these are the possible estate tax changes and how they might affect wealthy families.
It’s Possible That Nothing Will Change
Since the TCJA of 2017 won’t expire until the end of next year, there shouldn’t be any major changes until the start of 2026. However, it’s also possible that Congress will extend the current federal estate tax exemption beyond its original timeline.
Given the exemption is inflation-adjusted, it could continue to increase each year as it already has. This will enable wealthy families to continue taking advantage of the benefit as they pass on their estates — without the hefty tax burden.
Federal Estate Taxes Could Be Modified or Eliminated
Making changes to existing tax law is complicated, but not impossible. It’s possible that the estate and gift tax rate could be permanently reduced from 40% to no more than 20%. This cap would also keep the $13.61 million estate tax exemption roughly where it is (adjusted for inflation).
Barring a modification or extension, another possibility is to simply eliminate federal estate tax. The Death Tax Repeal Act, a bill with significant Republican support in both the Senate and the House, champions the idea of repealing both the federal estate tax and the generation-skipping transfer tax. Without bipartisan support, however, a total repeal is unlikely.
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The Exemption Amount Could Be Reduced
Another possibility is that the $13.61 million exemption ($27.22 for those filing jointly) could simply be lowered.
Take the American Housing and Economic Mobility Act of 2024 as an example. This bill introduces multiple proposals related to federal gift and estate taxes. This includes:
- Swapping the 40% estate tax rate with progressive rates ranging from 55% to 60% (depending on the estate value)
- Adding a 10% tax surcharge to any estate valued at $1 billion or more
- A possible reduction of the estate tax exemption to $3.5 million (the lowest it’s been since 2009)
- Cutting the annual gift tax exclusion from $18,000 to $10,000
Even without this bill, it’s possible that Congress and the next president will seek to find a middle ground on the federal estate tax exemption. It might not be quite as high as it is now, but it might not drop all the way down to what it was before (adjusted for inflation).
The Exemption Will Expire
And of course, the TCJA’s federal estate tax exemption could simply lapse back to what it was (adjusted for inflation). The current estate tax rate of 40% would remain, however, as it wasn’t directly affected by the TCJA in the first place.
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