Estate Tax Exemption: The Permanent $15 Million OBBBA Threshold

For nearly a decade, estate planning ran on a countdown: the doubled federal estate tax exemption from the 2017 Tax Cuts and Jobs Act was scheduled to expire at the end of 2025, reverting to roughly half its value. That deadline came and went — but not the way most people expected. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, eliminated the scheduled reduction entirely and raised the exemption further instead.

The Current Figure

For deaths and gifts occurring after December 31, 2025, the federal estate and gift tax exemption is $15,000,000 per individual, or $30,000,000 for a married couple using portability (described below). This is a permanent feature of current law — OBBBA struck the TCJA's scheduled sunset provision rather than merely extending it, so there is no expiration date built into the statute. The figure is indexed for inflation annually starting in 2027, using 2025 as the base year. The top federal estate tax rate on amounts above the exemption remains 40%, unchanged by OBBBA.

Why So Much Existing Content Gets This Wrong

Because the TCJA's higher exemption was always scheduled to sunset on January 1, 2026, a large volume of estate-planning content written in 2023, 2024, and early 2025 correctly described an approaching cliff back down to roughly $7 million per person — advice that was accurate when written but became obsolete the moment OBBBA passed in July 2025. Anyone reading older planning content — or an estate plan drafted before mid-2025 — should treat any reference to a 2026 reduction as outdated. The reduction did not happen.

Portability: A Feature That Requires an Affirmative Filing

A surviving spouse can use a deceased spouse's unused exemption amount — a feature called portability — allowing a married couple to effectively shield up to $30,000,000 combined. But portability is not automatic: the executor of the first spouse's estate must file a federal estate tax return (Form 706) electing portability, even if the estate is well below the exemption and no tax is owed. Failing to file this return when no tax appears to be due is one of the most common, and most costly, missed steps in estate administration — a surviving spouse who remarries, receives a later inheritance, or simply outlives actuarial expectations can find years later that a large amount of exemption capacity was permanently lost because a return that seemed unnecessary at the time was never filed.

The Exemption Is Unified Across Gifts and Bequests

The estate and gift tax exemption is a single, unified amount — lifetime gifts above the annual exclusion (see Gift Tax Annual Exclusion) reduce the amount available to shelter the estate at death. A person who uses $6,000,000 of lifetime exemption through taxable gifts has $9,000,000 remaining (plus any further inflation adjustments) to shelter their estate. This unified structure means large lifetime gifting and estate planning at death are not separate exemption pools — they draw from the same number.

The Anti-Clawback Rule

Treasury regulations (Treas. Reg. §20.2010-1(c)) confirm that lifetime gifts made while a higher exemption was in effect are not retroactively taxed if the exemption is later reduced by a future Congress. This rule was originally significant when the TCJA's doubled exemption was scheduled to revert downward — taxpayers worried that gifts made under the higher amount might be penalized once the exemption dropped. With OBBBA having raised the exemption rather than lowered it, the anti-clawback rule is less urgently relevant today, but it remains in place as a general protection against any future reduction.

What Didn't Change: State Estate Taxes

The federal exemption is only part of the picture. A number of states impose their own estate or inheritance tax, at thresholds far below the federal $15,000,000 figure and without necessarily conforming to the federal exemption at all. New York applies a particularly unforgiving structure: if a New York taxable estate exceeds 105% of the state's own exemption amount, the entire exemption is lost and tax applies from the first dollar — not just to the excess. Oregon's estate tax threshold is $1,000,000; Massachusetts is $2,000,000. A household relocating between states, or one with property in a state other than their primary residence, should evaluate state-level exposure separately from the federal number — being well under the $15,000,000 federal threshold does not mean an estate is free of estate tax exposure entirely.

What This Page Does Not Cover

This page covers the base federal exemption amount and its mechanics. For the related but distinct generation-skipping transfer tax exemption — which moves with this figure but is not portable — see Generation-Skipping Transfer Tax. For the separate annual gift exclusion that doesn't count against this lifetime figure at all, see Gift Tax Annual Exclusion. For the trust structures (GRATs, CRTs, ILITs, SLATs) commonly used to plan around estate tax exposure, see Trusts for Tech Workers.

California Note

California has no state estate tax, so California residents' estate tax exposure is determined solely by the federal $15,000,000 exemption described above (subject to owning property in another state with its own estate tax, which would create exposure there regardless of California residency). Combined with the community property step-up in basis described in Step-Up in Basis, California residents holding concentrated, long-appreciated positions — common among tech workers with significant vested equity — generally face a more favorable combined federal-plus-state outcome at death than residents of states imposing their own estate tax on top of the federal rules.

This article is for educational purposes only and does not constitute legal, tax, or financial advice. Federal estate tax law is subject to future legislative change, and state-level estate and inheritance tax rules vary significantly. Always consult a qualified estate planning attorney, particularly for an estate approaching or exceeding either the federal exemption or a relevant state threshold.