On July 4, 2025, federal legislation was signed that brings significant changes to the American tax law landscape. Among other components, the law extends and in some cases amends several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were originally set to expire at the end of 2025. This might have significant implications for your tax and estate planning.

A cornerstone of new law, known as the One Big Beautiful Bill Act, is an increase in the federal gift and estate tax exemption. The TCJA had doubled the then-existing gift and estate tax exemption to $13.99 million per individual and $27.98 million per married couple, but this provision was temporary. The exemption was scheduled to revert in 2026 to its pre-TCJA level of approximately $5 million per individual (adjusted for inflation). The 2025 law not only prevents this sunset but also permanently raises the exemption to $15 million for single individuals and $30 million for married couples filing jointly, starting in the 2026 tax year. These amounts would be indexed for inflation for transfers made in subsequent years.

This higher exemption provides certainty and expanded opportunities for high-net-worth individuals and families to pass on assets to the next generation without a tax bite. It covers gifts made during one’s lifetime as well bequests that take effect upon death. The exemption increase also affects the Generation Skipping Transfer (GST) tax, which applies to certain gifts and transfers to those who are two or more generations (or a certain number of years) younger than the donor. 

Beyond the gift and estate tax, the 2025 law extends other key individual tax provisions from the TCJA. These include lower individual income tax rates, a higher standard deduction and an expanded child tax credit. The bill also addresses the $10,000 cap on the deduction for state and local taxes (SALT), a contentious issue for residents of high-tax states.

An experienced California tax planning attorney can help you understand the intricacies of the law and ensure that your planning goals are addressed in the most tax-efficient manner. The increased gift and estate tax exemptions may warrant a review of your will, trusts and other wealth transfer vehicles to determine if they should be updated to take full advantage of these tax law changes. 

Favaro, Lavezzo, Gill, Caretti & Heppell, PC. In Vallejo, California provides tax planning services for individuals throughout Solano, Contra Costa and Napa counties. Call us at 707-674-6057 or contact us online to schedule a consultation.