New Tax Legislation Signed on July 4, 2025
On July 4, 2025, alongside the celebration of Independence Day, President Trump reaffirmed and expanded several provisions from the 2017 Tax Cuts and Jobs Act. This new law, often dubbed the “one big beautiful bill,” revises numerous aspects of federal taxes and internal revenue laws, building on reforms that gained bipartisan support in Congress. The document itself is quite extensive, spanning around 870 pages, and introduces sweeping changes concerning taxes, expenditures, and deductions.
Consider how this legislation might influence your existing estate plan, and think about adjustments you may want to make moving forward.
Permanent Changes to Federal Property and Gift Tax Exemptions
This new law secures permanent federal property and gift tax exemptions originally outlined in the TCJA. As of 2025, the exempt amount stands at a record $13.99 million per person. Starting in 2026, the exemption will rise to $15 million per individual, with annual increases tied to inflation thereafter. This move establishes a new baseline for inflation adjustments from 2026 onward. Importantly, this increase appears to be solidly permanent, lacking any provisions for a sunset or expiration. Reduction of this baseline would require future congressional action, and the President has the authority to lower the exclusion amount directly.
Implications of the Changes
Prior to this legislation, the federal real estate tax exemption was set to revert on January 1, 2026, to the pre-TCJA limit of $5 million per person, adjusted for inflation. Not only does this new law eliminate that decrease, but it also makes the current exemptions permanent, significantly reducing potential liabilities.
From an estate planning perspective, this act means a decreased federal property tax burden after death, allowing for a greater inheritance to be passed down to heirs. Think of the federal lifetime exemption like a “coupon.” Each U.S. citizen or permanent resident can utilize this coupon at any point during their lifetime, effectively diminishing their taxable estate. If any of the coupon amount remains unused at death, it can be applied to assist in transferring remaining assets to heirs. Should taxable property exceed this remaining exemption at the time of death, the surplus will face federal property tax at a 40% rate. Starting in 2026, this “coupon” will increase, enabling married couples to exempt up to $30 million from their taxable estates throughout their lives.
Should You Revise Your Real Estate Plan?
Real estate planning remains a critical aspect of establishing gift strategies that promote asset protection, minimize probate issues, and lower taxable properties. However, this new law does not inherently alter core estate planning documents, such as wills, powers of attorney for property and healthcare, or revocable trusts.
If you’ve made gifts that are nearing the exemption limit in recent years, this law opens up the opportunity for you to give up to $15 million in 2026. Gifting now—not waiting until death—not only removes the current asset value but also future appreciation from becoming taxable, thus significantly decreasing property taxes while preserving the exemption. For optimal asset protection and tax efficiency, consider gifting through an irrevocable trust.
Wealthier individuals now have additional time to evaluate various strategies for reducing or even eliminating federal real estate tax liabilities. While the looming December 31, 2025, sunset deadline is no longer a concern, it’s wise not to delay planning indefinitely. Utilizing current laws to formulate strategies with estate planning professionals can help ensure significant assets are strategically positioned should future laws change.
For many Americans with average real estate holdings, this increase might push potential federal real estate taxes down to zero or near-zero.
Note of Caution – While federal real estate and gift tax exemptions are on the rise, real estate tax exemptions in Illinois remain unchanged at $4 million per person. There still exist numerous planning opportunities for Illinois residents to reduce taxable land exposure.
