On July 3, 2025, Congress passed the One Big Beautiful Bill Act (“OBBBA”). This legislation was officially signed into law on July 4, 2025, and makes permanent a number of provisions first introduced in the 2017 Tax Cuts and Jobs Act (TCJA). Below are some of the highlights from the OBBBA as they pertain to estate planning and personal tax strategies.
Gift and Estate Tax Exemption
Under the TCJA, the estate and gift tax exemption amounts were increased, with the exemption amount scheduled to expire on January 1, 2026. Absent congressional action, the exemption would have reverted from $13.99 million per individual in 2025 to an estimated $7.5 million in 2026 ($5 million indexed for inflation). This reduction was commonly referred to as the estate and gift tax “sunset.”
The OBBBA permanently increases the exemption amount for the federal estate tax to $15 million per person, subject to annual inflation adjustments. For married couples, this effectively allows up to $30 million to pass free of estate tax with proper planning. With the elimination of the sunset, the OBBBA eliminates the uncertainty for now, and allows individuals and families to plan with greater confidence.
Charitable Contribution Changes
The OBBBA makes several notable changes to the rules governing charitable contributions. For taxpayers who itemize deductions, the OBBBA introduces a 0.5 percent floor, allowing charitable contribution deductions only to the extent contributions exceed 0.5 percent of adjusted gross income. The OBBBA also adds an above-the-line charitable deduction for taxpayers who do not itemize, allowing a deduction of up to $1,000 for individual filers and $2,000 for joint filers. To qualify, contributions must be made in cash and may not be made to donor-advised funds or private foundations. Qualifying charitable deductions for non-itemizers are not subject to the 0.5 percent contribution base limitation.
ABLE Account Enhancements
An ABLE account is a tax-advantaged savings and investment account for individuals with disabilities. The OBBBA makes several favorable and permanent changes to ABLE accounts. Most notably, the legislation expands eligibility for ABLE accounts by increasing the age at which a qualifying disability must have begun from 26 to 46. In addition, tax-free rollovers from 529 college savings plans into ABLE accounts are now permanent. Finally, ABLE account contributions are eligible for the Saver’s Credit under I.R.C. § 25B, providing an additional benefit for lower-income workers by reducing their overall federal income tax liability.
Expanded Use of 529 Plans
The OBBBA broadens the use of 529 education savings plans. The annual limit for K-12 education expenses increased from $10,000 to $20,000. The list of expenses considered as “qualified” expenses expanded to include curriculum materials, standardized testing fees, books, dual-enrollment course costs, online educational programs, tutoring, and specialized educational services for students with disabilities.
Trump Savings Accounts
The OBBBA introduces a new type of savings vehicle commonly referred to as Trump accounts. These accounts permit after-tax contributions of up to $5,000 per year (indexed for inflation after 2027) until the beneficiary reaches age 18, with earnings growing on a tax-free basis. Withdrawals are generally prohibited prior to age 18, and once the beneficiary reaches that age, the account must be converted to an IRA, at which point withdrawals are generally taxed at the beneficiary’s income tax rate. Employers may make annual contributions of up to $2,500 per year (indexed for inflation after 2027) to a Trump Account for an employee or the employee’s dependent. The employer contributions will not be treated as taxable income to the employee. Unlike 529 plans, the withdrawals from Trump accounts are not limited to use on education-related expenses. In addition, U.S. citizens born between January 1, 2025, and December 31, 2028, are slated to receive a $1,000 federal contribution deposited into an account. The first contributions to Trump accounts may be made after July 4, 2026.
From an estate and gift tax planning perspective, these accounts should be approached with caution, as contributions may not constitute gifts of a present interest and therefore may fail to qualify for the annual gift tax exclusion. This failure to qualify for the annual gift tax exclusion could potentially require the filing of a federal gift tax return unless future guidance provides otherwise.
OBBA Poised to Reshape Federal Tax System
The OBBBA represents a significant reshaping of the federal tax system. The increased $15 million estate tax exemption, absence of a sunset provision, expanded uses for 529 and ABLE accounts, and new charitable contribution rules all present opportunities and planning challenges. Although there are many “permanent” updates, future political changes could still alter the tax landscape. Accordingly, clients may wish to consider taking advantage of the high estate and gift tax exemptions and consider wealth-transfer strategies.