Estate Tax Changes: Are You Affected?

2025-07-21 00:00:40.14

The US federal estate tax exemption has seen dramatic changes. In 2000, the exemption was \$675,000; however, by 2025, it will reach \$13.99 million per person. Initially set to revert to roughly \$7 million in 2026, the One Big Beautiful Act (OBBA) increased the exemption to \$15 million, with annual inflation adjustments thereafter. Married couples effectively double this exemption due to unused exemption carryover. While the OBBA didn't alter tax rates (18% to 40%), it significantly reduces the number of estates subject to federal tax, from 2.1% in 2001 to 0.07% in 2019. The OBBA is projected to decrease federal revenue by nearly \$212 billion over ten years. Despite the federal changes, twelve states and the District of Columbia still have their own estate taxes, with varying exemption levels and rates. For example, Massachusetts has a \$2 million exemption with rates from 0.8% to 16%, while Washington has a \$3 million exemption but rates as high as 35%.