Big GOP Tax Bill Could Change Your Estate Planning for 2025

"Living Trust and Estate Planning" printed on paper, with fountain pen and leather book

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Many consider estate planning crucial, though recent political movements aren’t making it easy.

The GOP’s “One Big Beautiful Bill Act” (OBBBA) includes a slew of tax provisions that could affect all Americans, including those with trusts and estates.

Enacted during Trump’s first term, the Tax Cuts and Jobs Act (TCJA) became the biggest change to tax law and policy in recent decades. Among its many provisions, the TCJA temporarily increased the estate and gift tax exemption while slashing the number of taxpayers subject to a “parallel tax system” known as the Alternative Minimum Tax (AMT).

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At the time, the Tax Policy Center estimated that the number of taxpayers who would have paid AMT the year TCJA was enacted fell by almost 5 million people, while the number of filed estate tax returns diminished by about 3,500.

It hasn’t ended there. The OBBBA has made some individual AMT thresholds permanent. Plus, the increased estate exemptions were raised even higher under the legislation.

What does all this mean for estate tax planning? Should you make plans now for potential outcomes of tax policy change?

Here’s what you need to know as we continue through an eventful tax year.

In the news: A recent LegalZoom survey reports that 40% of younger Americans (ages 44 and under) can't afford an inherited home. However, 62% of Baby Boomers and Gen X surveyed expect to leave behind real estate to their loved ones one day. Here's why an inherited home isn’t always a gift.

Trump tax bill estate tax changes

Currently, the federal estate tax exemption kicks in for estates valued at more than $13.99 million for single filers and $27.98 million for married couples. Previous TCJA exemption limits were about half those amounts.

Under the OBBBA, the higher exemption amounts are not only permanently extended, but increased for 2026:

Single filers could exempt $15 million from estate taxes.
Married couples filing jointly might be exempt from $30 million in estate tax.

Estate tax exemption in GOP bill

While the GOP agreed on permanently raising and extending the estate tax exemption, it’s no secret that House and U.S. Senate Republicans didn't see eye-to-eye on everything.

Proposals to increase the state and local tax (SALT) cap, slash clean energy tax credits, and cut Medicaid benefits were a source of some disagreement between the House and Senate. Plus, despite the proposed cuts to tax benefits, the House bill was estimated to cost about $4 trillion, according to early estimates, raising concern among fiscal hawks in both chambers.

But by comparison, the estate tax exemption received relatively little debate about its details.

With a GOP-controlled House and Senate, and Republicans generally in favor of raising or repealing the estate tax entirely, the higher estate tax exemption faced fewer challenges than other tax provisions in the OBBBA.

Also, extending the raised estate tax exemption ($200 billion over 10 years, according to the Institute on Taxation and Economic Policy) was less costly than other provisions in the GOP tax plan. For instance, the cost of extending estate tax thresholds isn’t as high as the AMT provision (more on that below).

The Alternative Minimum Tax (AMT) in 2025

An Alternative Minimum Tax (AMT) places a floor on the amount higher-income taxpayers must pay, regardless of credits or deductions taken on their taxes.

The AMT is only enacted when a taxpayer meets certain income limits; even then, taxpayers might not be subject to the entire amount if they qualify for an exemption.

Under the TCJA, income limits and phase-outs for the AMT exemption were raised:

Pre-TCJA, single filers could be subject to AMT when their income exceeded $54,300 (married, filing jointly, was $84,500).
In 2025, taxpayers could be subject to AMT if their incomes exceeded $88,100 (single filers) or $137,000 (married, filing jointly, couples).
Pre-TCJA, single filers wouldn’t qualify for an AMT exemption if they had income of more than $120,700. The exemption limit for married, filing jointly, couples was $160,900.
In 2025, exemption limits are $626,350 (single) and $1,252,700 (married, filing jointly).

The AMT income limit under the TCJA has dramatically lowered the number of people who qualify for AMT. Only 200,000 taxpayers were eligible for this tax system the year the law was enacted.

If a taxpayer qualifies for individual AMT, they generally pay less in taxes under the TCJA, due to the higher exemption phase-outs. According to the Tax Policy Center, almost $34 billion would’ve been paid if the TCJA hadn’t been enacted the year it took effect.

Shifting AMT to higher thresholds was big news for folks taxed on this “parallel tax scheme” for years, and even for some who only qualified for AMT occasionally. This caused some to call for the AMT income limits and phase-outs to be made permanent.

"inheritance tax" printed on paper with pen, glasses, calculator, and other desk supplies — Inheritance taxes, capital gains tax and AMT are just a few factors that go into estate planning.

Is the higher ‘AMT tax’ permanent?

Certain AMT increased thresholds are made permanent under the OBBBA.

This means fewer taxpayers continue to be subject to AMT, potentially leaving more money for higher-income individuals to give to their heirs.

However, as mentioned, the cost of permanently raising the AMT threshold is high compared to the estate tax exemption:

According to the Center on Budget and Policy Priorities, extending (without increasing) an estate tax exemption will cost $200 billion over 10 years. Previous estimates of eliminating the estate tax have suggested a cost of $370 billion over 10 years, as reported by Kiplinger.
By comparison, the Bipartisan Policy Center estimated that extending the higher AMT thresholds would cost $1.4 trillion over 10 years.

While Republicans generally favored extending the AMT provision, some senators called for a reduction in the nearly $4 trillion estimated cost of the House plan.

This may have caused the higher AMT thresholds to face challenges in Congress.

The final version of the “One Big Beautiful Bill Act" outlines a reversion of AMT phaseout thresholds to 2018 levels. This lowers the phaseout limits to $1,000,000 for married filing joint filers ($500,000 for single filers).

But here's some good news for those who hate AMT: The tax bill proposes a permanent extension of the current exemption amounts. This means AMT won't kick in until you meet the post-TCJA limits of $88,100 (single filers) or $137,000 (married, filing jointly, couples).

Estate tax planning strategies under the new tax bill

How can you and your heirs respond to an ever-changing tax policy landscape?

As higher estate tax exemptions and the individual AMT exemption are made permanent, here are a few general strategies you might consider in your estate planning:

Higher estate exemption amounts mean more money for your heirs, through either inheritance or gifts made throughout your lifetime. However, raised exemption limits make gifting less critical.
Maintaining wealth under a higher exemption amount offers heirs savings on capital gains tax if they plan to sell part of the estate, such as certain investments (for more information, see Kiplinger’s report, How the Basis Step-Up Rule Works).
Strategies that focus on “tax avoidance” through trusts or gifting assets become a little less urgent under raised estate exemption amounts than those centered on wealth preservation.

The last bullet is particularly true regarding AMT. While the OBBBA makes some individual AMT exemptions permanent, estates and trust AMT are still subject to lower income and exemption amounts.

Consequently, the legislation doesn't particularly affect your AMT planning. Be sure to consult a tax professional regarding your estate plan.

Note: When determining an estate plan, other factors such as the type of estate, costs associated with running the estate, and whether the gifted asset will be later sold, should also be considered. You might want to consult with your financial adviser about creating an inheritance plan for various potential outcomes of passed legislation.

Keep state estate tax rules in mind

You might also consider how state law can impact your estate tax planning. Several states have their own estate and inheritance taxes, and some can have quite low estate thresholds.

For example, Nebraska imposes an inheritance tax on adult children when their inheritances exceed $100,000. In Kentucky, nephews and nieces receive a $1,000 exemption.

If you live in a state that taxes your heirs, especially one in which estate exemptions are low, you may want to consider relocating to a state with more favorable estate taxes, as the federal exemptions remain high.

Not everyone might be able to relocate, and there are definitely other factors to consider, such as the average cost of living in the new state, local income and property tax rates, and how important your current home is to you and your family.

When in doubt, consult with an estate planning professional to adjust your family’s plans in response to changes on Capitol Hill.

Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.