Prior to the passage of the “One Big Beautiful Bill Act”, the federal estate tax threshold (also commonly referred to as the unified credit) per individual was $13.61 million in 2024 and was set to increase to around $13.9 million in 2025. This threshold was scheduled to sunset at the end of 2025 and as of January 1, 2026 would have been approximately half of the current amount. However, the passage of the “One Big Beautiful Bill Act” on July 4, 2025 now permanently increases the federal estate tax threshold to $15,000,000 per individual starting in 2025 and any unused credit is portable to the surviving spouse.
However, if you are a resident of the State of New York, the state estate tax threshold is much lower than the new federal threshold. For 2025, the New York estate tax basic exclusion amount is $7,160,000. There is also no portability between New York resident spouses, meaning that any unused New York estate tax exclusion not used by the first spouse to pass away cannot be transferred to the surviving spouse. There is also a “cliff” with the New York estate tax that removes the exemption amount if an estate is over this exemption amount by 5% or more.
As such, the suggestions by my colleague Mary Anne Cody in her 2022 blog regarding the potential gifting to the next generation and balancing of assets between spouses and also the use of a “Santa Clause” provision in a will or trust discussed in our 2019 blog are still applicable today for high-net wealth New York residents.
The “One Big Beautiful Bill Act” also increased and made permanent several income tax related deductions, exclusions and credits that were previously set to sunset after 2025. This is just a small sampling of pertinent changes:
- The standard deduction permanently increases to $15,750 for single tax filers and to $31,500 for married filing jointly tax filers retroactively as of January 1, 2025. The amount will be indexed for inflation post-2025.
- Personal exemptions were suspended for 2018 through 2025. They are now permanently removed.
- The Child Tax Credit has permanently increased to $2,200 per child.
- Up to $10,000 of interest on new car loans is now deductible on U.S. assembled vehicles.
- The $10,000 cap on state and local taxes (SALT) has now increased to $40,000 for 2025. The cap reverts to $10,000 in 2030.
- The 20% deduction for pass-through income for certain service trades (including but not limited to health, consulting, financial services, artists) that was set to expire after 2025 is now permanent.
Now is the time to review your estate planning documents to understand what impact the federal and state estate tax limits will have on your family.
Written by Ryan T. Emery
