Federal Estate Tax Exemption Rises to $15 Million in 2026
Federal estate tax exemption increases to $15 million per person in 2026, providing permanent relief for most families while New York’s lower state threshold remains.
What Happened
Congress passed the One Big Beautiful Bill Act in July 2025, resolving uncertainty about federal estate and gift tax exemptions. The legislation, signed into law on July 4, 2025, prevents the scheduled expiration of increased exemptions that were set to revert to lower levels on January 1, 2026.
Under the new law, the federal estate and gift tax exemption increases to $15,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Jan 2, 2026 per person starting January 1, 2026. This represents an increase from the 2025 exemption of $13.99 million per person. The exemption will continue to adjust annually for inflation beginning in 2027, and unlike previous versions, this increase has no expiration date.
The legislation also maintains the generation-skipping transfer tax exemption at $15,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Jan 2, 2026 per person, though portability between spouses remains unavailable for GST exemptions. The top marginal tax rate for federal gift, estate, and GST taxes stays at 40%26 USC 2001(c)Verified Jan 2, 2026. Additionally, the annual gift tax exclusion remains at $19,00026 USC § 2503(b); Rev. Proc. 2025-32Verified Feb 4, 2026 per recipient for 2026.
What It Means
The permanent increase in federal exemptions significantly impacts estate planning strategies for New York families. With the federal exemption now at $15,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Jan 2, 2026 per person, married couples can effectively shield $30,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Jan 2, 2026 from federal estate taxes through portability provisions that allow surviving spouses to use their deceased spouse's unused exemption.
However, New York residents face a different calculation due to the state's separate estate tax. New York maintains its own estate tax with an exemption of $7,350,000N.Y. Tax Law §§ 951–971Verified May 31, 2026 for 2026. This creates a significant gap between federal and state thresholds. New York estates valued above 105% of the state exemption—approximately $7.7 million—face the full state estate tax on the entire estate value, not just the excess above the threshold.
For New York families with estates between $7,350,000N.Y. Tax Law §§ 951–971Verified May 31, 2026 and $15,000,00026 USC 2001(c), 2010; P.L. 119-21 §70106Verified Jan 2, 2026, the new federal exemption provides relief from federal taxes while state estate tax obligations remain. These families can focus their planning on state-level strategies rather than complex federal tax avoidance structures. The permanent nature of the federal increase also eliminates the uncertainty that previously drove rushed estate planning decisions before potential exemption reductions.
Charitable Giving Changes
The Act introduces new limitations on charitable deductions starting January 1, 2026. Non-itemizers who take the standard deduction can claim up to $1,000 for direct charitable contributions ($2,000 for married couples filing jointly). However, itemizers face new restrictions: charitable deductions only count when they exceed 0.5% of adjusted gross income, and high-income taxpayers in the 37% bracket see their deduction benefits capped at a 35% rate.
These changes particularly affect New York residents, who often make substantial charitable contributions and face high state income tax rates. The new federal limitations may reduce the tax benefits of charitable giving for wealthy New York families, potentially influencing their estate planning and philanthropic strategies.
Context from SimplyTrust
The increased federal exemption creates opportunities for families to reassess their estate planning strategies. Many trusts created when exemptions were lower may no longer need complex tax-focused provisions. Instead, families can focus on core estate planning goals like avoiding probate, maintaining privacy, and ensuring smooth asset transfers.
For New York families approaching the $7,350,000N.Y. Tax Law §§ 951–971Verified May 31, 2026 state threshold, proper estate planning remains crucial. A revocable living trust can help manage assets efficiently and provide clear instructions for distribution, even when tax considerations are less pressing. The trust structure also offers flexibility to adapt to future law changes without requiring complete estate plan overhauls.
Source: Planning for 2026: Trusts and Estates Tax Updates | Seyfarth Shaw LLP