What’s going to happen with the estate tax? Now, the federal lifetime estate and gift tax exemption is $13,610,000, and the highest estate tax rate is 40%. However, after 2025, the $13,610,000 figure will drop, reverting to the 2017 amount, adjusted for inflation… $7 million or so…unless Congress chooses to act.

We don’t know what lawmakers will do. But let’s look at some options out there.

The first one is keeping things as they are, meaning extending the current estate tax exemption and maintaining the top 40% tax rate. Donald Trump often says he wants to make permanent the tax cuts in the 2017 law, and we believe that promise would also include the higher lifetime estate and gift tax exemption. Whether Trump wants other additional easings to the estate tax remains to be seen.
The second is lowering the tax rate and/or raising the exemption amount. The authors of Project 2025, the blueprint spearheaded by the Heritage Foundation and designed for the next GOP administration, sets forth a federal estate tax rate of no higher than 20% and would make permanent the current estate tax exemption, adjusted for inflation. Some Republican lawmakers want a higher exemption amount.
Third is getting rid of the estate tax. A bill that draws strong GOP support in the House and the Senate, the Death Tax Repeal Act, calls for the repeal of the estate tax and the generation-skipping transfer tax. This is not a new idea.
Fourth is coming up with a middle-ground estate tax exemption figure, somewhere between the current $13,610,000 and the $7 million amounts.
Fifth is doing nothing. This would cause the higher estate tax exemption in the 2017 tax law to automatically lapse, reverting to about $7 million for 2026 deaths. The 40% top estate tax rate would remain in place, as it wasn’t changed in the 2017 law.
Sixth is lowering the exemption below 2017’s figure and/or hiking the tax rate. An example is the American Housing and Economic Mobility Act of 2024, a bill introduced in the Senate by Elizabeth Warren (D-MA) and in the House by Emanuel Cleaver (D-MO). The bill sets forth a slew of affordable housing proposals. It also calls for changes to estate and gift taxes to offset the cost of the provisions.

Among the key proposed estate and gift tax changes: Lower the exemption to $3.5 million, an amount last seen in 2009. Replace the current 40% estate tax rate with a series of progressive rates, ranging from 55% for estates over $3.5 million to 75% for estates of billionaires. Reduce the annual gift tax exclusion to $10,000 per donee.

Some online stories say that Kamala Harris endorses the bill’s estate tax plan. But we’ve found no concrete evidence of this. So far, Harris has been mum on the campaign trail when it comes to estate taxes. President Joe Biden in 2020 might have supported a $3.5 million exemption, but he apparently changed course.

PLEASE NOTE; This information is intended to inform and educate not to support or promote any political party.