Overview
The One Big Beautiful Bill Act (the Act) was signed into law on July 4, 2025. The bill makes permanent both individual and corporate provisions that were enacted by the Tax Cuts and Jobs Act and provides new temporary tax provisions. We highlight below two provisions of the Act of particular interest in estate planning.
1. Estate and Gift Tax Exemption
The Act makes permanent the increased estate, gift, and generation skipping transfer tax exemption amount and further increases it for 2026 to $15 million per individual and $30 million per married couple. The exemption amount will be indexed for inflation starting in 2027.
This historically high exemption can be leveraged with potential valuation discounts, affording additional opportunities for high-net-worth individuals to pass on wealth and appreciation to the next generation.
2. Qualified Small Business Stock Exclusion
Section 1202 of the Internal Revenue Code provides for the partial exclusion of gain on the sale of qualified small business stock (QSBS) provided the stock was held at least five years. The Act raises the exclusion from the greater of $10 million or ten times basis to the greater of $15 million or ten times basis. The Act also modifies the QSBS exclusion to provide a tiered exclusion determined based on the years the taxpayer holds QSBS stock so that stock held less than five years is eligible for a reduced exclusion (50% for stock held three years, 75% for stock held four years and 100% for stock held five or more years). The Act also increases eligibility for the exclusion by increasing the eligibility limit on the corporation’s aggregate gross assets at the time of issuance from $50M to $75M.
Clients considering lifetime gifting with QSBS may multiply the benefit of the QSBS exclusion by using non-grantor trust planning to use multiple QSBS exclusions.
Please click here for a chart summarizing other key provisions of the Act and a comparison against prior law prepared by Steptoe's Tax Group.
