Depending on where you live in the U.S., your estate might be subject to state taxes after you die. Twelve states (including our own Washington State) plus the District of Columbia charge estate taxes, and each has its own rules, exemption levels, and tax rates.  

However, when it comes to federal estate taxes, the same rules apply to every American taxpayer. Basically, if your taxable estate exceeds a certain dollar amount, your financial agent will likely have to write Uncle Sam a generous estate tax check. Now that President Trump’s One Big Beautiful Bill has become law, we’re learning that the new tax law made some important changes to the laws governing federal estate taxes.  

These adjustments should be good news for holders of large estates who want a higher percentage of their assets to flow to their heirs and not to the U.S. Treasury. 

We recently discovered this article on the website of CNN explaining how the new tax law will allow wealthy individuals and couples to pass along more of their estate than ever before, free of federal estate taxes. CNN reporter Jeanne Sahadi wrote the piece, which also points out the fine print:  namely, even though federal estate taxes impact only a relative handful of U.S. estates, the new exemption rates are going to cost the federal government more than $200 billion in lost revenue over the coming decade.  

Let’s take a closer look at the CNN analysis. 

20-Fold Rise in Federal Estate Tax Exemption Since 2000 

It’s hard to believe, considering today’s wealth climate, that there was a time when a significant percentage of U.S. taxpayers had to contend with federal estate taxes. But it’s true, as CNN observes. 

“The US federal estate tax has come a long way since 2000, when the exemption level was set at $675,000,” Sahadi writes. “The amount has increased greatly over the past quarter century.” Increase it has. Sahadi notes that Americans who die in 2025 may leave up to $13.99 million tax free to their heirs – and for couples it’s twice that much.  

Ironically, she notes, the current high exemption level had been set to expire at the end of 2025, reverting to an anticipated $7 million exemption per person. Until the OBBB, that is. 

Instead of Dropping, the Exemption Level Rises with the New Law 

“The recently enacted tax-cuts package prevents the federal estate tax exemption level from falling to roughly $7 million next year from $13.99 million currently,” Sahadi explains. “Instead, starting in 2026, the exemption level will increase by roughly 7.2 percent to $15 million and adjust for inflation every year thereafter.”  

This effectively locks the new level into place semi-permanently, unless a new administration and Congress come along to change it. It’s all “courtesy of the One Big Beautiful Act that Republicans pushed through in time for President Donald Trump to sign it into law on his self-appointed deadline of July 4,” says CNN.  

Married Couples Enjoy Twice the Tax-Free Giving Power 

Couples filing jointly have always been able to claim a double benefit when it comes to federal estate tax, a provision which is even more significant given the new, higher rates. 

“Keep in mind, while not new, the exemption level is effectively doubled for married couples,” says Sahadi. “That’s because any unused exemption from the first spouse who dies can be passed to the surviving spouse, and the decedent’s estate can pass to the widow or widower tax free. Then, when they die, they will get up to two times the individual exemption level.” 

Bottom line: $27.98 million tax free for couples in 2025, and $30 million next year – indexed for inflation in the years to come.  The only caveat: your estate tax exempted amount is reduced by how much you gave away in gifts while you were alive, says CNN. 

Tax Rates Remain Unchanged Under the New Law 

Next time someone complains that taxes keep going up, you might want to point them toward the federal estate tax. Just a quarter-century ago, when the exemption level was a relatve fraction of what it is today, the graduated tax rate peaked at 55 percent. Today the highest rate is 40 percent. 

“The OBBA did not change the federal tax rates imposed on the taxable portion of estates,” says Sahadi. “They’re set on a graduated scale, from 18 percent to 40 percent with the initial portion above the exemption level taxed at 18 percent, the next portion at 20 percent and so on up to 40 percent, which is well below the 55 percent top rate that applied in 2001.” 

(You’ll find relevant IRS instructions along with a Unified Rate Schedule here on the Internal Revenue Service website.) 

As Exemptions Rise, the Number of Estates Affected Plummets  

As it is, only a tiny percentage of estates are directly affected by the federal estate tax. As rates rise, that percentage declines even further – although the size of the affected estates still means billions per year in revenue for Uncle Sam. In 2024, revenue from estate and gift taxes was estimated at $33 billion, a figure projected to double in the next decade. (That figure has not been adjusted to accommodate the new exemption level.) 

Sahadi writes, “Raising the exemption level to $15 million a person is likely to further reduce the already low share of estates subject to the estate tax.” As recently as 2001, she adds, about one estate in 50 (2.1 percent) paid estate taxes. In 2019, according to the Congressional Research Service, that figure dropped below one in 1,400.  

“That share was expected to rise to 0.2 percent in 2026, had the exemption level snapped back to roughly $7 million as was scheduled,” Sahadi says. Today that seems unlikely. 

What’s more, even though fewer estates are affected, the lost revenue due to the new, higher exemption rates is significant. CNN quotes the Joint Committee on Taxation which projects that these estate tax changes will reduce federal revenue by nearly $212 billion over the next decade.  

When Planning for Estate Taxes, Remember to Look Closer to Home 

CNN ends with an essential reminder. “Even if your estate or that of a loved one falls well below the federal exemption level, the estate may still be considered taxable in the state where a decedent was living when they died,” warns Sahadi. In fact, that’s quite likely considering the fact that state exemption levels are far below those of the feds. 

As of this year, 12 states and the District of Columbia have an estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington.  

Take a look at our recent Blog article about changes to the Washington State estate tax now in effect. We’re also re-posting this article on the Blog this week as part of our estate tax focus. 

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(originally reported at www.cnn.com)