The 2017 Tax Cuts and Jobs Act (TCJA) made significant changes to federal individual income and estate tax policies, though some policies were temporary. In 2018, the TCJA increased the estate tax exemption amount from $5.49 million to $11.18 million. This increase is set to expire at the end of 2025.
The exclusion amount will revert in 2026 to the pre-TCJA level, adjusted for inflation, of $6.98 million per deceased person. For married couples, a portability provision in estate tax law allows the surviving spouse to use any unused portion of the deceased spouse’s exemption.
Researchers with the USDA’s Economic Research Service (ERS) estimated the expiring increased exemption would be $13.95 million per person at the time of the expiration. Lowering the level of the estate tax exemption in 2026 is estimated to increase the percent of farm operator estates taxed from 0.3 to 1.0. This means that of the estimated 40,883 estates that are expected to be created in 2026, the expiration of the increased exemption would raise the number of estates that owe tax from 120 to 424.
Large farms (gross cash farm income between $1-5 million) would experience the largest increase in the share of estates owing estate tax, increasing from 2.8% to 7.3%. Total federal estate taxes for farm estates would be expected to more than double to $1.2 billion if the provision were allowed to expire. — USDA ERS
