OBBBA’s Impact on Business Valuations for Gift and Estate Planning

With the signing of the One Big Beautiful Bill Act (OBBBA) into law by President Trump on July 4, 2025, certain provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) related to the estate and gift tax exemptions that were set to expire are now permanently increased. Prior to the OBBBA, the federal estate tax exemption was expected to sunset at the end of this year, reverting from $13.99 million per individual in 2025 to roughly half that amount in 2026, which was the pre-TCJA limit. Now, beginning in 2026, the OBBBA makes permanent the TCJA increased exemption amounts, increasing the exemption to $15 million per individual, indexed for inflation.

How it Plays Out

For married couples, this translates to a $30 million exemption starting in 2026. The OBBBA also increases the generation-skipping transfer tax (GSTT) exemption, which will also increase to be aligned with the estate and gift tax exemption, indexed to inflation. The top federal estate and gift tax rate remains at 40%.

Although the increase to the estate and gift tax exemption alleviates some of the urgency to gift interests in businesses prior to the end of 2025, families and business owners should continue to work with tax advisors and attorneys to be proactive and review estate plans. While there may not be a rush to determine the value of business interests prior to the end of 2025, it will still be important to plan transfers in line with the new exemption limits, which will require the preparation of a business valuation for the IRS.

Additionally, one should expect to see less aggressive uses of discounts in valuations for estate purposes, as the higher exemption limit results in less of a need to utilize discounts to transfer value within the exemption limit. However, the IRS always scrutinizes discounts, and it is important for valuation experts to continue to utilize supportable and justifiable discounts in determining the value of interests in closely held businesses.

Strategic Planning

Per the OBBBA, the new exemption will be a permanent change, which will remove the uncertainty that existed with the potential sunsetting of the TCJA exemptions and create a higher baseline for tax-free wealth transfers going forward. Because the exemption was set to significantly decrease at the end of 2025, there had been a rush in prior years to make significant gifts prior to the sunsetting of the provisions. The permanence and stability of the new estate and gift exemptions allows for better and more strategic estate planning. However, as Americans have seen over the last few years, things change with each administration, so planning for the exemptions to be permanent forever may be shortsighted. Engaging experienced valuation professionals and estate planners is important in navigating any new changes in the law. 

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This article is an update to the article "Impact of Potential Tax Changes on Business Valuations for Gifting and Estate Planning" written by Megan Kelly prior to the passage of OBBBA that appeared in the summer 2025 issue of New Jersey CPA.