Ax Falls on Exemptions in 2026; Planning Right Now Will Save Your Family Business Millions
By Pat Soldano
This is as good as it gets.
Today, family businesses have never had it better when it comes to the estate tax lifetime exemption. But it all changes January 1, 2026.
Unless new legislation is passed, January 1, 2026, is the date the most favorable estate tax exemptions in 50 years will come to a close, and exemptions will be cut in half.
We’re talking significant dollars for family businesses that have worked hard to save money and build their businesses.
The 2017 Tax Cuts and Jobs Act nearly doubled the lifetime estate and gift tax exemption from $5.6 million for individuals and $11.18 million for couples, to $11.18 million for individuals and $22.36 million for couples, indexed for inflation after 2018.
For 2023, the exemption stands at $12.92 million per person and $25.84 million for a married couple. You can give up to those amounts over your lifetime without paying federal gift tax. Any amount above is taxed at a hefty 40%.
In 2026, it will get ugly. That is when the gift and estate tax rate revert to pre-2018 levels, which means exemptions will be axed in half.
If you want to maximize your family estate and minimize the cost of the Internal Revenue Service tax bill, the time is now to start planning, or face gift or estate tax liability in 2026 you won’t like.
There are questions about the real damage these changes will cause. Some experts say the benefits will be cut in half, others say individual exemptions will be something like $7 million, while married couples will be $14 million.
Either way, we are talking about dramatic, and painful, cuts. So, there is no time to waste when it comes to planning for these changes.
There is the possibility of new tax legislation making the lifetime exemption permanent, at its current level, but with a Republican House and Democrat Senate is not too likely in 2023 or 2024.
Fortunately, there is a new voice that is educating Congress on the value of family businesses and keeping them strong by avoiding onerous tax legislation. The new voice is the bipartisan Congressional Family Business Caucus.
The caucus is co-led by Reps. Jodey Arrington (TX-19), Brad Schneider (IL-10), Henry Cuellar (TX-28) and Claudia Tenney (NY-22). Rep. Tenney, a longtime small business owner with a family printing and manufacturing company in upstate New York.
With this new Caucus, family businesses have a voice dedicated to their concerns, and will be able to meet directly with these leaders to discuss and create new tax policy. This can only help make way for the potential to create new, helpful legislation.
But as we move through the first quarter of 2023 NOW is the time to look at your estate planning and take advantage of this historic high lifetime exemption; DON’T WAIT! The looming date of January 1, 2026, may affect your family, your family business, and your children.
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The need for fact-based reporting of issues important to family offices and successful individuals and protecting a lifetime of savings has never been greater. Now more than ever, family offices and successful individuals are under fire. That’s why Policy and Taxation Group is passionately working to increase the awareness of issues important to family offices and successful individuals, while continuing to strengthen our presence on Capitol Hill.
Since 1995, Policy and Taxation Group has been the leading advocacy group working to reduce and eliminate estate tax, gift tax, and generation skipping transfer tax while blocking increased income tax and capital gains taxes, the creation of a wealth tax, and other hostile tax policies that punish hardworking taxpayers and success.
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