#OneBigBeautifulBill

Many of the provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) affecting individual taxpayers are scheduled to expire at the end of 2025 (the “sunset”). If it occurs, the sunset will result in over $4 trillion of tax increases in 2026. The scheduled tax increases include higher individual income tax rates and an approximately $7 million decrease in the estate tax exemption amount. This possibility has Congress awash in tax proposals to avert the sunset. In addition, various legislative proposals have been circulated to provide additional tax relief, including eliminating tax on tips and expanding the state and local tax deduction limitation.

Transfer taxes (gift, estate, and generation-skipping transfer [GST] tax) constitute one of the smaller tax revenue items at stake1 but several proposals have been introduced to specifically address these taxes. The current exemption amount for all three federal transfer taxes is $13.99 million per person ($27.98 million for married couples). In other words, an estate’s value up to $13.99 million (for a single person) does not incur federal estate tax upon the owner’s death. Estate tax is levied at a rate of 40%. If the sunset occurs, all three transfer tax exemption amounts will decrease to approximately $7 million as of January 1, 2026.

Both houses of Congress have introduced separate bills to extend the 2017 tax cuts. Both of these bills include provisions to avoid the scheduled transfer tax sunset by maintaining exemption amounts at their current levels. There are, however, differences between the House and Senate bills. The House has introduced one bill, endorsed by President Donald Trump as “one big, beautiful bill.” The one big, beautiful bill addresses border security, energy policy, and tax cuts. The Senate bill addresses border security first, and tax cuts will be addressed later in a second, separate bill.

The one big, beautiful bill would allow all issues to be addressed at the same time and provide a quicker resolution for taxpayers.