New Law Increases Federal Estate Tax Exemption

On July 4, 2025, a new federal law was passed that changes the rules for estate and gift taxes starting in 2026.

Beginning January 1, 2026, the amount of money a person can pass on at death—or give away during their life—without paying federal estate or gift taxes will increase to $15 million. This is a permanent increase. For comparison, in 2025 the amount is $13.99 million.

Before this new law, the exemption was set to be cut in half in 2026, meaning people would have only been allowed to transfer about $7 million tax-free. This law stops that cut from happening and locks in a higher exemption.

Starting in 2027, the $15 million exemption will go up each year based on inflation.

While this is a federal rule, each state has its own laws too.

For residents of Alabama, generally there is no separate state estate or gift tax, so typically only the federal rules apply.

This change means that fewer families will need to worry about paying estate taxes when someone passes away or gives away large amounts of money.

What Does This Mean for You?
Even though most families won’t hit the new $15 million exemption, this change is a great opportunity to revisit your estate plan, especially if you’ve been putting it off or if your plan was created under the old rules.

At McCartha Law, we help Alabama families create clear, thoughtful estate plans that reflect your values and protect what matters most—now and for the future.

Ready to update your plan or start fresh?
Call us today at 256-270-4233 or schedule a consultation online to make sure your estate plan takes full advantage of the new law.