Hits to Multi-Million-Dollar Estate Tax Gifts and Ultra High Net Worth Individuals in California and New York
An Interpretation of the 2025 Trump Tax Reform Proposal by a Senior U.S. Tax Attorney
On May 13, 2025, the U.S. House Ways and Means Committee introduced and passed a sweeping tax reform proposal as part of the One Big, Beautiful Bill. Subtitled Make American Families and Workers Thrive Again, the proposal focuses on extending and expanding many of the individual and small business tax cuts enacted under the 2017 Tax Cuts and Jobs Act (TCJA) passed during Trump’s previous term.
The bill includes provisions to increase the standard deduction, expand the child tax credit, enhance the Qualified Business Income (QBI) deduction for partnerships and small businesses, permanently raise the estate tax exemption, and adjust the cap on state and local tax (SALT) deductions. Below is my understanding of and observations on the 2025 tax reform proposal.
Higher Taxes for High Earners, Lower Taxes for Low Earners
The 2017 TCJA and the new 2025 proposal—scheduled for a Senate vote on May 26—continue and strengthen tax benefits for middle- and lower-income groups, but impose more burdens on high earners, especially professionals and dual-income families in high-tax states (e.g., California and New York).
Even though the SALT deduction cap is likely to increase from $10,000 to $40,000, families with incomes above $600,000 will still effectively face a $10,000 cap due to downward adjustments.
Since 2017, many high-tax states have enacted laws allowing residents to bypass the $10,000 SALT limit via their businesses (the PTET workaround). However, this federal tax reform would end the ability of investment and service industry business owners to use PTET to avoid the SALT cap.
It is highly likely the Senate will pass all provisions that reduce taxes for middle- and lower-income households.
Tax Advantages for High-Net-Worth but Low-Income Individuals
The reform further enhances the tax advantages available to high-net-worth individuals with low reported incomes. Many wealthy business owners and investors can control the amount of income they recognize. Since U.S. income tax is based on income rather than total assets, these individuals can keep reported income within middle- or lower-income ranges while taking advantage of basic tax-saving strategies such as real estate depreciation and long-term capital gains treatment.
Estate Tax Exemption Raised to $30 Million for Ultra-High-Net-Worth Families
The 2017 reform doubled the estate tax exemption from about $6.5 million to roughly $13 million per person. The exemption is inflation-adjusted each year, and by 2025 it has grown to nearly $14 million per person. For married couples, that’s nearly $28 million in exemptions.
Before 2017, only 0.1% of U.S. households ever reached the estate tax exemption limit. Now, Trump aims to make the doubled exemption—nearly $28 million per couple—permanent. This would effectively grant tens of millions of dollars in tax-free transfers to the wealthiest 0.1% of households.
Deepening Preferential Tax Rates on Overseas Profits of U.S. Corporations
The 2017 reform required that most foreign profits of Controlled Foreign Corporations (CFCs)—including active business income, not just passive income—be included in the U.S. tax base in the year earned, even if no distribution was made to U.S. shareholders.
This category of active foreign income is called GILTI. The 2017 reform aimed to encourage repatriation of overseas profits while maintaining U.S. multinationals’ global competitiveness. For GILTI subject to an effective foreign tax rate of at least 13%, U.S. companies usually owe little or no additional U.S. tax (due to foreign tax credits), preserving competitiveness in most countries, including China.
Without legislation to extend the 2017 rules, starting in 2026 the minimum tax rate on GILTI will increase from 10.5% to 13.125%, and foreign tax credits will be capped at 80% of the U.S. liability—hurting competitiveness in certain jurisdictions like Ireland.
The 2017 reform also reduced the tax rate on FDII (foreign-derived intangible income) from the standard 21% corporate rate to 13.125% to encourage companies to hold intangible assets in the U.S. or develop them domestically. This preferential FDII rate is also set to rise to 16.4% in 2026 unless extended.
The 2025 reform proposal, now heading to a Senate vote, would make these lower GILTI and FDII tax rates permanent. It is very likely the Senate will approve these provisions to support the global competitiveness of U.S. multinationals.
