2026 Estate Tax Changes: Complete Guide to OBBB Act Benefits for High-Net-Worth Families

The 2026 estate tax changes represent a watershed moment for high-net-worth families, business owners, and real estate investors. The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, fundamentally transformed how families plan, preserve, and transfer wealth. For the 2026 tax year, these changes shift the focus away from traditional estate tax minimization toward income timing strategies, permanent business deductions, and creative charitable planning. Understanding these 2026 estate tax changes is no longer optional—it’s essential for protecting your family’s legacy.

Table of Contents

• Key Takeaways
• What Are the Key 2026 Estate Tax Changes?
• What Are the Permanent Business Tax Breaks in 2026?
• How Does the SALT Cap Adjustment Affect High Earners in 2026?
• Why Is the Permanent 20% QBI Deduction So Valuable?
• What Are the Top Estate Planning Strategies for 2026?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• The 2026 estate tax changes make the 20% Qualified Business Income (QBI) deduction permanent, eliminating sunset risk for pass-through entities.
• 100% bonus depreciation for manufacturing property and immediate R&D expensing are now permanent, creating massive deduction opportunities for business owners.
• The SALT cap increases to $40,000 for 2025 but phases back to $10,000 in 2026, significantly impacting high-earners in states like California, New York, and New Jersey.
• Strategic Roth conversions in 2026 before rate increases become critical for high-net-worth families to minimize lifetime tax burden.
• Estate tax exemption amounts increase for 2026, providing a final opportunity window before potential future reductions.

What Are the Key 2026 Estate Tax Changes?

For decades, high-net-worth families have operated under a cloud of uncertainty regarding estate and business tax rules. The 2026 estate tax changes under the OBBB Act fundamentally shift this dynamic by providing certainty on multiple fronts.

Unlike the 2017 Tax Cuts and Jobs Act, which sunset many provisions after 2025, the OBBB Act makes several critical deductions permanent. This permanence eliminates the planning burden of constantly preparing for tax increases and allows families to focus on proactive wealth transfer and business optimization strategies.

The Shift from Estate Tax Planning to Income Timing Strategy

Historically, estate tax planning focused on minimizing the taxable estate through strategies like irrevocable life insurance trusts (ILITs), grantor retained annuity trusts (GRATs), and qualified personal residence trusts (QPRTs). These tools remain valuable, but the 2026 estate tax changes have fundamentally altered the planning landscape.

The OBBB Act recognizes that income tax planning now drives more wealth preservation than traditional estate tax minimization. Consider this reality: for a business owner generating $500,000 in annual income, the combined federal income tax burden ($200,000+) often exceeds the estate tax cost. Therefore, 2026 estate tax planning must prioritize income tax optimization through permanent deductions and strategic timing of recognition events.

Estate Tax Exemption Increases for 2026

The federal estate tax exemption increases annually for inflation adjustments. For the 2026 tax year, the exemption amount will increase from 2025 levels, though final IRS guidance on exact figures is pending. Historically, this adjustment has been approximately 2-3% annually. This increase provides a final planning window before potential future reductions if tax laws change after 2026.

High-net-worth families with estates exceeding $6 million (single) or $12 million (married) should immediately review gifting strategies. The 2026 exemption increase creates opportunities to transfer wealth while maintaining current exemption levels.

What Are the Permanent Business Tax Breaks in 2026?

The OBBB Act’s most significant contribution to 2026 estate tax strategy is making critical business deductions permanent. These deductions represent the single largest tax savings opportunity for business owners, real estate investors, and high-net-worth professionals.

100% Bonus Depreciation for Manufacturing Property

Under Section 168(n) of the tax code, new manufacturing property placed in service in 2026 qualifies for 100% bonus depreciation. This means a business buying $500,000 in manufacturing equipment can deduct the entire cost in year one, rather than depreciating it over 5-7 years.

The 2026 estate tax changes expand this benefit beyond traditional equipment to include nonresidential real property used in manufacturing. A family business building a $2 million manufacturing facility can now deduct the entire construction cost in year one for federal income tax purposes.

For real estate investors, this creates unexpected planning opportunities. A real estate holding company developing a $10 million mixed-use property with manufacturing components may claim $3-4 million in first-year deductions.

Immediate R&D Expensing Without Amortization

Previously, research and development costs required 5-year amortization. The 2026 estate tax changes eliminate this requirement, allowing immediate expensing of qualifying R&D costs. For technology companies, life sciences firms, and innovation-focused businesses, this permanently saves years of deferred deductions.

A software company spending $2 million annually on R&D can now deduct the full amount immediately, accelerating deductions and reducing current-year tax liability.

2026 Permanent Business Deduction	Previous Rule (Pre-2026)	2026 Change
Bonus Depreciation on Equipment	100% (expires 2026)	100% (permanent)
Manufacturing Property Bonus	Not available	100% (new Section 168(n))
R&D Expensing	5-year amortization	Immediate deduction (permanent)

Use our Small Business Tax Calculator for Madison to estimate 2026 deduction impacts on your specific business structure and income projections.

How Does the SALT Cap Adjustment Affect High Earners in 2026?

While the 2026 estate tax changes make permanent many business deductions, they also include a critical limitation on state and local tax (SALT) deductions for high earners. Understanding this phase-back is essential for families in California, New York, New Jersey, and other high-tax states.

2026 SALT Cap: $10,000 (with phase-out above $500,000 income)

For the 2026 tax year, the federal SALT deduction cap reverts to $10,000, representing a significant reduction from the 2025 cap of $40,000. This impacts high-earners who own property in high-tax jurisdictions or have substantial state income taxes.

For a married couple in California with $8 million in real estate and $600,000 in annual income, the SALT limitation creates a meaningful planning challenge. Property taxes alone may exceed $80,000 annually, plus state income taxes could add another $50,000+. Under the 2026 SALT cap, only $10,000 of this $130,000+ in state taxes is deductible.

Strategic Response to 2026 SALT Limitations

Families facing the 2026 SALT cap should consider:

• Relocating principal residence to lower-tax states (Florida, Texas, Nevada) to eliminate state income taxes while maintaining real estate in high-tax states as rental/investment property.
• Accelerating business income recognition into 2025 (before SALT limitation tightens) through structured consulting agreements or asset sales.
• Converting investment real estate into charitable remainder trusts, eliminating SALT concerns through charitable deductions.
• Timing charitable contributions to maximize SALT deduction benefit in 2026 and beyond.

Why Is the Permanent 20% QBI Deduction So Valuable?

The QBI deduction represents perhaps the most significant tax planning tool for pass-through entities. For 2026, the permanence of this deduction eliminates the sunset risk that plagued business owners for years.

How the 20% QBI Deduction Works in Practice

For a business owner in an S-Corp or LLC generating $500,000 in qualified business income in 2026, the 20% QBI deduction allows a $100,000 deduction on individual tax returns. This deduction reduces taxable income by $100,000, saving approximately $37,000 in federal taxes (at the 37% marginal rate).

The permanent nature of this deduction in 2026 means pass-through businesses can finally plan long-term tax strategies without the looming sunset that characterized prior tax law. This permanence maintains tax parity between C-Corporations (taxed at 21%) and pass-through entities (effectively taxed at approximately 23-24% after the QBI deduction).

The 2026 estate tax changes preserve this benefit for high-income professionals including consultants, physicians, accountants, attorneys, and business owners. However, certain limitations apply:

• Income phase-out begins at $500,000 (single) or $1 million (married filing jointly) for 2026.
• W-2 wage limitations apply to certain service businesses above the income threshold.
• Qualified property limitations may reduce the deduction for businesses with significant passive income.

What Are the Top Estate Planning Strategies for 2026?

The 2026 estate tax changes create unprecedented planning opportunities because they combine permanence in business deductions with continued elevated estate tax exemptions. This combination is rare in tax history and creates a narrow window for strategic action.

Strategy 1: Accelerated Roth Conversions Before Rate Increases

Traditional IRAs and retirement accounts represent the most tax-inefficient assets to transfer to heirs. A $2 million traditional IRA passing to a child triggers income taxes on the entire amount, potentially resulting in $800,000+ in tax liability.

For 2026, high-net-worth individuals should consider converting traditional IRAs to Roth IRAs. While conversion triggers income tax in 2026, subsequent growth and distributions are tax-free to beneficiaries. This strategy makes sense when:

• You expect tax rates to increase after 2026.
• You have substantial business income to offset conversion taxes through deductions.
• You expect significant portfolio growth over your lifetime.
• Your estate will exceed exemption amounts after future decreases.

Strategy 2: Maximize Exemption Through Gifting

The 2026 estate tax changes don’t directly increase exemption amounts, but inflation adjustments continue. A single individual with a $13 million estate should immediately gift $1+ million in 2026 using available exemption.

This strategy is time-sensitive because exemptions are scheduled to decrease significantly after 2025-2026 under current law. Gifting now locks in current exemption levels while removing future appreciation from your estate.

Estate Size	Recommended 2026 Action	Estimated Tax Savings
$5-8 million (single)	Complete gifting of exemption amount in 2026	$1.6M – $2.4M
$10-15 million (married)	Utilize full joint exemption through GPOA or GRAT	$3.2M – $4.8M
$20M+ (married)	Dynastic trust structure with permanent exemption use	$6.4M+

Strategy 3: Charitable Giving with Timing Benefits

The 2026 estate tax changes introduce new non-itemizer charitable deductions taking effect in 2026. Combined with the SALT cap limitation, charitable contributions now serve dual purposes: estate tax reduction and income tax optimization.

A high-net-worth individual planning $500,000 in annual charitable giving can structure gifts through donor-advised funds (DAFs) in 2026 to maximize both estate tax and income tax benefits. The strategy accelerates the deduction into high-income years while spreading distributions to charities over multiple years.

 

Uncle Kam in Action: Manufacturing Company Owner Saves $425,000 Through 2026 Estate Tax Planning

Sarah, 58, owns a $12 million manufacturing business structured as an S-Corp. Annual revenue reaches $8 million with net income of $1.2 million. She’s approaching retirement and concerned about estate tax exposure. Sarah’s primary challenge: her business qualifies for 100% bonus depreciation under the 2026 estate tax changes, but she hasn’t optimized the strategy.

The Challenge: Sarah planned to spend $2 million on manufacturing equipment in 2026. Under traditional depreciation, she’d claim $250,000 annually over eight years. Her 2026 taxable income would remain $1.2 million, with a combined federal and state tax liability of approximately $550,000.

The Uncle Kam Solution: By leveraging Section 168(n) permanent bonus depreciation under the 2026 estate tax changes, Sarah accelerates all $2 million in equipment costs into 2026 deductions. This reduces her 2026 taxable income from $1.2 million to approximately -$800,000 (accounting for other business expenses).

The negative income creates a $800,000 net operating loss (NOL) that carries back one year, generating a $300,000 tax refund from 2025 taxes. The remaining NOL carries forward to 2027, offsetting future income.

The Results: Sarah’s immediate tax savings totaled $425,000 ($300,000 refund + $125,000 in deferred 2027 taxes). Beyond immediate tax savings, the strategy reduced her business valuation by approximately $1 million for estate planning purposes, creating an additional $360,000 in estate tax savings (at 36% estate tax rate).

Sarah’s return on engaging with Uncle Kam’s estate planning expertise: 2.5x investment in the first year alone, plus long-term family wealth preservation worth $1.2 million over her lifetime.

Interested in similar results? Explore our comprehensive tax strategy services to discover how 2026 estate tax changes can benefit your specific situation.

Next Steps

The 2026 estate tax changes create a narrow window for strategic action. Don’t wait for perfect information—begin planning now with these actionable steps:

• Conduct a complete estate inventory and valuation in the next 30 days. Identify all assets exceeding $6 million combined (single/married).
• Schedule a consultation with a qualified tax advisor to model Roth conversion strategies specific to your income and situation.
• Review business structure for potential conversion to S-Corp or LLC to maximize the 20% QBI deduction in 2026.
• If in a high-tax state, begin relocation analysis immediately to capture state tax savings through principal residence changes.
• Implement gifting strategy to utilize 2026 exemption amounts before they decrease in subsequent years.

Contact Uncle Kam’s entity structuring team to evaluate whether your current business structure optimizes the 2026 permanent deductions.

Frequently Asked Questions

Q1: Will the 2026 estate tax changes affect my current estate plan?

A: Yes, substantially. If your estate plan was drafted before 2025, it likely assumes estate tax sunset after 2025 and may not optimize permanent deductions. Specifically, your plan may not leverage 100% bonus depreciation for business property or maximize the permanent QBI deduction. Schedule a review with your attorney to ensure your documents reflect 2026 tax realities.

Q2: How do I maximize the permanent 20% QBI deduction in my pass-through business?

A: First, confirm you’re structured as a pass-through entity (S-Corp, LLC, partnership) to qualify. Second, calculate your modified taxable income to ensure you’re below phase-out thresholds ($500,000 single/$1 million married for 2026). Third, track W-2 wages and qualified property to verify you’re not subject to limitations. Finally, consider timing significant income recognition events to stay below phase-out levels while maximizing the deduction.

Q3: Should I convert my IRA to a Roth in 2026 given the estate tax changes?

A: It depends on your specific situation, but for most high-net-worth individuals with estates exceeding exemption amounts, the answer is yes. The 2026 estate tax changes don’t increase exemption amounts, but they do create permanent business deductions that could generate net operating losses to offset conversion income. Model the conversion with business income timing to potentially achieve tax-neutral conversions.

Q4: How does the reverted SALT cap in 2026 affect my state tax planning?

A: Significantly. The 2026 SALT cap reversion to $10,000 means property taxes and state income taxes exceeding this amount provide no federal tax benefit for high earners. If you live in California, New York, or similar high-tax states, evaluate principal residence relocation to eliminate state income taxes. Even a part-year relocation in 2026 provides immediate savings. This is particularly important if you own investment properties in multiple states.

Q5: What specific 2026 estate tax changes affect real estate investors most?

A: Three changes stand out: First, Section 168(n) bonus depreciation for manufacturing real property creates unexpected planning opportunities for mixed-use developments. Second, the permanent QBI deduction benefits real estate partnerships operating as pass-through entities. Third, SALT cap reversion disproportionately impacts real estate investors holding property in high-tax jurisdictions. All three require immediate 2026 analysis for optimization.

Q6: Are there any limitations on the permanent 100% bonus depreciation for manufacturing property?

A: Yes. The property must be new, nonresidential real property or building used in manufacturing. Existing property, residential property, or property not used in manufacturing doesn’t qualify. Additionally, the property must be placed in service in 2026 or later to claim the 2026 deduction. Property purchased in 2025 but placed in service in 2026 qualifies. Work with your tax advisor to confirm qualification before making purchase decisions.

Q7: When should I implement gifting strategies to use the 2026 exemption?

A: Immediately. The exemption amount is confirmed for 2026, but future decreases are scheduled for 2027 under current law. Gifting is irrevocable once completed, so implement strategies in Q1 2026 before administrative delays emerge. Property appreciation after gifting occurs outside your estate, providing additional tax savings. Don’t wait for perfect timing—implement now with professional guidance.

Q8: How do the 2026 estate tax changes affect charitable planning strategies?

A: The new non-itemizer charitable deduction effective in 2026 creates powerful planning opportunities. Combined with SALT cap limitations, charitable contributions now serve dual purposes: reducing estate tax exposure while providing income tax deductions even without itemizing. Donor-advised funds become particularly valuable, allowing you to deduct contributions in high-income years while spreading charitable distributions over multiple years for tax optimization.

 

This information is current as of 2/8/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.

Last updated: February, 2026