OBBBA: Child Tax Credit, AMT, and Estate Planning Changes

Laurie Barrett |

Families, AMT Watchers, and the Affluent — This One’s for You

~ Bigger Credits, New Triggers, and a $15M Estate Exemption ~

The OBBBA law doesn’t just tweak deductions, it also reshapes some key credits and planning levers for families, stock-compensated employees, and those thinking about legacy and estate plans.

Here’s what’s new:

Bigger Child Tax Credit (with Inflation Protection)
The Child Tax Credit gets a permanent boost in 2025: 

•    Now $2,200 per child (up from $2,000)
•    Indexed to inflation starting in 2026
•    Phaseouts remain at $200K (single) and $400K (joint)

📌 Effective Starting: January 1, 2025

🚨 Key Detail: The refundable portion (Additional Child Tax Credit) remains at $1,700 in 2025 but will increase over time — so filing strategy may matter depending on income.

⚠️ Alternative Minimum Tax (AMT): New Risk Zones
Starting January 1, 2026, the AMT gets tougher: 

•    The exemption phaseout thresholds drop to $500K (single) and $1M (joint) bringing them back to the levels in place before the Tax Cuts and Jobs Act of 2017.
•    The phaseout rate doubles from 25% to 50%, creating sharp “tax cliffs”.
•    Further complicating the picture is the increased deductibility of state and local taxes (SALT) allowed by OBBBA.  Because this itemized deduction gets added back in AMT calculations, the deduction may not be as useful as initially thought.

💡 Planning Alert:
If you’re considering exercising incentive stock options (ISOs), 2025 may be your last chance to do so before these harsher AMT rules kick in.  Please consult your tax adviser. The effective marginal tax rate in the AMT “danger zone” could exceed 42% for some taxpayers in 2026.

Estate Tax Exemption: $15M Per Person
For those concerned about estate tax exposure: 

•    The lifetime gift and estate exemption increases to $15 million per person starting in 2026 (previously scheduled to fall back to ~$7M)
•    Indexed for inflation

📌 Planning Window: If you previously accelerated gifts before a presumed 2026 exemption reduction, now’s the time to reassess your gifting and trust strategies with your estate planning attorney.

🚨 Key Detail: The higher exemption eliminates the urgency of end-of-2025 lifetime gifting, but it may create opportunities to unwind or rebalance existing estate plan strategies.
 
 


Next Up: We’ll explore two brand-new planning tools for education and retirement: Trump Accounts for kids and expanded 529 plan uses.