6 Major Tax Changes This Year That Could Impact Your North Carolina Estate Plan

Significant tax changes are coming—and they could directly impact your estate plan, inheritance, and wealth transfer strategies. With key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of this year, many current tax benefits—including estate tax exemptions, deductions, and business incentives—could be reduced or eliminated in 2026.

For families and small business owners in North Carolina, these shifts could have meaningful consequences. From estate tax exposure to the phasing out of business-friendly deductions, planning ahead is more important than ever—especially if you want to protect your legacy and minimize surprises down the road.

To help you prepare, here are five major tax updates that could affect your estate plan and why you should take action now:

The Estate & Gift Tax Exemption Is Set to Drop

In 2025, the federal lifetime estate and gift tax exemption is $13.99 million per person. The annual gift tax exclusion also increases slightly to $19,000 per recipient.

But here’s the catch: If Congress doesn’t act, these limits will sunset January 1, 2026 cutting the estate tax exemption roughly in half—likely down to $7 million per person.

This change means that many families who previously had no estate tax concerns could suddenly face a 40% federal estate tax—but only on the portion of inherited wealth that exceeds the reduced exemption limit.

💡 Estate Planning Consideration: If your total estate (including real estate, investments, and business interests) exceeds $7M, this change could put your heirs at risk of owing substantial estate taxes. Proper planning, such as Trust strategies, can help reduce or eliminate tax liability.

2. Expiring Tax Breaks Could Increase the Cost of Passing Down Wealth

Several individual tax provisions are set to expire at the end of this year, including:

✔ The return of pre-2018 tax brackets, with the top rate increasing from 37% back to 39.6%.
✔ The $10,000 SALT deduction cap is set to expire at the end of 2025.
✔ The Child Tax Credit could drop from $2,000 per child to just $1,000.

These changes don’t just affect income tax—they can impact how much wealth is preserved and passed down to future generations. A higher tax burden on heirs may result in less inheritance and greater difficulty maintaining generational wealth.

💡 Estate Planning Consideration: If your estate plan includes structured gifting or Trusts designed to reduce your taxable estate, now is the time to review those strategies before the tax rules change.

3. Retirement Contribution Limits Have Increased for 2025

For those adding retirement assets into their estate plans, 2025 brings higher contribution limits for tax-advantaged accounts:

401(k): Contribution limits increase to $23,500.

Catch-Up Contributions (Ages 60–63): For those aged 50 to 59 or 64 or older, the general catch-up limit remains $7,500. However, beginning this year, those aged 60 to 63 are eligible for a higher “super catch-up” contribution of $11,250.

SIMPLE IRA Plans: The general catch-up limit for those aged 50 to 59 or 64 or older is $3,500. However, beginning this year, those aged 60 to 63 are eligible for a higher “super catch-up” contribution of $5,250.

Traditional IRA Plans: The contributions limits remain the same as 2024, at $7,000 for those under age 50 and $8,000 for those age 50 or older.

💡 Estate Planning Consideration: Retirement accounts often make up a significant portion of an estate. If you plan to leave these fto heirs, consider how tax changes could affect Required Minimum Distributions (RMDs), Roth conversions, and inheritance strategies.

4. Roth IRA Income Limits Are Expanding—More Families Can Plan for Tax-Free Inheritance

Higher-income limits this year mean more people can contribute directly to a Roth IRA, which offers tax-free growth and withdrawals:

Joint filers: The income limit is $236,000 for the maximum contribution limit. The contribution limit is reduced if income is between $236,000–$246,000. No contribution is allowed if income is $246,000 or more.

Single filers: The income limit is $150,000 for the maximum contribution limit. The contribution limit is reduced if income is between $150,000–$165,000. No contribution is allowed if income is $165,000 or more.

💡 Estate Planning Consideration: Roth IRAs are an excellent tool for tax-efficient wealth transfer, as inherited Roth IRAs allow heirs to receive distributions tax-free. If you’re looking to pass down retirement assets with minimal tax consequences, now may be a good time to explore Roth conversions or strategic funding of Roth accounts.

5. Income Tax Changes That Could Impact NC Individuals

Changes to deductions and exemptions could affect how much of your estate is taxed, both during your lifetime and after your passing.

✔ Standard Deduction Increases:

Single filers: $15,000
Married filing jointly: $30,000
Heads of household: $22,500

✔ Earned Income Tax Credit (EITC): The maximum credit increases to $8,046 for those with three or more qualifying children. Most families will qualify for less, depending on income and number of children.

✔ Alternative Minimum Tax (AMT) Exemptions: Adjusted for inflation to $88,100 for singles and $137,000 for married couples filing jointly.

💡 Estate Planning Tip: Even these seemingly small changes can influence your long-term tax exposure, especially when paired with potential reductions in estate tax exemptions. It’s a smart time to revisit how your income and estate plans align.

6. Income Tax Changes That Could Impact NC Business Owners

If your estate includes a family-owned business, these income tax changes could affect both your business operations and your legacy planning.

✔ Pass-Through Business Deduction (Section 199A): The 20% deduction for qualified business income expires at the end of the year unless extended.

✔ Corporate Tax Rate: The flat 21% corporate tax rate remains unchanged—for now.

💡 Estate Planning Tip: These changes can influence business income, valuation, and ultimately how much of your business is passed on. Now is the time to consider succession planning, Trust structures, and asset protection strategies to help secure your business.

Bonus: Charitable Giving Just Became an Even More Powerful Estate Planning Strategy

For those who incorporate philanthropy into their estate planning, an important update increases the tax advantages of charitable donations.

If you’re 70½ or older, you can now transfer up to $108,000 directly from your traditional IRA to a qualified charity through a Qualified Charitable Distribution (QCD).

You can support charitable causes tax-free, satisfy RMDs, and reduce your taxable estate—all at once.

💡 Estate Planning Consideration: Charitable Trusts and QCDs are powerful tools to reduce estate taxes while supporting the causes you care about. If you plan to leave a portion of your estate to charity, these changes benefit your ability to do so tax-efficiently.

What Should You Do Now?

With major tax law changes approaching, now is the time to evaluate your estate plan. Waiting until next year could mean missed opportunities to reduce taxes, maximize inheritance, and protect your legacy.

At Carolina Family Estate Planning, we help families create plans to minimize tax burdens and protect generational wealth. If you’re concerned about how these shifts might impact your estate, we’re here to help. Contact us today to schedule a case assessment and start preparing for the future.

FAQs About Tax Changes and Estate Planning

1. What is the estate tax limit for North Carolina in 2025?

North Carolina does not impose a state-level estate or inheritance tax. However, federal estate tax laws still apply. For 2025, the federal estate and gift tax exemption is $13.99 million per person, or nearly $28 million per couple with proper planning.

2. Will the estate tax exemption change in 2026?

Yes. If Congress doesn’t act, the federal estate tax exemption will be cut roughly in half on January 1, 2026, reverting to around $7 million per person. Any portion of your estate above that threshold could be subject to a 40% federal estate tax.

3. How can I reduce estate taxes in North Carolina?

Even though North Carolina doesn’t have its own estate tax, residents may still face significant federal estate tax exposure. Strategies like irrevocable trusts, lifetime gifting, business succession planning, and charitable giving can help reduce or eliminate this burden.

4. Are Roth IRAs still a good strategy for estate planning?

Yes. In fact, with expanded income limits for 2025, more families qualify to contribute directly to Roth IRAs. These accounts grow tax-free and can be inherited tax-free by your beneficiaries, making them a powerful estate planning tool.

5. I own a small business in North Carolina. How will these tax changes affect me?

If your estate includes a family-owned business, changes like the sunset of the 20% pass-through deduction and potential changes in valuation could affect how much of your business is preserved. Planning now—especially with trusts and succession plans—can help protect your business legacy.

This article is for informational purposes only and does not constitute legal or regulatory advice. Please consult a qualified attorney or compliance professional regarding your specific business obligations.