NMHC/NAA Viewpoint: The apartment industry supports the permanent estate tax exclusion legislation enacted in 2025 tax legislation.
Because many apartment firms are small businesses, often family owned, estate planning is a major consideration for company principals. A critical part of planning focuses on the estate tax imposed on the transfer of their assets to their heirs.
As part of the tax legislation enacted in 2025, Congress permanently increased the estate tax exclusion amount to $15 million beginning in 2026 (indexed for inflation in subsequent years).
The estate tax rules include three key elements:
Exemption level: The estate tax exemption level is the amount that a donor may leave to an heir without incurring any federal estate tax liability. In 2025, the law establishes a $13.99 million exemption ($27.98 million per couple).
Any action to reduce the estate tax exemption level would expose many more taxpayers to the levy, which would make it more difficult to transfer businesses to future generations and force taxpayers to engage in costly planning that diverts capital from their businesses.
Tax rate: The estate tax rate applies to the value of an estate that exceeds the exemption level. Under the rules, the maximum rate is 40 percent.
Basis rules: The basis rules determine the tax basis of inherited property. The estate tax today features stepped-up basis rules, which reset the tax basis of inherited property to reflect the fair market value of the property at the time of the inheritance. This is particularly important for the apartment industry because many industry executives’ estates include significant amounts of depreciable real property.
Without stepped-up basis, the tax basis of inherited property can be quite low if the property was purchased long ago and has been depreciated over a number of years. As a result, heirs could inherit an apartment property with no basis and sizeable debt. If they sell it, they will face significant depreciation recapture taxes and capital gains taxes. This discourages heirs from investing further capital to maintain it and removes valuable affordable housing from the inventory.
As many apartment executives prepare to leave a legacy to their heirs, today’s estate tax rules provide clarity and consistency in the tax code but only through 2025. The apartment industry supports making the estate tax rules enacted in 2017 permanent.
Any action to reduce the estate tax exemption level would expose many more taxpayers to the levy, making it more difficult to transfer businesses to future generations and forcing taxpayers to engage in costly planning that diverts capital from their businesses.
