Because the Tax Cuts and Jobs Act has put estate and gift tax exemptions at record-high levels, fewer taxpayers are worrying about these taxes. But the high exemptions currently are available only through 2025 and Congress could pass legislation that reduces the limits sooner. So whether or not you’d be subject to estate tax at the current exemptions, it’s a good idea to consider if you can seize opportunities to potentially lock in tax savings today.
While the TCJA keeps the estate tax rate at 40%, it has doubled the lifetime exemption base amount from $5 million to $10 million. The inflation-adjusted amount for 2019 is $11.4 million.
The gift tax continues to follow the estate tax, so the gift tax exemption also has increased under TCJA. You can exclude certain gifts of up to $15,000 per recipient in 2019 or $30,000 per recipient if your spouse elects to split the gift with you, without depleting any of your lifetime gift and estate tax exemption.
Choose gifts wisely.
Donations to qualified charities aren’t subject to gift tax, as well as tuition and medical expenses paid directly to the provider. Consider both estate and income tax consequences and the economic aspects of any gifts you’d like to make. To minimize estate tax, gift property with the greatest future appreciation potential. To minimize your beneficiary’s income tax, gift property that hasn’t appreciated significantly while you’ve owned it. To minimize your own income tax, don’t gift property that’s declined in value. Instead, consider selling the property, taking the tax loss and then gifting the tax proceeds. Have questions? Please contact us at ATA.