IRS proposes higher estate and gift tax exemption

According to a recent article from Bloomberg, the IRS has proposed a potential benefit for wealthy taxpayers, saying that individuals who give lots of gifts to their heirs under a generous but temporary provision of the 2017 Republican tax overhaul won’t later owe taxes on them.

Here’s a summary of the proposed regulation on estate and gift taxes.

  • All individuals are given a lifetime exemption amount for the estate tax.
  • Any gifts made on an annual basis that is over and above the annual gift tax exclusion amount ($15,000 in 2018), is allocated to the lifetime estate tax exemption amount.
  • Under tax reform, all individual lifetime estate tax exemption amounts were doubled.  (2018 – 2025 exemption amounts are $11.2 million for an individual and $22.4 million for a married couple, adjusted for inflation)
  • There was concern that in these years, if individuals gifted amounts over and above the old exemption amounts, there would be a “clawback” in 2026, when the lifetime estate exemption amounts are set to return to the old limits.
  • IRS issued proposed Regulations stating there would be NO clawback.  Good news for taxpayers!
  • The agency will hold a hearing on the proposed rule on March 13, 2019.

Bottom line: This won’t apply to most, but if you want to take advantage of the doubled lifetime estate tax exemption, 2018 – 2025 is the time to do it!

For more information on this and other estate and gift tax exemptions, contact a ShindelRock tax professional today.