We would like to share with you the final regulations regarding the exclusion amounts when computing federal gift and estate taxes. See below for a summary of the changes, and follow the link for more information. If you have any questions regarding gift and estate taxes, please contact our office!
Background. Generally, gift and estate taxes are calculated using a unified rate schedule on taxable transfers of money, property and other assets. Any tax due is determined after applying a credit – formerly known as the unified credit – based on an applicable exclusion amount.
The applicable exclusion amount is the sum of the basic exclusion amount (BEA) established in the statute, and other elements, if applicable, described in the final regulations. The credit is first used during life to offset gift tax, and any remaining credit is available to reduce or eliminate estate tax.
Because of changes made by the TCJA, the BEA for decedents dying and gifts made after December 31, 2017, and before January 1, 2026, is increased to $10 million, as adjusted for inflation. However, on January 1, 2026, the BEA will revert to $5 million, as adjusted for inflation.
Final regs. Generally, these final regs adopt, with certain revisions, the proposed regs that were issued on November 23, 2018. To address concerns that the estate tax of decedents dying and gifts made after December 31, 2017, and before January 1, 2026, could apply to gifts exempt from gift tax by the increased BEA, the final regs provide a special rule that allows an estate to compute its estate tax credit using the higher of the BEA applicable to gifts made during life or the BEA applicable on the date of death.
If you have any questions, please give the professionals in our office a call today.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the Internal Revenue Code, or for promoting, marketing, or recommending any transaction or matter addressed herein.