Take Advantage of the Lifetime Estate and Gift Tax Exemption While You Still Can: Kiplinger Tax Letter
And while you’re at it, check out whether you live in a state with an estate or inheritance tax.
Getting the right tax advice and tips is vital in the complex tax world we live in. The Kiplinger Tax Letter helps you stay right on the money with the latest news and forecasts, with insight from our highly experienced team (Get a free issue of The Kiplinger Tax Letter or subscribe). You can only get the full array of advice by subscribing to the Tax Letter, but we will regularly feature snippets from it online, and here is one of those samples…
The lifetime estate and gift tax exemption for 2023 deaths is $12,920,000. After 2025, the exemption will fall back to $5 million, adjusted for inflation, unless Congress agrees to extend the higher amount. The odds of any extension depend on which party controls the White House and Congress after the 2024 election.
Federal estate and gift tax exemption
Most tax-free gifts you make now won’t trigger post-2025 estate tax bills. Estates use the higher lifetime exemptions for gifts to calculate post-2025 estate taxes. So, many people who made or make big gifts from 2018 through 2025 won’t lose out on the benefit of the larger exemption amount if it drops back down in 2026.
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But not all gifts would qualify. Under an IRS proposed regulation, completed gifts that are later included in the decedent’s gross estate at death would be subject to the exclusion amount in effect in the year of the donor’s death. Implicated strategies include grantor-retained income trusts and transactions involving promissory notes.
State estate and inheritance taxes
The District of Columbia and 12 states levy their own estate taxes on some decedents: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. The estate tax exemption amounts in these 13 locales vary widely from state to state. Only Connecticut has hiked its exemption amount close to the current federal level. Six states now have inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa’s inheritance tax is currently being phased out and is slated to end after 2024.
This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.
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