On behalf of Silver Tax Group posted in IRS Tax Audits on Friday, November 11, 2016.
The Internal Revenue Service recently announced an increase in the estate tax and gift tax exemptions for 2017. Currently the limit is $5.45 million over a person’s lifetime, but the amount of this exemption will go up to $5.49 million in 2017. Married couples will be able to exclude up to $10.98 million before having to pay any tax. There is no change to the annual gift exclusion as this will remain at $14,000 per year. In other words, this allows for you to receive $14,000 in gifts each year without having to report this towards the lifetime gift tax exemption.
Taxpayers often attempt to reduce the size of their estates in an effort to avoid the 40 percent tax rate the estate would otherwise incur. As one estate lawyer mentioned, the increase in the exemption does provide for couples another $80,000 to work with. Still, efforts in reducing one’s estate and gift tax can be extremely complex. The failure to report the receipt of gifts correctly can result in an IRS tax audit.
Politics, of course, plays a role in what will happen in the future regarding the estate tax. Presidential-elect Donald Trump has in the past stated he is in favor of repealing the estate tax entirely. His opponent, Hillary Clinton, was in favor of returning to the $3.5 million exemption formerly in place. She also proposed a graduated tax rate of 45 percent and rising to 65 percent for estates over $500 million.
In any event, we will likely see changes to the law sometime in the near future. With the laws regarding the estate tax always being in flux, it is often helpful to speak to an attorney who keeps up on changes to the estate tax and who can advise you on what steps to take to lower the amount of taxes you pay.