Federal Estate and Gift Tax for 2018

In 2011, the unified estate and gift tax exclusion amount (the amount that you can transfer during lifetime or upon death without incurring a federal estate or gift tax) was set at $5 million. This amount has been adjusted for inflation each year since then. In 2017, the applicable exclusion was $5,490,000. For 2018, it was scheduled to increase to $5,600,000. Through appropriate planning or through portability, this amount could be doubled for married couples with the total exemption per couple to be $11,200,000. However, the Tax Cuts and Jobs Act of 2017 doubled the applicable exclusion to $11,200,000, or a total of $22,400,000 for married couples. These amounts will continue to be adjusted annually for inflation. However, unless there is further legislation to extend the increased amounts, they will sunset at the end of 2025. If no additional legislation is passed, then in 2026, the limits will revert to the $5,600,000 amount adjusted for inflation.

Once an estate is over the exclusion amount, the tax rate remains at 40%.

The Annual Gift Tax Exclusion (the amount that you can give to an unlimited number of individuals without consuming any of your lifetime exclusion amount or incurring a gift tax) is $15,000 for 2018 and future years (subject to future increases to reflect inflation). A married couple can join together and give $30,000 per year to any one person without impacting the exclusion amount. Gifts in excess of the annual exclusion require the filing of a Federal Gift Tax Return (due at the same time as your Federal Income Tax Return). However, no gift tax is payable unless cumulative gifts in excess of the annual exclusion exceed the lifetime exclusion.

The exclusion for tuition payments made directly to educational organizations and to health care providers continues in effect. This means that you can pay the tuition or medical bills of any other person, in an unlimited amount and whether or not related to you, as long as the payment is made directly to the school or provider. These payments are in addition to the Annual Gift Tax Exclusion and have no impact on your total exclusion amount.