February 24, 2020

February 24, 2020

Subscribe to Latest Legal News and Analysis

IRS Announces 2018 Estate and Gift Tax Limits

While recent news reports focus on the potential for tax change as result of the introduction of the “Tax Cuts and Jobs Act” in the House on November 2, 2017, the IRS continues its job of administering existing law. Under the current rules, several key gift and estate tax exclusions are adjusted for inflation annually, including the estate tax exclusion, the annual gift tax exclusion, and the estate tax deduction for decedents dying with certain farm or closely held business real estate. The IRS has recently announced that the estate and gift tax exclusion will be $5,600,000 effective January 1, 2018. Due to the unified nature of the estate and gift tax systems, this means a person can make up to $5.60 million of taxable gifts without paying gift tax or transfer up to $5.60 million of assets at death without paying estate tax. In 2017, the exclusion amount was $5.49 million.

In 2018, the annual per donee gift tax exclusion will increase to $15,000. The annual per donee gift tax exclusion had been at $14,000 since 2013. That means in each year, any person can give to any other person up to $15,000 without having any obligation to file a gift tax return or use any of the combined gift and estate tax exclusion referenced above.

Further, if a person dies in 2018 owning certain farm and closely held business real property, the executor of the decedent’s estate may select to value the property at its farm or business use value rather than its fair market value. For 2017, the tax law authorizes a deduction that can reduce the fair market value of the decedent’s qualified property not more than $1,140,000. The IRS has not yet announced if there will be changes to the standard mileage rates for the use of a car (also vans and pickups), which can be reimbursed by an employer, or if not, deducted on the income tax return. In 2017, the rate was 53.5 cents per mile for business miles driven, which was slightly reduced from the rate of 54 cents per mile for 2016.

If the Tax Cuts and Jobs Act were to pass in its current form, the estate tax exclusion amount would increase to $10 million effective January 1, 2018. It is not clear if that amount will retroactively incorporate the annual inflation increase that has been in place since 2012. Additionally, the estate tax would be repealed effective January 1, 2024. The taxation of gifts will remain a part of the Tax Code, with the gift tax exclusion amount increasing to $10 million effective January 1, 2024. This amount would be adjusted for inflation.

Stay tuned for further updates as tax legislation weaves its way through Congress.

© 2020 Davis|Kuelthau, s.c. All Rights Reserved


About this Author

Ann Rieger, Davis Kuelthau, Corporate Estate Tax Attorney

Ann M. Rieger is a Past President of Davis & Kuelthau, s.c. and currently serves on its Board of Directors. She is a practicing attorney on the firm’s Corporate Team. With 29 years of experience, Ann concentrates her practice in the areas of estate planning, tax planning, tax exempt organizations, and business law. While her clients are typically business owners, professionals and senior executives who appreciate her thoughtful and creative approach to their often complicated personal, tax and financial planning challenges, Ann regularly works with clients of varying personal and...

Jacqueline Messler, Brookfield WI attorney, estate planning, tax law, and small business law, Davis  Kuelthau law firm

Jacqueline Messler’s practice includes estate planning, business succession planning, marital property agreements, guardianships, probate, and trust administration. Jackie regularly advises clients, particularly high net worth individuals, on all aspects of estate planning, including wills, revocable trusts, powers of attorney, irrevocable life insurance trusts, and generation-skipping transfer trusts. Jackie has worked with many clients in blended families. She has also assisted clients in special needs planning, including creating trusts under WisPact and Life Navigators. As an animal lover herself, Jackie has extensive experience advising clients on the best way to take care of pets after the owner’s incapacity or death, including drafting pet trusts.

In addition, she advises business owners in ongoing business operating and succession planning. This includes the preparation of organizational documents, including the Articles of Incorporation and Operating Agreement, buy-sell and transfer restriction agreements, the negotiation and preparation of various other corporate agreements, as well as legal services related to ongoing business operations, and the documents necessary to ensure the successful transition of the ownership and management of the businesses.

She has advised clients on pre-nuptial and post-nuptial agreements, including provisions related to keeping individual property (including business interests), maintenance, provisions for divorce, and provisions for death.

Jackie also has experience representing clients petitioning for a guardianship, including petitioning for guardianship over a minor child, petitioning for guardianship for a disabled child turning 18, and petitioning for guardianship over an incompetent adult.

Additionally, Jackie has extensive experience in advising clients in probate and trust administration after the death of a loved one. She advises Trustees and Personal Representatives in all aspects of estate administration. She has experience in negotiating settlement agreements in a contentious administration to allow for the efficient settlement of the estate. Jackie has experience in the preparation of gift tax returns, estate tax returns, and trust and estate income tax returns.