This year, the Tax Cuts and Jobs Act drastically affected the basic exclusion amount allowed for determining federal estate, gift, and generation-skipping transfer tax liability. Actually, the Act doubled the tax exemption allowed. Now, every individual is allowed an exemption for roughly $11.2 million of assets. Estate transfers after death won’t see a federal estate taxation on the exempt amount through the end of 2025 at least. Meanwhile, the combined exclusion amount for married people went up to roughly $22.4 million.
Basic Exclusion Amounts To Federal Estate Tax Over The Years
Over the years, these basic exclusions changed many times. Let’s take a look at the basic exclusion amounts to the federal estate tax over the years.
2004 – $1,500,000
2005 – $1,500,000
2006 – $2,000,000
2007 – $2,000,000
2008 – $2,000,000
2009 – $3,500,000
2010 – $5,000,000
2011 – $5,000,000
2012 – $5,120,000
2013 – $5,250,000
2014 – $5,340,000
2015 – $5,430,000
2016 – $5,450,000
2017 – $5,490,000
2018 – $11,180,000
Step-Up In Basis Remains
Additionally, when someone passes, their assets continue to receive a step-up in basis for federal income tax purposes. The step-up in basis is the readjustment of the value of the asset. This form of tax relief allows for a beneficiary to avoid paying a capital gains tax on the appreciated value. See, when the asset is passed on to an heir or beneficiary, it’s usually worth much more than when the original owner first purchased or acquired it.
Be Sure To Review Your Current Estate Plan
These changes are significant so, property owners should review their current estate plans with an estate planning attorney to make sure that it’s all still applicable. If wills or trusts utilize federal estate tax exemption, some changes might be needed.
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