No Clawback Planned for Higher Estate and Gift Tax Limits
Beginning in 2018, the Tax Cuts and Jobs Act increased the federal estate and gift tax lifetime limits to approximately $11.2 million per person or over $22 million for married couples. This is great news for many business owners including financial institution shareholders. These thresholds are expected to increase slightly each year with inflation before sunsetting in 2025 and reverting back to pre-2018 levels.
Estate planning professionals had been worried that come 2026, the IRS might attempt to collect taxes on gifts that were already made using the higher limits, but the IRS has said in a proposed regulation that it will not seek such retroactive taxes. Therefore, many shareholders will want to consider whether additional gifting in the next few years may be advantageous for their families.
For those planning year end 2018 gifts, there are still a few days left. The annual gift tax exclusion is currently $15,000 per recipient. Gifts over the annual exclusion limit must be reported on an IRS Form 709 and count towards your lifetime limit of $11.2 million.
Gift and estate tax rules are complex. CLA is here to help you plan for the future. Please contact us.
Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.
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