2019 Gift and Estate Tax Exemption Amount

Yesterday the IRS announced the official 2019 federal gift and estate tax exemption amount.  This amount is adjusted periodically for inflation.  

The federal gift and estate tax exemption amount is the amount of assets that a U.S. citizen can give away during life or at death without the imposition of federal gift or estate tax.  Amounts given away during life or at death in excess of the exemption amount that do not qualify for a deduction are taxed at a 40% rate.  

The 2019 federal gift and estate tax exemption amount will be $11,400,000 per individual (increased from $11,180,000 per individual in 2018).  This means that in 2019, an individual can give away (during life or at death) up to $11,400,000 or a married couple can give away up to $22,800,000 (including gifts made in prior years), without the imposition of gift or estate tax.  

If a married individual dies in 2019 and does not use all of his or her exemption amount, a "portability election" can be made to transfer the decedent's unused exemption amount to the surviving spouse.  A portability election must be made on a timely filed estate tax return, which is due 9 months after death unless extended.  As a result, the surviving spouse will have their own exemption amount (whatever that may be in any given year) plus the unused exemption amount that was transferred to them from the deceased spouse.  This could be particularly useful if the surviving spouse's personal exemption amount decreases in the future.  

Don't forget that the exemption amount is scheduled to drop to approximately $6,300,000 per person ($12,600,000 per couple) beginning in 2026, unless the law changes between now and then.

In addition to the exemption amount, there is also a gift tax annual exclusion that allows all U.S. citizens to make gifts of up to $15,000 per recipient  per year without the imposition of federal gift taxes.  This amount is also adjusted periodically for inflation, but there is no adjustment scheduled for 2019.

Please feel free to contact us if you would like to discuss how these exemption amounts affect your estate planning.