The IRS has released Revenue Procedure 2015-53, containing the following updated thresholds for 2016:
For estates of decedents who die in 2016, the federal estate tax exemption (the “basic exclusion amount”) will be $5,450,000. This is an increase of $20,000 over the $5,430,000 exemption available to estates of decedents who die in 2015. This means that an individual can leave $5,450,000 ($10,900,000 for married couples) to heirs and pay no federal estate tax.
The federal annual exclusion amount for gifts made in 2016 will remain the same as in 2015, namely $14,000 per year, per person. Married couples who split gifts can still make gifts of $28,000 per year, per person. Also, an individual can make lifetime gifts of $5,450,000 ($10,900,000 for married couples) and pay no federal gift tax.
For gifts to non-citizen spouses, the federal annual exclusion amount will be $148,000.
The top federal estate and gift tax rate remains at 40%.
Trusts will reach the highest federal income tax bracket of 39.6% on all income over $12,400.
The tension between republicans and democrats regarding the estate tax continues to build, with republicans calling for estate tax repeal and democrats, such as Sen. Bernie Sanders, calling for a reduction in the estate tax exemption to $3,500,000 and a maximum estate tax rate of 65%. Stay tuned for the presidential election.
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