IRS Releases 2020 Estate and Gift Tax Exclusion Limits



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Estate And Gift Tax Limits For 2020 Have Increased

Beginning in 2020, the lifetime estate and gift tax exclusion (which is indexed for inflation) will rise to $11.58 million, up from $11.4 million in 2019. This is the limit on tax-free wealth transfers during one’s lifetime or at death. As a result, couples who have not yet made any lifetime gifts will be able to avoid estate taxes if their combined estate is less than $23.16 million. Importantly, it may be necessary for a surviving spouse to file an estate tax return for his or her deceased spouse in order to take advantage of this combined exclusion amount.

With the 2020 Presidential and Congressional elections looming, there are a number of proposals from Democratic candidates which would reduce the lifetime exemption to a much smaller number, perhaps as low as $3.5 million.  There are also suggestions that the rates for taxable transfers to rise from the current 40% flat rate.  Of course, nothing is certain in elections or politics, but, if you are planning a large lifetime gift, timing may be an important consideration.

The annual gift tax exclusion will remain at $15,000, the same amount as it was in 2019.  So, for 2019 and 2020, you can make a gift of $15,000 to as many people as you like without it counting against your lifetime estate and gift tax exclusion.  Spouses can combine their annual exclusions to gift a combined $30,000 to an unlimited number of recipients.

In addition to this annual tax exempt amount, taxpayers can make non-taxable gifts to pay for tuition, dental, and medical expenses for anyone they choose. However, the payments must be made directly to the provider of the service – they don’t count as non-taxable gifts if they are made as reimbursements.

If you have questions about how these rules may apply to you, please contact us or our friends at Maddox, Thomson & Associates.  We are glad to help.

Horizon Wealth Advisors is a Houston based fee-only wealth management firm. Horizon is a fiduciary advisor. We specialize in helping successful individuals and families understand, organize, and manage their often complex financial situations. Horizon offers integrated financial planning and investment management services.

Larry Maddox, CFP®, CPA
Larry founded Horizon Advisors, LLC in Houston, Texas in 1999 with fellow business partner Joe Thomson. He collaborates with our wealth management team and other external advisors to provide comprehensive wealth management services.

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