Projected Increase of Annual Gift Tax Exclusion
Each year a variety of items in the Internal Revenue Code are updated based on inflation, specifically the consumer price index.
While official adjustments won’t be released by the IRS until near the end of October, Bloomberg BNA, a Virginia-based company, has estimated the automatic changes that will take effect in 2018.
Bloomberg BNA predicts that tax brackets will be increased, along with the standard deduction amount. For example, a couple filing jointly with income of $237,000 is in the 33% tax bracket for 2017. In 2018, Bloomberg BNA estimates that a couple with the same income will instead be in the 28% tax bracket.
Notably, Bloomberg BNA estimates that the annual gift tax exclusion amount will increase from $14,000 to $15,000. This will be the first time this amount has increased since 2013. The annual exclusion amount is the amount of gifts that can be made to a single person during a year without impacting the taxpayers lifetime exemption amount ($5.49 million for 2017). An increase to the annual exclusion amount will benefit taxpayers engaged in estate tax planning, as those taxpayers will be able to transfer an additional $1,000 per recipient per year from their net worth without reducing their lifetime exemption.
For more information about how these projected increases impact your personal wealth planning strategy, contact your Foster Swift tax attorney.