In 2020, the top tax rate remains 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly). The other rates are: 35%, for incomes over $207,350 ($414,700 for married couples filing jointly). The estate tax exemption to $11.58 million per individual, or $23.16 million per couple. A provision of the Tax Cuts and Jobs Act of 2017 more than doubled the exemption and raises it each year to keep pace with inflation. State death taxes paid are deductible from the federal gross estate for estate tax purposes. For amounts exceeding estate tax exemptions, Federal estate and gift tax are assessed at a flat rate of 40%.
With these multiple changes in estate tax laws, it is very important that you consult a trusted and knowledgeable estate and tax professional to help you in your planning decisions.
The unused portion of the estate tax exemption carries over to the surviving spouse. For example, if in 2019 the husband dies and does not fully use his estate tax exemption, the deceased husband's unused exemption can be attributed to the wife, so that when she dies, her estate plan can use both her unused estate tax exemption and her late husband's unused exemption. Thus, a married couple can easily shelter $22.8 million of assets.
See the section Estate and Gift Taxes for more information.
|
For taxable Estates in this range |
Base Amount of Tax |
Plus: This Rate on the Excess Above the Lower End of the Range |
| $0 to $10,000 | $0 | 10% |
| $10,000 to $20,000 | $1,800 | 20% |
| $20,000 to $40,000 | $3,800 | 22% |
| $40,000 to $60,000 | $8,200 | 24% |
| $60,000 to $80,000 | $13,000 | 26% |
| $80,000 to $100,000 | $18,200 | 28% |
| $100,000 to $150,000 | $23,800 | 30% |
| $150,000 to $250,000 | $38,800 | 32% |
| $250,000 to $500,000 | $70,800 | 34% |
| $500,000 to $750,000 | $155,800 | 36% |
| $750,000 to $1 Million | $248,300 | 38% |
| $1 Million and Up | $345,800 | 40% |
| DATA SOURCE IRS |
Currently the exclusion is $11.58 million and is scheduled to remain at this high level until 2025. Many taxpayers believe that if an individual dies with assets under this amount, there is no need to file an estate tax return (Form 706). While it is true that a return may not be required, an executor needs to seriously consider the future benefit of filing a return. Doing so allows for an election to transfer the Deceased Spousal Unused Election Amount (DSUE) to the surviving spouse. This portability election increases the total exclusion available to the surviving spouse by the amount of the deceased spouse's unused exclusion. If you don't file the 706 at the first death, you cannot elect to port over this remaining amount.
2020 Annual Estate Planning Limits
| Estate Planning | 2019 | 2020 |
| Annual Gift Tax Exclusion | $15,000 | $15,000 |
| Annual Gift Tax Exclusion to a Non Citizen Spouse | $155,000 | $157,000 |
| Applicable Exclusion Amount: | ||
| Gift Tax | $11,400,000 | $11,580,000 |
| Estate Tax | $11,400,000 | $11,580,000 |
| Applicable Credit Amount: | ||
| Gift Tax Credit Equivalent | $4,505,800 | $4,577,800 |
| Estate Tax Credit Equivalent | $4,505,800 | $4,577,800 |
| Maximum Estate and Gift tax rate | 40% | 40% |
| GSTT Exclusion Amount | $11,400,000 | $11,580,000 |
| Estate Installments (Section 6166) | $ 1,550,000 | $ 1,570,000 |
| Special Use Valuation (Section 2032A) | $1,160,000 | $1,180,000 |
With these multiple changes in estate tax laws, it is very important that you consult a trusted and knowledgeable estate and tax professional to help you in your planning decisions.
