Taxation

2017 Estate and Gift Tax Update – A Quick Snapshot

Every year I like to post a quick Estate and Gift Tax update for you to reference throughout the year. This way, if you’re anything like me, you won’t find yourself constantly “Googling” different estate and gift tax thresholds at the beginning of the year for a quick refresher on the updated thresholds. The purpose of this post is to provide a snapshot of some of the most common 2017 estate and gift tax thresholds, tax rates, exemptions, elections, etc. Feel free to use this how you see fit. Additionally, if you have any other commonly used 2017 estate and/or gift tax updates that I may have left off the list, please feel free to leave them in the comments.

Federal Gift Tax

  • Lifetime Exemption: $5,490,000
  • Annual Exclusion: $14,000
  • Gift-Splitting: Yes, if married and spouse consents (i.e., annual exclusion is $28,000 for married couples)
  • Rate: 40% on gifts above the lifetime exemption (plus the annual exclusion)

Federal Generation-Skipping Transfer Tax

  • Exemption: $5,490,000
  • Portability: No
  • Rate: 40% on generation-skipping transfers above the exemption

Federal Estate Tax

  • Exemption: $5,490,000 (exemption is decreased by lifetime gifts)
  • Portability: Yes (i.e., surviving spouse may elect to use deceased spouse’s unused exemption, in effect, giving married couples an exemption of $10,980,000)
  • Rate: 40% on the value of the estate above the exemption amount

Federal Income Tax for Trusts and Estates

  • Tax Brackets: see chart below
  • Tax Rates: see chart below
  • Net Investment Income Tax: A 3.8% surcharge tax on net investment income applies to trusts and estates that are above the $12,500 income threshold (i.e., the marginal tax rate on net investment income above that threshold is then 43.4%)
  • Distributable Net Income: Net income that is distributed to beneficiaries of a trust or estate is taxed at the beneficiaries’ level and not at the trust or estate’s level
Chart: Federal Income Taxation of Trusts and Estates
If Taxable Income is: The Tax is:
Not over $2,550 15% of the taxable income
Over $2,550 but not over $6,000 $382.50 plus 25% of the excess over $2,550
Over $6,000 but not over $9,150 $1,245.00 plus 28% of the excess over $6,000
Over $9,150 but not over $12,500 $2,127.00 plus 33% of the excess over $9,150
Over $12,500 $3,232.50 plus 39.6% of the excess over $12,500


State Taxes

Each State has its own set of rules when it comes to estate tax, gift tax, inheritance tax, and income taxation of trusts and estates. Be sure to check with a professional in your State for an update.

For a complete summary of all 2017 Federal tax-related inflation adjustments see Rev. Proc. 2016-55, available here: https://www.irs.gov/pub/irs-drop/rp-16-55.pdf.

I hope this helps!

-Matt

 

© 2016 Matthew D. Brehmer and Crummey Estate Plan.

2016 Estate and Gift Tax Update – A Quick Snapshot

Last year it dawned on me that a lot of us out there, including myself, find ourselves constantly “Googleing” different estate and gift tax thresholds throughout the beginning of the year for a quick refresher on the updated thresholds. The purpose of this post is to provide a snapshot of some of the most common 2016 estate and gift tax thresholds, tax rates, exemptions, elections, etc. Feel free to use this how you see fit. Additionally, if you have any other commonly used 2016 estate and/or gift tax updates that I may have left off the list, please feel free to leave them in the comments.

Federal Gift Tax

  • Lifetime Exemption: $5,450,000
  • Annual Exclusion: $14,000
  • Gift-Splitting: Yes, if married and spouse consents (i.e., annual exclusion is $28,000 for married couples)
  • Rate: 40% on gifts above the lifetime exemption (plus the annual exclusion)

Federal Generation-Skipping Transfer Tax

  • Exemption: $5,450,000
  • Portability: No
  • Rate: 40% on generation-skipping transfers above the exemption

Federal Estate Tax

  • Exemption: $5,450,000 (exemption is decreased by lifetime gifts)
  • Portability: Yes (i.e., surviving spouse may elect to use deceased spouse’s unused exemption, in effect, giving married couples an exemption of $10,900,000)
  • Rate: 40% on the value of the estate above the exemption amount

Federal Income Tax for Trusts and Estates

  • Tax Brackets: see chart below
  • Tax Rates: see chart below
  • Net Investment Income Tax: A 3.8% surcharge tax on net investment income applies to trusts and estates that are above the $12,300 income threshold (i.e., the marginal tax rate on net investment income above that threshold is then 43.4%)
  • Distributable Net Income: Net income that is distributed to beneficiaries of a trust or estate is taxed at the beneficiaries’ level and not at the trust or estate’s level
Chart: Federal Income Taxation of Trusts and Estates
If Taxable Income is: The Tax is:
Not over $2,550 15% of the taxable income
Over $2,550 but not over $5,950 $382.50 plus 25% of the excess over $2,550
Over $5,950 but not over $9,050 $1,232.50 plus 28% of the excess over $5,950
Over $9,050 but not over $12,400 $2,100.50 plus 33% of the excess over $9,050
Over $12,400 $3,206 plus 39.6% of the excess over $12,400

State Taxes

Each State has its own set of rules when it comes to estate tax, gift tax, inheritance tax, and income taxation of trusts and estates. Be sure to check with a professional in your State for an update.

For a complete summary of all 2016 Federal tax-related inflation adjustments see Rev. Proc. 2015-53, available here: https://www.irs.gov/pub/irs-drop/rp-15-53.pdf.

I hope this helps!

-Matt

 

© 2015 Matthew D. Brehmer and Crummey Estate Plan.

Making Sense of: Year End Tax Planning

There are many variables when planning for taxes, here are some tips! Remember every tax situation is different and you should contact us or your tax professional for more information.

  • Our first tip deals with income. If you are in a higher income tax bracket this year than you expect to be in next year, or vice versa, you can either defer or accelerate income into this year or next year to lower your overall tax rate.
  • If you are in the 15% tax rate or lower, you can recognize capital gains at a 0% tax rate.
  • Another way to offset your capital gains, if you have them, is to recognize capital losses to offset those capital gains at a 0% tax rate.

Every taxpayer is allowed to deduct either itemized deductions or the standard deduction, whichever is higher.

  • If your itemized deductions tend to be the same as your standard deduction each year, you may want to double up on your itemized deductions every other year. For example: Paying your real estate taxes for one year in January and then paying again in December of the same year to double up.
  • Double up on charitable contributions in one year; that way you can deduct your itemized deductions every other year and deduct your standard deduction in the remaining years.

I hope this helps!

-Matt

© 2015 Matthew D. Brehmer and Crummey Estate Plan.

 

2015 Estate and Gift Tax Update – A Quick Snapshot

It recently dawned on me that a lot of us out there, including myself, find ourselves constantly “Googleing” different estate and gift tax thresholds throughout the beginning of the year for a quick refresher on the updated thresholds. The purpose of this post is to provide a snapshot of some of the most common 2015 estate and gift tax thresholds, tax rates, exemptions, elections, etc. Feel free to use this how you see fit. Additionally, if you have any other commonly used 2015 estate and/or gift tax updates that I may have left off the list, feel free to leave them in the comments.

Federal Gift Tax

  • Lifetime Exemption: $5,430,000
  • Annual Exclusion: $14,000
  • Gift-Splitting: Yes, if married and spouse consents (i.e., annual exclusion is $28,000 for married couples)
  • Rate: 40% on gifts above the lifetime exemption (plus the annual exclusion)

Federal Generation-Skipping Transfer Tax

  • Exemption: $5,430,000
  • Portability: No
  • Rate: 40% on generation-skipping transfers above the exemption

Federal Estate Tax

  • Exemption: $5,430,000 (exemption is decreased by lifetime gifts)
  • Portability: Yes (i.e., surviving spouse may elect to use deceased spouse’s unused exemption, in effect, giving married couples an exemption of $10,860,000)
  • Rate: 40% on the value of the estate above the exemption amount

Federal Income Tax for Trusts and Estates

  • Tax Brackets: see chart below
  • Tax Rates: see chart below
  • Net Investment Income Tax: A 3.8% surcharge tax on net investment income applies to trusts and estates that are above the $12,300 income threshold (i.e., the marginal tax rate on net investment income above that threshold is then 43.4%)
  • Distributable Net Income: Net income that is distributed to beneficiaries of a trust or estate is taxed at the beneficiaries’ level and not at the trust or estate’s level

Chart: Federal Income Taxation of Trusts and Estates

If Taxable Income is: The Tax is:
Not over $2,500 15% of the taxable income
Over $2,500 but not over $5,900 $375 plus 25% of the excess over $2,500
Over $5,900 but not over $9,050 $1,225 plus 28% of the excess over $5,900
Over $9,050 but not over $12,300 $2,107 plus 33% of the excess over $9,050
Over $12,300 $3,179.50 plus 39.6% of the excess over $12,300

State Taxes

Each State has its own set of rules when it comes to estate tax, gift tax, inheritance tax, and income taxation of trusts and estates. Be sure to check with a professional in your State for an update.

For a complete summary of all 2015 Federal tax-related inflation adjustments see Rev. Proc. 2014-61, available here: http://www.irs.gov/pub/irs-drop/rp-14-61.pdf

I hope this helps!

-Matt

© 2015 Matthew D. Brehmer and Crummey Estate Plan.