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Common Estate and Gift Tax Questions


Gift taxes apply to transfers of property, money, and assets that are made by a person during his or her lifetime. Estate taxes, on the other hand, apply to large inheritances left to an heir upon a person’s death. The overhaul to the tax code that took place in 2017 made some significant changes to how these taxes are calculated, so if you have questions or concerns about the consequences of these changes on your own tax situation, please call a Florida tax & IRS law attorney who can advise you.

How are Estate Taxes Calculated?

Estate taxes are taxes on a person’s right to transfer property upon his or her death. The total of a person’s property is known as a gross estate and consists of assets like cash and securities, real estate, insurance, trusts, and business interests. Once a person’s gross estate has been accounted for, certain deductions will be assessed, including mortgages and other debts, the expenses of estate administration, and any property that passes to a spouse or qualified charity. After calculating this net amount, the value of lifetime taxable gifts will be added to the tax, which will then be reduced by the available unified credit.

Most simple estates don’t require the filing of an estate tax return. A filing is required, however, for estates with combined gross assets and taxable gifts exceeding $11,400,000 in 2019, $11,580,000 in 2020, and $11,700,000 in 2021.

How are Gift Taxes Calculated?

Unlike estate taxes, the gift tax applies to the transfer of property, which includes money and the use of income from property), by one person to another during his or her lifetime. This is true regardless of whether a donor intended the transfer to be a gift. Gift taxes are also calculated by applying a unified rate schedule to a person’s cumulative taxable gifts and taxable estate. Any tax due is then determined by applying a credit that is based on the basic exclusion amount (BEA).

How Did the Tax Reform Law Affect Estate and Gift Taxes?

The tax reform law, enacted in 2017, doubled the BEA for tax years starting in 2018 and ending in 2025, making the BEA $11.18 million for 2018 and $11.4 million for 2019. Under the tax reform law, the increase is only temporary, which means that the BEA will revert to its pre-2018 levels of $5 million. The IRS later clarified that taxpayers who take advantage of the increased BEA by making gifts between 2018 and 2025 won’t lose the tax benefit of the higher exclusion level once the amount is lowered in 2026.

Call Today with Your Estate and Gift Tax-Related Questions

To speak with an experienced tax law attorney about the repercussions of the tax reform law on your own gift and estate taxes, please call Ronald Cutler, P.A. today. You can schedule a one-on-one consultation by calling a member of our legal team at 386-490-9949 or by sending us an online message.