Last month the Internal Revenue Service issued a proposed regulation addressing large gifts made prior to 2026. The basic exclusion amount for estate or gift tax for the year 2017 was $5,490,000.00. The 2017 Tax Cuts and Jobs Act increased the basic exclusion amount from 5 million to 10 million for tax years 2018 through 2025 with both dollar amounts adjusted for inflation. For the year 2018 the basic exclusion amount adjusted for inflation is $11,180,000.00 million. For 2019 the basic exclusion amount adjusted for inflation is $11,400,000.00. Under the 2017 Tax Cuts and Jobs Act in the year 2026, the basic exclusion amount will go back to the 2017 level adjusted for inflation, which is $5,490,000.00.
The new proposed regulation provides that individuals utilizing the increased gift and estate tax exclusion amounts for the years of 2018 through 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. The proposed regulation provides that individuals making large gifts between 2018 and 2025 can do so without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025. There is a question being raised by many commentators as to whether a proposed regulation can be binding on future law to make the pre-2026 gifts completely safe.
If you have additional questions concerning the tax regulations guidelines on large gifts or have other business tax questions, please contact our offices at 515-225-1100.