Critter Corner: Higher Gift Tax and Estate Tax Limits For 2020

Dear Angel,

We have a few more days left in the year to make gifts but we may hold off until next year. I heard the gift tax and estate tax limits went up for 2020. What will they be for the coming year? Will they stay that way with the election on the horizon?

Thanks for your help!

Estee Tacks

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Dear Estee,

The Internal Revenue Service (IRS) announced last month the official estate and gift tax limits for 2020, as follows:

Estate and Gift Tax Exemption

In 2020, the federal lifetime estate and gift tax exemption will be $11.58 million per individual, up from $11.4 million in 2019. That means an individual can leave upon death (and/or gift during life) $11.58 million to heirs and pay no federal estate or gift tax, while a married couple leave or gift double that amount — $23.16 million.

These huge gift and estate tax exemptions have prompted many super wealthy folks to make big lifetime gifts, in case the exemption goes down again. With the 2020 elections looming, Republicans hope to make the doubled exemption permanent, while Democratic presidential hopefuls say they’ll bring it back to its 2009 level of $3.5 million, with a graduated tax rate up to 77%, compared to today’s flat 40% rate.

Annual Gift Exclusion

The annual gift exclusion amount remains the same at $15,000. You can give away $15,000 to as many individuals as you’d like. A husband and wife can each make $15,000 gifts, doubling the impact. Separately, you can make unlimited direct payments for medical and tuition expenses. These annual amounts are simply amounts that if you go over, you have to report the difference to the IRS on an informational gift tax return.

Gifts over $15,000 per person, per year, are completely legal; they simply have to be reported to the IRS and use up part of the giver’s lifetime gift tax exemption, which is meaningless for most people because the lifetime exemption is $11.58 million per person ($23.16 million per couple), as described above, which means that gift and estate tax never gets paid by 99.8% of the population.

Remember, gift giving can be a risky venture for people who may need Medicaid coverage within five years. For more information about gifting and Medicaid eligibility, read “Medicaid: The Perils of Gifting FAQ” on our website.

Virginia has no gift and estate tax, but Maryland does. DC has estate tax.

Hope this is helpful,

Angel