Estate and Gift Tax Changes

December 2019

The Department of Treasury has issued new inflationary amounts for those passing away in 2020, as listed below: 

  • Estates of decedents who die during 2020 have a basic exclusion amount of $11,580,000, up from a total of $11,400,000 for estates of decedents who died in 2019.
  • The generation-skipping transfer tax exemption for transfers made in 2020 will be $11,580,000, which is an increase from $11,400,000 in 2019.
  • The 2020 annual exclusion for present-interest gifts remains unchanged at $15,000.

 Other 2020 changes applicable to most taxpayers include the following: 

  • The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 in for 2020, up $200. For heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.
  • There is no limitation on itemized deductions for 2020. This remains the same as in 2019 and 2018, following passage of the Tax Cuts and Jobs Act in 2017.
  • For 2020, your total contributions to all of your individual traditional and Roth IRAs cannot be more than: $6,000 ($7,000 if you’re age 50 or older), or your taxable compensation for the year, if your compensation was less than this dollar limit. This is the same as 2019, and can be limited by your employment based retirement contributions. If you don’t maximize your IRA contributions limits, you may want to do so prior to the end of the year, though you typically have until you file your personal income tax return, or April 15, 2020, whichever is sooner, to contribute fully to your IRA.

The tax year 2020 adjustments generally are used on tax returns filed in 2021. The federal estate and gift tax limits, combined with the State of Tennessee’s lack of either a gift or estate tax, mean that most people will not pay estate or gift taxes, even if they have to file a return (gift tax returns are due when your income tax return is due and estate tax returns are due within 9 months of death unless an extension is filed.) However, there are certain assets which make better gifts than others from an income tax standpoint of your beneficiary. Certain tax planning will help you maximize your gifts and your intention for their use. Contact a member of the Estate Planning and Administration Practice Group for more information or for other estate planning needs.

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