Don't Mess With Taxes

Last month, the Internal Revenue Service issued its annual inflation adjustments for myriad tax provisions.

The new numbers were released before the Nov. 5, so there was a bit of concern that these figures could dramatically change after 2025.

The trepidation was based on the expiration at the end of next year of mostly individual tax breaks in the Tax Cuts and Jobs Act (TCJA) of 2017, the signature tax law in Donald J. Trump’s first term.

Now, with Trump returning to the Oval Office in January, along with Republican majorities in the House and Senate, there’s a bit more tax certainty, at least as far as TCJA provisions.

Historic protection from tax: That’s a relief to the wealthy donors who supported Trump’s presidential campaigns, especially when it comes to the estate tax. The GOP in general detests this levy, which they dubbed the death tax.

With the TCJA, the estate tax exemption is at a historic high. IRS inflation adjustments will bump it from $13.61 million per person ($27.22 million for married couples who file joint tax returns) this year to $13.99 million per person ($27.98 million for a married joint filers) in 2025.

Exemption increases are likely to continue as long as Republicans are in control in Washington, D.C.

Some in the party are even speculating about the possible demise of the death tax, as was proposed in the TCJA’s original version.

Estate tax history: Federal estate taxes were first collected in 1916. I'm sure complaints about the tax started that year.

The estate tax actually was eliminated for one year for those who died in 2010 due to Congressional inaction. It was resurrected in 2011 with an exemption of $5 million, adjusted annually for inflation, until the major TCJA estate tax changes.

But until any change happens, individuals with large, potentially taxable estates still need to do some tax planning. This weekend’s Saturday Shout Out selections offer advice in this area.

Estate tax planning tips: Let’s start with the basics.

The Internal Revenue Service has a web page dedicated to estate tax. At its most basic, an estate tax is a tax on your right to transfer property at your death, says the IRS. It consists of everything you own or have certain interests in at the date of death.

IRS.gov also has more at its frequently asked questions on estate taxes page, and information for executors.

We get another take on federal estate taxes from the private sector.

Devin Hecht, attorney and Wealth Transition Services Practice Leader at Eide Bailly, provides some foundational answers to Fundamental Questions About Estate Planning.

Estate planning attorney Martin Shenkman tells us in his Forbes article that while Trump’s re-election makes it unlikely that harsher estate taxes will be imposed on the wealthy in the next four years, Yes, Estate Planning Is Still Important.

State estate tax implications: Then there are the state estate, and inheritance, tax considerations. Not only do a handful of states take a tax bite from estates and/or heirs, they typically have a lower exemption level than Uncle Sam.

The Tax Policy Center’s Briefing Book provides a primer in How do state and local estate and inheritance taxes work?

And the Tax Foundation gets us up to date on Estate and Inheritance Taxes by State, 2024. The tax policy nonprofit's map below gives you a visual preview.

Only the wealthy: I realize that most of us won’t ever have to worry about the estate tax.

But just in case you happen to hit the lottery (another taxable event, by the way) or have a wealthy, and generous, relative or friend who likes you more than you realized, it’s better to be prepared.

Advertisements

🌟 Search Amazon Luxury Beauty Products 🌟
The text link above goes to affiliate ads. If you click through and then buy a product, I receive a commission.