Despite being enacted into law almost a year ago, the Tax Cuts and Jobs Act of 2017 (“TCJA”) continues to challenge professional advisors working on client tax planning, especially as 2018 begins winding down. The sunset provisions in the TCJA relating to increased gift and estate tax exclusion amounts granted under the current law are just one area of uncertainty facing taxpayers. Luckily, the IRS recently released proposed regulations indicating that individual taxpayers who take advantage of the increased gift and estate tax exclusion amounts in effect from 2018 through 2025 by making large gifts will not be adversely impacted after 2025 when the exclusion reverts to pre-TCJA numbers.
The TCJA increased the exclusion amount from $5 million to $10 million per individual, subject to further adjustment for inflation. For the calendar year 2018, the inflation-adjusted exclusion amount for gift and estate tax purposes is $11.8 million per individual. However, in 2026, when certain provisions of the TCJA are scheduled to sunset, those exclusion amounts will revert to $5 million per individual, as then further adjusted for inflation. However, based on the proposed regulations mentioned above, if a taxpayer makes a gift or files an estate tax return between 2018 and 2025 using the higher exclusions amounts, the increased exclusion amount will be respected by the IRS after the law changes in 2026.
The U.S. Treasury is currently seeking public comment on the proposed regulations, which may change in the years ahead, but taxpayers and tax planners may follow the proposed regulations for the time being. For further discussion of tax planning and how the TCJA impacts your personal or business taxes, please contact one of our tax attorneys.