Current TCJA Gift and Estate Tax Laws
Under the TCJA law, effective January 1, 2018, each person is granted an exemption of $11.18 million from payment of U.S. gift tax and, to the extent not applied toward gift tax, U.S. estate tax. This exemption effectively shelters the taxpayer up to an aggregate amount of $11.18 million in 2018, twice the amount that was applicable in the year before.
For each year after 2018, this exemption amount will be indexed to inflation. For tax year 2019, the exemption amount is now $11.4 million. For married couples, exemptions can be aggregated. In 2019, this amount is $22.8 million. The annual gift exclusion amount is set at $15,000 and is not adjusted annually for inflation.
Taxable transfers of any amount that exceed the exemption amount then in effect are subject to a transfer tax of 40 percent under the TCJA. This is the same tax rate as was in effect prior to the TCJA.
However, absent additional legislation, this new exemption level will terminate on December 31, 2025, and revert thereafter to the unified credit amount in effect prior to the enactment of the TCJA, or $5 million indexed for inflation after 2011.
Given the doubling of the gift and estate tax exemptions, as well as the lower income tax rate brackets, some legislators have criticized the taxpayer-friendly changes to the Code.
The following sections highlight the current proposals by members of Congress. Many of these proposals attempt to redirect tax savings to the middle class, infrastructure projects, and educational programs at the expense of high-net-worth taxpayers.