IRS Announced Gift and Estate Tax Exemption Amounts for 2016

The IRS recently announced the inflation adjusted figures for gift and estate tax exemption amounts for 2016 as well as other related tax numbers. End of year tax planning is a good time to review your overall estate and income tax plan to make certain you are on the right track. Whether you are deferring income, offsetting capital gains, taking tax deductions, or planning to reduce your overall estate tax burden, we can help.

The IRS has announced that the basic estate tax exclusion amount for the estates of decedents dying during calendar year 2016 will be $5.45 million, up from $5.43 million for calendar year 2015. The increase in the estate tax exclusion means that the lifetime tax exclusion for gifts should also rise to $5.45 million, as will the generation-skipping transfer tax exemption. The annual gift tax exclusion will remain at $14,000 for 2016.

Married Individuals Filing Joint Returns and Surviving

Spouses
If Taxable Income Is: The Tax Is:
Not over $18,550 10% of the taxable income
Over $18,550 but not over $75,300 $1,855 plus 15% of the excess over $18,550
Over $75,300 but not over $151,900 $10,367.50 plus 25% of the excess over $75,300
Over $151,900 but not over $231,450 $29,517.50 plus 28% of the excess over $151,900
Over $231,450 but not over $413,350 $51,791.50 plus 33% of the excess over $231,450
Over $413,350 but not over $466,950 $111,818.50 plus 35% of the excess over $413,350
Over $466,950 $130,578.50 plus 39.6% of the excess over $466,950
Unmarried Individuals (other than Surviving Spouses and Heads of Households)
If Taxable Income Is: The Tax Is:
Not over $9,275 10% of the taxable income
Over $9,275 but not over $37,650 $927.50 plus 15% of the excess over $9,275
Over $37,650 but not over $91,150 $5,183.75 plus 25% of the excess over $37,650
Over $91,150 but not over $190,150 $18,558.75 plus 28% of the excess over $91,150
Over $190,150 but not over $413,350 $46,278.75 plus 33% of the excess over $190,150
Over $413,350 not over $415,050 $119,934.75 plus 35% of the excess over $413,350
Over $415,050 $120,529.75 plus 39.6% of the excess over $415,050

For taxable years beginning in 2016, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,050.

For taxable years beginning in 2016, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $13,460.

Eligible Long-Term Care Premiums. For taxable years beginning in 2016, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care,” are as follows:

Attained Age Before the Close of the Taxable Year Limitation on Premiums
40 or less $390
More than 40 but not more than 50 $730
More than 50 but not more than 60 $1,460
More than 60 but not more than 70 $3,900
More than 70 $4,870