The Internal Revenue Service announced at the end of October the official estate and gift tax limits for 2021: The estate and gift tax exemption is $11.7 million per individual, up from $11.58 million in 2020. That means an individual could leave $11.7 million to heirs and pay no federal estate or gift tax, while a married couple could shield $23.4 million. This assumes no changes will be made in 2021 to the existing tax structure.
But what if the election results remain as they currently stand and Joe Biden is elected president? Time will tell, but it could mean an end to the existing estate and gift tax exemption tax structure. President Trump’s tax overhaul when he was elected doubled the then-$5 million per person base level exemption amount to $10 million, from 2019 through year-end 2025, with a flat tax rate of 40%. (The $10 million is indexed for inflation; that accounts for the $11.7 million figure.) Republicans desire to make the doubled exemption amount permanent. Biden has proposed restoring estate and gift taxes to their 2009 level: $3.5 million per person for the estate tax, $1 million for the gift tax, and a top rate of 45%. We’ll see what happens.
By the way, the annual gift exclusion amount for 2021 stays the same at $15,000 according to the IRS announcement.