The Transitory Nature of the Estate Tax Exemption Amount

The wealthy rejoiced when the Tax Cuts and Jobs Acts (TCJA) increased the exemption to $11.18 million, and married couples have the added benefit of enjoying double this amount as well as exemptions being portable. But these increases are not permanent, meaning they will revert back to their previous amount (adjusted for inflation) in 2026.

There was included suggestions within the TCJA that Congress could make the adjustments “permanent,” but in legislation there is no such thing –  a willing Congress and President could simply pass another act that nulls it.

Elizabeth Warren has been making some noise about becoming a possible presidential candidate for the 2020 election. Among her proposed legislation is reverting the estate tax exemption to 2009 numbers – $3.5 million for an individual and $7 million for couples –  and increasing what the taxable estate would be taxed at to 55%.

Warren’s bill also includes progressive, marginal estate tax rates with higher thresholds: 60 percent on anything over $10 million for an individual or $20 million for a couple and then 65 percent on anything over $50 million for an individual or $100 million for a couple. For estates worth more than $1 billion, all of those rates would be increased 10 percent across the board to 65 percent, 70 percent, and 75 percent, respectively.

See Charles Rubin, The Transitory Nature of the Estate Tax Exemption Amount, Rubin on Tax, September 28, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.