The
Internal Revenue Service has released the official inflation adjustments that
will affect 2015 federal reporting for estate taxes, gift taxes,
generation-skipping transfer taxes, and estate and trust income taxes.
2015 Federal
Estate Tax Exemption
In
2015 the estate tax exemption will be $5,430,000. This is an increase of $90,000 above the 2014
exemption.
What
this means is that when the value of the gross estate of a person who dies in
2015 exceeds $5,430,000, the estate will be required to file a federal estate
tax return (IRS Form 706). Form 706
is due within nine months of the deceased person’s date of death.
The maximum federal
estate tax rate remains unchanged at 40%.
2015 Federal Lifetime Gift Tax Exemption
In 2015 the lifetime gift
tax exemption will
also be $5,430,000. This is an increase
of $90,000 above the 2014 exemption.
What
this means is that if a person makes any taxable gifts in 2015 (in general a
taxable gift is one that exceeds the annual gift tax exclusion – see more on
that below), then they will need to file a federal gift tax return (IRS Form
709). For taxable gifts made in 2015, Form
709 is due on or before April 15, 2016.
The maximum federal gift
tax rate remains unchanged at 40%.
2015 Federal Generation-Skipping Transfer Tax Exemption
In 2015 the exemption
from generation-skipping transfer taxes (GSTT) will also be
$5,430,000. This is an increase of
$90,000 above the 2014 exemption.
What
this means is that if a person makes any transfers that are subject to the GSTT
in 2015, then they will need to file a federal gift tax return (Form 709). For generation-skipping transfers made
during 2015, Form 709 is due on or before April 15, 2016.
Note that if the
generation-skipping transfer does not exceed $5,430,000, then no GSTT will be
due; instead, the transferor’s GSTT exemption will be reduced by the amount of
the transfer.
For example, if Bob has
not made any prior generation-skipping transfers and makes one of $500,000 in
2015, then his GSTT exemption will be reduced to $4,930,000 ($5,430,000 GSTT exemption
- $500,000 generation-skipping transfer made in 2015 = $4,930,000 GSTT exemption
remaining).
The maximum federal GSTT rate
remains unchanged at 40%.
2015 Annual Gift Tax Exclusion
In 2015 the annual gift
tax exclusion will
be $14,000. This is the same as the 2014
exclusion.
What
this means is that if a person makes any gifts to the same person that exceed
$14,000 in 2015, then they will need to file a federal gift tax return (Form
709). For taxable gifts made in 2015, Form
709 is due on or before April 15, 2016.
Note that if the taxable
gift does not exceed $5,430,000, then no gift tax will be due; instead, the
lifetime gift tax exemption of the person who made the gift will be reduced by
the amount of the taxable gift.
For example, if Bob has
not made any taxable gifts in prior years and makes a gift of $500,000 to his
daughter in 2015, then Bob’s lifetime gift tax exemption will be reduced to
$4,944,000 ($500,000 gift - $14,000 annual exclusion = $486,000 taxable gift;
$5,430,000 lifetime gift tax exemption - $486,000 taxable gift made in 2015 =
$4,944,000 lifetime gift tax exemption remaining).
As mentioned above, the
maximum federal gift tax rate remains unchanged at 40%.
2015 Estate and Trust Income Tax Brackets
Finally, estates and
trusts will be subject to the following income tax brackets in 2015:
If Taxable Income Is: The
Tax Is:
Not over $2,500 15% of the
taxable income
Over $2,500 but $375 plus 25%
of
not over $5,900 the excess
over $2,500
Over $5,900 but $1,225 plus
28% of
not over $9,050 the excess
over $5,900
Over $9,050 but $2,107 plus
33% of
not over $12,300 the excess over
$9,050
Over $12,300 $3,179.50
plus 39.6% of
the
excess over $12,300
As you can see, an income
of only $12,300 inside a trust could be taxed at a marginal rate of 39.6%. In
addition, many trusts paying at the top bracket are also subject to the 3.8%
net investment income tax, making the top marginal rate 43.4%. Many states also
impose an income tax on trusts. So, depending on which state the trust pays income
taxes, the marginal income tax rate could be over 50% for trusts earning just
$12,300.
What this means is that Trustees
should give careful consideration to the timing of income and deductions and
whether distributions of income to beneficiaries should be made to avoid paying
excessive trust income taxes. Any income tax planning, of course, has to be
balanced against a Trustee’s fiduciary duties to the trust.
To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax adviser based on the taxpayer’s particular circumstances.
No comments:
Post a Comment