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Tax Reform Series: New Federal Gift and Estate Exemption


The December 22 Tax Cuts and Jobs Act contained major tax changes and reform affecting both businesses and individuals. 

The following is a summary of changes regarding the new federal gift and estate exemption. For Berntson Porter’s White Paper on the full impact of the new tax legislation, click here.

The Tax Cuts and Jobs Act doubled the federal estate and gift tax exemption for 2018-2025. The exemption, previously $5M per person indexed for inflation, was increased to $10M (also indexed for inflation). For 2018, the exemption is approximately $11.2M per person. However, the increase is temporary and on January 1, 2026, the exemption amount will return to $5M per person.

The stepped-up cost basis on property transferred at death still remains. The new law also maintains portability of the federal exemption, which is the ability of a surviving spouse to use a deceased spouse’s unused exemption. Finally, the top federal tax rate remains at 40 percent for estates and gifts over the exemption amount.

For 2018, the annual exclusion gift amount was increased from $14,000 per person to $15,000.

While the federal exemption amount has increased dramatically, the new law does not affect the Washington State estate tax. In 2018, the Washington estate tax exemption is $2,193,000. Washington estates larger than the exemption amount are taxed at rates starting at 10 percent and going as high as 20 percent.

Changes in the law always signal a good time to review your estate planning documents to ensure compliance with any legal changes and to avoid any unexpected outcomes. The increased federal exemption also requires planning and discussion for individuals who wish to take advantage of new lifetime gifting opportunities.

Your team at Berntson Porter looks forward to working with you on this historic change to our tax system. If you have any questions, please contact your tax professional at Berntson Porter & Company, PLLC at 425-454-7990.