YOUR BUSINESS AUTHORITY
Springfield, MO
The upcoming sunset of the current lifetime gift and estate tax exemption amounts could increase the number of high net worth individuals impacted by the estate tax. Federal estate taxes are levied on estates with a fair market value exceeding the exemption amount set by the IRS. Absent new legislation, this basic exclusion amount is poised for a substantial reduction in 2026.
The Tax Cuts and Jobs Act, passed in 2017, increased the basic exclusion amount from $5.49 million to $11.18 million, indexed for inflation. This change is temporary, as these provisions of the TCJA are scheduled to expire on Dec. 31, 2025.
The 2024 basic exclusion amount is $13.61 million for individuals and $27.22 million for married couples. Unless further legislation is passed, the basic exclusion amount will revert on Jan. 1, 2026, to $5 million per individual, as adjusted for inflation.
Tax efficiency strategies
Given the uncertainty regarding which direction the basic exclusion amount will move in 2026, it is important to implement a proactive strategy now to maximize tax efficiency. Several strategies can be used to proactively reduce the value of your taxable estate, which can reduce your estate tax liability.
Financial planners, estate and tax specialists, investment managers and private bankers, alongside your estate planning attorney and accountant, can help you explore the variety of options available to you and assist with making educated decisions based on your goals and unique financial situation.
James Ballard is a private client adviser with Commerce Trust in Springfield. He can be reached at james.ballard@commercebank.com.
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