What's New for 2016 for Federal and State Estate, Inheritance, and Gift Tax Law
The parties are over. The decorations have been packed away. We are all back at work. And it's a new year. Here's a quick summary of the new gift, estate, and inheritance changes that came along in 2016.
1. The federal estate and gift tax exemption has been increased from $5,430,000 in 2015 to $5,450,000 in 2016. This number was set at $5,000,000 in 2012 by the American Taxpayers Relief Act, and indexed to inflation, so has increased each year since then. This higher federal exemption means that fewer people will be subject to the estate tax, since only estates with assets that exceed that exemption are required to file a federal estate tax return. (Surviving spouses of decedents with estates less than this exemption may still decide to file an estate tax return to request portability, which is the ability to use their deceased spouse's unused exemption at their own death, but they are not required to do so.) Click here to find out more about when an estate tax return does, or doesn't, need to be filed.
2. Several states have increased their state estate tax exemptions, either because they were already indexed for inflation or because they changed their state laws, either way this means that fewer residents of those states will be subject to estate tax.
- Delaware and Hawaii already match the federal exemption and allow the surviving spouse to make sure the deceased spouse's unused exemption, just like the feds do.
- Rhode Island's exemption will be indexed for inflation ($1.5 million for 2015).
- Washington state's exemption will be indexed for inflation ($2.054 million for 2015).
- The District of Columbia is increasing it's exemption from $1 million to $2 million, then will match the federal estate tax exemption when the district meets certain revenue targets.
- Maine increased its exemption to $5.45 million (from $2 million) so that it is tracking the federal estate tax exemption.
- Tennessee has repealed it's estate tax as of 2016.
- Connecticut has an exemption of $2 million, but has added a new $20 million tax cap.
- Maryland has increased it's estate tax exemption to $2 million from $1.5 million.
- New York is increasing it's estate tax exemption in a series of steps: from April 1, 2015 to March 31, 2016 the cap is $3.125 million; then it goes up to $4,187,500.
- Minnesota increased it's exemption to $1.6 million (from $1.4 million) and is set to stay at $2 million in 2018.