With the presidential election just around the corner, taxpayers might be wise to use their 2020 $11.58 million gift and estate tax exemption before it is too late. The gift and estate tax exemption is the amount that each individual may use to transfer property either during their lifetime or at their death without incurring tax. The amount is indexed for inflation and temporarily was doubled as part of the Tax Cuts and Jobs Act of 2017 (TCJA), but it currently is scheduled to revert to the pre-TCJA indexed amount of approximately $5.8 million after 2025.
President Donald Trump has said that if reelected he would extend the higher exemption amount past its 2025 expiration date. Vice President Joe Biden has not addressed this specific issue on the campaign trail, but it is unlikely that he would support extending the higher exemption amount given his proposal to eliminate the tax benefit of a stepped-up basis for appreciated property transferred at death. However, the economic downturn and increasing deficits caused by the COVID-19 pandemic could make increases in the estate tax an attractive option for enhancing revenue regardless of who wins the election.
Given the uncertainties, individuals should consider acting now to take advantage of the higher estate and gift tax exemption.