As 2014 comes to a close, we felt it was important to discuss the changing fiscal environment approaching in 2015, and how it would affect estate taxes and planning. As they regularly do, the IRS released Revenue Procedure 2014-61 just a few weeks ago, and it confirmed some pretty significant changes coming in the next fiscal year. Continuing with their yearly pattern of adjusting for inflation, some noticeable five-figure changes have been made to estate taxes, and we’ll outline them below.
Estate Tax Changes
The biggest changes seen occurred in three different categories, estate tax exemptions, estate tax exclusions, and estate tax brackets. Outlined below, are the changes to be expected in 2015.
Estate Tax Exemptions
The estate tax exemption was a strong $5,340,000 in 2014, adjusted from the prior year to do inflation. The trend of adjusting for inflation continues into 2015, and Rev. Proc. 2014-61 announced the newly adjusted exemption to be $5,430,000, a $90,000 increase from the prior year.
The top estate tax rate, however, will remain at 40%, the same figure as last year.
The generation-skipping transfer tax exemption, as seen the same increase from 2014’s $5,340,000 to $5,430,000. The top rate will similarly remain at 40%
The lifetime gift tax exemption also increase by the same exact margins as the previous two exemptions, and its top tax rate will also remain at 40%.
Estate Tax Exclusions
Estate tax exclusions saw fewer changes than the exemptions, but there is still one worth mentioning for the upcoming year. The annual gift tax exclusion for gifts to noncitizen spouses will increase from $145,000 in 2014, to $147,000 in 2015. As we discussed above, the top gift tax rate will remain at 40%.
For those wondering, the annual gift tax exclusion will remain at $14,000 in 2015, which is the same as 2014. While not a change, it is certainly still worth noting.
Estate Tax Brackets
Beyond covering changes to exclusions and exemptions, Revenue Procedure 2014-61 also provided information on the following income tax brackets for 2014.
|If the taxable income is…||your tax is…|
|Less than $2,500||15% of taxable income|
|More than $2,500 but less than $5,900||$375 + 25% of the surplus over $2,500|
|More than $5,900 but less than $9,050||$1,225 + 28% of the surplus over $5,900|
|More than $9,050 but less than $12,300||$2,107 + 33% of the surplus over $9,050|
|More than $12,300||$3,179.50 + 39.6% of the surplus over $12,300|
As 2014 comes to a close, we are excited and prepared to deal with changes that may occur in the 2015 fiscal year, and we wanted to take the time to thank you for your patronage and interest in our estate services, as well as wish you a Happy Holidays and a Happy New Year!