House Cancels Estate Tax Repeal, Extends Current Tax Rate
Last week, the House voted 225 to 220 to permanently extend the estate and gift tax in its current form. This means that the first $3.5 million of an individual’s gross estate – and the first $1 million of gifts made during an individual’s lifetime – would be exempt from tax. The highest rate applied to the taxable portion of an estate would remain at 45%.
At first blush, it appears that no decision has been made concerning the potential repeal of the step up in tax cost basis. However, we are continuing to monitor this matter and we will continue to update you as we receive more information.
You may be aware that the step up in tax cost basis currently minimizes the potential for capital gains taxes. This occurs whether or not an estate is subject to federal estate tax. Stocks and other appreciating assets can benefit from the step up in tax cost basis, with the exception of stocks and other assets inside of IRAs or similar qualified retirement accounts. As you can see, almost all estates benefit in some way from the step up in tax cost basis benefit the tax code bestows. Taking away the step up in tax cost basis could result in one of the largest tax increases in estate tax law history, and would likely affect a majority of all estates that have appreciated assets or property, no matter their size. Again, we will keep you apprised of any changes.
If you have any questions or concerns about the extension or about step up in tax cost basis, please contact estate planning attorney Linda Grear at 716-636-7600.