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2016 Projections – Inflation-Adjusted Federal Estate and Gift Tax Exclusions

Next year, the federal estate and tax exclusion amount is projected to rise to $5.45 million, up $20,000 from this year’s $5.43 million exclusion amount. That means that in 2016, a person can die having transferred during life or at death, in the aggregate, $5.45 million in assets and no federal estate tax will be owed. A married couple will be able to pass $10.9 million federal gift and estate-tax free, as long as they follow the rules that the Internal Revenue Service has laid out. The threshold has risen dramatically over the past fifteen years – it is almost hard to remember that in 2001 the exemption was $675,000, and in 2005 it was $1 million.

The so-called “annual exclusion” amount for gifts is expected to remain at $14,000 for 2016. This means that the first $14,000 of gifts to any individual in a given year are not considered “taxable gifts” and therefore do not reduce the federal estate and gift tax exclusion.

The first $148,000 of gifts to a spouse who is not a U.S. citizen is not considered a taxable gift. This is up from $147,000 in 2015.

The Massachusetts estate tax threshold remains at $1,000,000 and is not adjusted for inflation. Massachusetts does not impose a gift tax.

Below is a link to a helpful summary of projected 2016 tax brackets and other key figures published by Thomson Reuters.