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Inflation-Adjusted Federal Estate and Gift Tax Exclusion Amounts For 2017

The IRS has announced that the 2017 federal estate and gift tax exclusion amount has increased by $40,000 from last year’s $5.45 million to $5.49 million. That means that in 2017, a person can die having transferred during life or at death, in the aggregate, $5.49 million in assets and no federal estate tax will be owed. A married couple will be able to pass $10.98 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 – remember that in 2001 the exemption was $675,000, and in 2005 it was $1 million. The federal estate tax rate is 40% for assets in excess of the exclusion amount.

The so-called “annual exclusion” amount for gifts remains at $14,000 for 2017. 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 $149,000 of gifts to a spouse who is not a U.S. citizen is not considered a taxable gift. This is up from $148,000 in 2016.

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