Federal Estate Tax and Gift Tax Limits Announced For 2020

Updated: Apr 3

Grain harvest by Chesapeake Bay Program
Grain harvest by Chesapeake Bay Program

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In November 2019, the IRS announced the revised federal estate tax and gift tax limits for 2020. The federal estate tax limit rises from $11.4 million in 2019 to $11.58 million in 2020. The federal gift tax limit will remain at $15,000 in 2020. In Maryland, state estate tax limits will stay at $5 million.

Federal Estate Taxes

For 2020, the federal estate tax limit increases to $11.58 million for an individual and $23.16 million for a couple. A deceased person owes federal estate taxes on a taxable estate. The taxable estate is the gross estate minus allowable expenses and deductions. For more information see, Lynch, Goeringer, and Musser, Estate Planning for Maryland Farm Families: Updated for 2014 (FS-972, 2014).

For example, a farm couple has a taxable estate of $24 million and passes away in 2020. The couple’s heirs would be able to exempt up to $23.16 million from federal estate taxes and only owe federal estate taxes on $840,000. Since the federal estate tax rate is 40 percent, the heirs would owe $336,000 in federal estate taxes.

One last note on federal estate taxes: a surviving spouse has an unlimited marital deduction, and the surviving spouse can include the predeceasing spouse’s unused federal estate tax limit in their federal estate tax limit. This concept is known as portability, and more on it is here.

Federal Gift Tax Limit

Federal tax law allows each taxpayer to gift up to $15,000 to one individual without incurring federal gift taxes. The federal gift tax limit remains at $15,000 in 2020. This exemption is tied to inflation, but can only increase to the nearest $1,000 amount.