News Oct 23, 2015 09:52 PM EDT

Estate and Gift Tax Limits for 2016 Now $5.45 Million per Individual, Says IRS

By Staff Writer

The Internal Revenue Service announced that the estate and gift tax exemption for 2016 is now $5.45 million per individual.

Accounting Web has reported that it means a person can leave up to $5.45 million to their heirs without paying any federal estate or gift tax. This is an increase from 2015's $5.43 million. Meanwhile, a married couple can be exempted from federal estate and gift taxes by leaving an inheritance of $10.9 million. The yearly gift exclusion is still $14,000.

According to the published report on Forbes, the inflation has affected the extremely rich who seeks to cut down their estate to remain under the threshold. In 2001, the threshold was $675,000. It went up to $1 million in 2003, and leaped to $3 million in 2008, until it reached $5 million in 2011. Meanwhile, the top federal estate tax rate is at 40 percent.

Think Advisor has reported that the IRS issued Wednesday its yearly inflation adjustments for more than 50 tax provisions for 2016, which are detailed in the IRS Revenue Procedure 2015-53. These adjustments are muted due to the tempered inflation rate experienced in 2015.

Democratic presidential candidate Senator Bernie Sanders seeks to have a "Responsible" estate tax that has a $3.5 million exemption and a 65% top estate tax rate. In the opposition, Republican candidates are dragging the party for repeal. The House voted in April to take out the estate tax 240-179. Seven Democrats joined the vote. The repeal bill, S. 860, may be voted on by the Senate, but the chance for a real repeal would only happen after the 2017 Presidential elections. For now, there is an action to lower the state estate and inheritance tax levies and eight states are supporting the changes for next year.

The federal gift tax is connected to the estate tax, which means the inflation indexing allows the wealthy to take advantage of tax-free lifetime giving as well.

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