Throughout his presidential campaign, Donald Trump made promises to eliminate the estate tax from the federal tax code. This has left many wealthy Americans, as well as accountants and attorneys who serve them, with questions about how taxes on high-net-worth individuals might be impacted by a Trump presidency.
Very few Americans pay the estate tax. Anyone with an estate valued at less than $5.49 million, or $10.98 million for U.S. citizen married couples, is exempt. Last year, only 4,918 estates in the country were required to pay under the law. Whether or not the estate tax is repealed, attorneys whose practices focus on large estates anticipate having plenty of work to do under Trump.
Under Donald Trump’s tax plan, any property owned by the deceased that has appreciated would be taxed at the capital gains rate, with the first $5 million in gains exempt from tax. Trump has also proposed a $100,000 cap ($200,000 for joint returns) on itemized deductions, which could limit wealthy taxpayers’ ability to mitigate their tax liability through charitable donations.
Income tax rates could also significantly change under Trump. His plan would lower the top investment and business income tax rate for individuals to 33%–the same rate proposed in the tax plan put forward by House Republicans.
Trump has not completely addressed whether he plans to make changes to the gift tax. If it were repealed, wealthy Americans might move quickly to transfer assets to their children before it could be reinstated.
The concept of the estate tax has been evident in the tax code since 1916, save for 2010 when it briefly lapsed. While the current rate is considerably lower than it was prior to that year, its elimination would mean $240 billion in lost revenue for the federal government over the next decade, according to a report by the Tax Foundation.
Expert opinions differ on whether a repeal of the estate tax seems likely. It would be a major undertaking for legislators, and other tax reforms might take priority. But Republicans have expressed interest in repealing the estate tax for years, and now that they hold the House, Senate, and the presidency, they may seize the opportunity to do so.
Trust and Estates attorney Kerri Castellini commented, “With so many aspects of the federal tax code in question, some high-net-worth individuals may take a circumspect approach to planning in the coming year, putting off major decisions until the future becomes clearer.”