The IRS is raising the federal estate tax exemption amount to $13.61million for 2024, one of the inflation adjustments for more than 60 tax provisions announced on Nov. 9. Kiplinger provided some important considerations for estate tax planning. 

Estates of decedents who die during 2024 have a basic exclusion amount of $13.61million, increased from $12.92 million for estates of decedents who died in 2023. Each spouse can take advantage of the exemption, which means the combined exemption amount is $27.22 million for married couples.

Only a small percentage of estates are subject to the federal estate tax due to the high estate tax exemption amount. Estates valued at more than the exemption amount are taxed at a high rate; those with values exceeding the exemption amount by more than $1 million ($14.61 million or $28.22 million combined for married couples) are taxed at 40 percent. 

Kiplinger provided a table of the rates that heirs can expect to pay based on the value of estates above the exclusion amount.

There is also some bad news for heirs of wealthy estates. The estate tax exemption increased from $5.49 million to $11.8 million 2018, as provided in the 2017 Tax Cuts and Jobs Act, but that provision will sunset, meaning that the base estate exemption amount is set to drop to $5 million (adjusted for inflation) in 2026.

Kiplinger also provided a table of the exemption amounts between 2017 and 2024.

Some states impose an estate tax of their own, and the exemption amounts aren’t typically as generous as the federal estate tax exemption, Kiplinger reported. Some states also impose an inheritance tax.

Other provisions affected by the inflation adjustments, including the tax rate schedules and other tax changes, are detailed in Revenue Procedure 2023-34.

To learn more about estate tax planning for high net worth individuals, attend the Foundation for Accounting Education’s Private Wealth Conference on Dec. 7.