June 14, 2024
The Tax Cuts and Jobs Act of 2017 more than doubled the lifetime estate tax exemption, increasing from $5.6 million for individuals and $11.8 million for married couples to an inflation-adjusted $13.61 million for individuals and $27.22 million for married couples in 2024.
Unless Congress acts, this legislation will expire January 1, 2026, and the exemptions will revert or “sun- set” to the 2017 amounts adjusted for inflation. This will be approximately $7 million for individuals and
$14 million for married couples.
With the boom in the auto industry over the last few years, more dealers will be facing a taxable estate after the exemption sunsets. However, there is an opportunity to utilize the higher exemption amounts through gifting before 2026. Appreciating assets subject to valuation discounts (such as a minority interest in an automobile dealership) are ideal for gifting because future appreciation escapes the estate tax, and valuation discounts allow the assets to be valued at a lower amount for gift tax purposes. It is worth noting that these types of gifts are subject to more IRS scrutiny so using a business appraiser who frequently values auto dealerships to provide a business valuation is highly recommended.
When considering which assets to gift, if any, remember that you will lose control over the assets and the income they generate once you transfer them to someone else. Assess your cash flow needs before making any transfers, but don't wait too long to act. Experts predict there will be an uptick in gift tax return filings leading up to the sunset date. Start working now with your estate planning advisors and CPA to develop the right plan for you and your family.
Find out more about Larson & Company's full range of tax, audit, and accounting services.
Source: AutoCPAGroup, @2024 Headlights