In recent days, House and Senate Republicans have released proposed bills that would make changes to the gift tax, estate tax, and generation-skipping transfer (“GST”) tax. First, both the House bill and the Senate bill propose to increase the gift, estate, and GST tax exemption. Under current law, the gift, estate, and GST tax exemption is $5 million per person, indexed for inflation for years after 2011. The exemption is scheduled to increase from $5.49 million per person this year to $5.6 million on January 1, 2018. Under both the House bill and the Senate bill, the exemption would increase to $10 million per person, indexed for inflation for years after 2011 (i.e., $11.2 million for 2018, or $22.4 million for 2018 for a married couple). Under the House bill, effective January 1, 2025, the estate and GST taxes would be repealed and the gift tax would be retained, but the gift tax rate would be reduced from 40% to 35%. The Senate bill retains the estate, gift, and GST taxes at the current 40% tax rate. Both bills would preserve the step-up in income tax basis for assets owned at death.
