By: Norman C. Hulberg, MAI, Senior Managing Director, Valbridge Property Advisors | NorCal

The federal deficit more than tripled in the first 10 months of the fiscal year. Federal spending has soared after Congress approved trillions in economic relief. Someone has to pay for it all. Many of Valbridge’s clients are looking closely at gifting by year-end.

The Tax Cuts and Jobs Act of 2017 dramatically increased the unified federal gift and estate tax exemption.  In general, federal taxes have generally trended lower in recent years.  The estate tax exemption is $11.58 million (x2 for a married couple) for this year -with inflation adjustments scheduled for 2021-2025. Changes forthcoming could alter current exemptions.

Possible outcomes include:

  • Keep the existing favorable rates in place until at least 2024 (the next election)
  • End to portability. The “portability” rules provide for the transfer of a deceased spouse’s unused estate tax exemption to a surviving spouse.
  • Go back to what we had in 2009: $3.5M exemption and 45% max tax rate
  • Go further back to 2000 with the $675,000 exemption and 55% max tax rate, and no portable exemption privilege.

An avalanche of possible tax increases is in the news lately. In California, with its  existing 13.3% rate, three new proposed surcharges on the state’s highest earners add 3.5% more at the top rate. Nationally, there is mounting support to tax long-term capital gains at the ordinary top Federal income-tax rate for 39.6%. In addition, the step-up in basis for capital-gains taxation at death would be eliminated.

For Valbridge’s clients considering gifting, we encourage them to speak to their tax advisor very soon.  Don’t delay as most are quite busy.

Valbridge Property Advisors is uniquely qualified to help clients with appraisals for gifting. In addition to providing appraisals for an entire property, IRS tax policies allow us to value a fractional interest at lower than its pro rata value, discounting for lack of marketability and lack of control. This means the giftor can pay a lower tax or pass a larger portion of property ownership on to the next generation. Contact your local Valbridge office today to ensure all your tax and estate planning valuation needs are expertly met.

Valbridge is the nation’s largest independent appraisal firm, with 78 offices covering the US. In addition to valuing real estate, we also value businesses.

On September 3rd, Norman Hulberg, MAI, Senior Managing Director, Valbridge Property Advisors | NorCal, will be speaking on a Zoom panel for the Appraisal Institute regarding doing appraisals for IRS purposes. While the primary audience is appraisers, others are welcome to join. For more information and to register for the event, click here.