The US Internal Revenue Service ("IRS") issued final regulations that ensure US citizens and domiciliaries who make gifts of up to their available transfer tax exclusion amount ($11.58 million in 2020) between 2018 and 2025 will receive the full benefit of the gift and estate tax exemption without risk of “clawback” if the exclusion amount is lowered by future legislation. This guidance is a relief for many individual taxpayers contemplating the use of the increased exclusion amount, although the US estate and gift tax landscape remains subject to change due to potential political developments over the coming years.

Background – 2018 US Tax Changes

The Tax Cuts and Jobs Act ("TCJA") increased the baseline for gift and estate tax exclusion amounts from $5 million to $10 million, which is adjusted annually for inflation effective January 1, 2017. The inflation-adjusted exclusion amount was $11.4 million in 2019 and will be $11.58 million in 2020. This exemption allows taxpayers to transfer up to this amount (or double the amount for a married couple) during life, or at death, without triggering gift tax or estate tax.

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