For the 2020 tax year, the U.S. Federal Estate Tax threshold is US $11.58 million (up from US $11.4 million in 2019) per individual, and US $23.16 million (up from US $22.8 million in 2019) for a married couple, provided that both spouses are U.S. citizens and the “marital deduction” has been elected on the death of the first spouse.
The Estate Tax exclusion threshold was doubled in the U.S. from the 2018 tax year onwards following the passing of the Tax Cuts and Jobs Act (TCJA) in December 2017, which increased the “Basic Exclusion Amount” in the Internal Revenue Code from US $5 million to US $10 million (as adjusted for inflation). It is important to note that the increased threshold only applies to the 2018 to 2025 U.S. tax years, and that from January 1, 2026 onwards, the exclusion is to revert to the pre-2018 threshold of US $5 million (single) and US $10 million (married couple), indexed for inflation .
If the gross value of an Estate exceeds the exclusion threshold, estate tax is payable on the excess, at rates of between 18% to 40% depending on which tier the taxable amount of the Estate falls into.
Our upcoming whitepaper International Estate Planning for U.S.-Australia cross-border clients which is due for publication in April 2020 provides an in-depth analysis of international estate planning issues.
If you have any questions, please contact:
Senior Tax Advisor
U.S. Australia Tax Desk