2015 Changes to Estate Taxes (and How it Affects Real Estate Appraisals)

IRS-Estate-Tax-Appraisal-San-DiegoAs 2014 comes to an end, it is important to look at what is changing to estate tax requirements in 2015. Here is a summary of estate tax laws, what is to come next year, and how these changes affect the valuation of your real estate.

What is an estate tax and how is it calculated?

According to the Internal Revenue Service, an estate tax is a tax on one’s right to transfer property at their death. This process consists of an accounting of everything one owns or has certain interests in at the date of death. The fair market value of these items is used, not necessarily what one pays for them or what their values were when they were acquired. The total of all of these items is your “Gross Estate,” which may include assets such as real estate. For real estate appraisal purposes, the effective date of the appraisal is typically the date of death, which means that the property is valued as of that particular date, not as of a current or future date.

Once the Gross Estate is accounted for, the next step is determining the “Taxable Estate,” which accounts for certain deductions made to the Gross Estate. From a real estate standpoint, deductions may include mortgages or property that passes to surviving spouses and qualified charities.  After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unified credit.

Changes to taxable estates in 2015

For most simple estates, estate tax return filings are not required. Simple estates include estates that generally have small amounts of easily valued assets with no special deductions or elections. A filing is required for estates with combined gross assets and prior taxable gifts exceeding a certain amount. In 2004, this amount was $1,500,000; however, it has been increasing steadily over the past 10 years, reaching $5,340,000 in 2014. Staring in 2015,  an estate tax return filing is required for estates exceeding $5,430,000, a $90,000 increase from 2014.

For more information Estate Taxes, speak to your estate tax professional or refer to this section of the IRS website.

How IRR San Diego can help

IRR San Diego is the leading expert on real estate appraisals for estate tax purposes. In fact, we have valued over $2 billion worth of real property for the IRS as an intended user of our appraisal reports. If you have any questions or needs regarding real estate appraisals for estate tax purposes, please contact us today at 858-259-4900 or sandiego@irr.com. Be sure to also check out our Estate Tax Appraisal page for more information on this specialty practice.


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