Spouses of recently deceased taxpayers are getting a break from the Internal Revenue Service (IRS). 

The IRS has announced it is extending the deadline for filing estate tax returns which include portability of the deceased individual’s estate tax exclusion. The surviving spouse now has up to five years to file the return. The deadline, which was originally 15 months and was changed to two years in 2017, was extended to five years because spouses and families were unable to file the proper return in time to take advantage of the portability option. 

Portability of the lifetime estate tax exemption can provide surviving spouses and their families significant tax savings. Surviving partners inherit all or part of the deceased spouse’s estate tax free and can also use any unused portion of the deceased’s estate tax exemption. For 2022, this exemption is set at $12.06 million per person. This means a surviving spouse could potentially shelter up to $24.12 million from federal estate tax (which ranges from 18% to 40% on a sliding scale) upon their own death.

It is important to remember that some states have their own estate tax and that state exemptions vary widely from the federal lifetime exemption. Also, the present federal lifetime estate tax exemption levels are scheduled to “sunset” in 2026 and revert to the pre-2018 level of $5 million per person. 

For more information on this or other tax issues, please contact Gray, Gray & Gray at (781) 407-0300.