Looking into the Crystal Ball – the Bloomberg BNA Inflation Projections for 2016 Estates, Gifts, Trusts, and Exempt Organizations

For those of you who want to get ahead of the planning curve for next year, Bloomberg BNA has pulled out the crystal ball and projected the inflation-adjusted amounts for income, estate, and gift tax thresholds and allowances, and exempt organization thresholds and penalties, for 2016.  The crystal ball uses a derivative of the formula in §1(f)(3) and data from the Consumer Price Index.  These projected inflation adjustments are designed to give tax preparers and advisers the opportunity to initiate tax preparation, year-end estimation, and tax planning as soon as possible.

These figures are adjusted for inflation annually. The full set of predictions can be found here. The IRS typically does not release the annual inflation adjustments until late October.

Income Tax of Trusts and Estates 

For 2016, the taxable income thresholds on trusts and estates under §1(e) should be as follows:

If taxable income is: 


  • Alternative minimum tax exemption amount for estates and trusts (§55(d)(1)(D)): $23,900
  • Phase-out of AMT exemption amounts: estates and trusts (§55(d)(3)(C)): $79,850
    • Threshold: $79,850
    • Completed phaseout: $175,450

Estate and Gift Tax

For decedents dying and gifts and generation-skipping transfers made in 2016, the basic exclusion amount, for purposes of determining the §2010(c) unified credit against estate tax, is $5,450,000.

The §2503(b) annual gift tax exclusion for gifts of current interest in property made in 2016 should remain the same at $14,000 per donee.

For gifts of current interest in property made to a non-citizen spouse in 2016, the annual gift tax exclusion under §2523(i)(2) should increase to $148,000.

Additionally, donees of gifts from certain foreign persons may be required to report these gifts under §6039F if the aggregate value of the gifts received in 2016 should exceed $15,671.

For estates of decedents dying in 2016, it is projected that the special use valuation method under §2032A for qualified property should not exceed $1,110,000.

For estates of decedents dying in 2016 extending payment of estate tax under §6166, the portion of the deferred estate tax subject to the two percent interest rate under §6601(j) should be $1,480,000.


For individuals losing U.S. citizenship in 2016, it is projected that an average annual net income tax of more than $161,000 for the five previous tax years is a covered expatriate for purposes of §877A(g)(1).

The amount that would be includible in the gross income of a covered expatriate under §877A(a)(1) should be reduced (but not below zero) by $693,000, for tax years beginning in 2016.

Exempt Organizations

For the §6033(e)(3) reporting exception for certain exempt organizations with nondeductible lobbying expenditures, the annual per person, family, or entity dues threshold should be $112 or less in 2016.

For §501(c)(5) agricultural and horticultural organizations, the §512(d)(1) limitation for exemption of annual dues required to be paid by a member should be $161 in 2016.

The unrelated business income of certain exempt organizations under §513(h)(2) in 2016 should not include a low cost article of $10.60 or less.

For organizations receiving fully-deductible charitable contributions under §170 where the donor received insubstantial benefits in return, the inflation-adjusted guidelines of Rev. Proc. 90-12, 1990-1 C.B. 471, §3 should be $10.60, $53 and $106 in 2016.

Failure to File Certain Information Returns, Registration Statements, Etc.

The penalties under §6652(c) for certain exempt organizations and trusts failing to file returns, disclosures, etc., which are required to be filed in calendar year 2016, should be:

(1) Annual returns under §6033(a)(1) or §6012(a)(6)


(2) Returns under §6034 or §6043(b)


 (3) Disclosure Under §6033(a)(2)


So now you can either wait until the IRS announces the adjusted amounts or start getting ready for your end of the year planning.