The IRS has issued a new revenue procedure extending the Deceased Spousal Unused Exclusion (DSUE), or portability option. Surviving spouses can now make a late portability election to their deceased spouse’s unused estate tax exemption up to 5 years after death instead of 2.
Since 2011, the surviving US citizen or resident spouse of a deceased spouse can take advantage of the DSUE, or “portability,” allowing them to claim the unused estate tax exemption of the deceased spouse, in addition to their own estate and gift tax exemptions.
Currently, the federal gift and estate tax exemption is $12,060,000.
The portability election is made on an estate tax return filed within 9 months of death unless a timely extension is filed for the estate.
In 2017, the Department of the Treasury allowed estates that were not required to file an estate tax return (those under the estate tax exemption) to make the election on a tax return filed as late as two years after the decedent’s death.
Effective July 8, 2022, the Department has extended the deadline for estates who qualify for this relief to file as late as the fifth anniversary of a decedent’s date of death.
WHO SHOULD TAKE NOTE
- Anyone who would otherwise qualify, but missed the two-year deadline
- Surviving spouses who filed a gift tax return on the assumption that the time for the portability election had expired
- The estate of a surviving spouse that filed an estate tax return on the assumption that the time for the portability election had expired
- Refunds may be available, if a claim for refund is timely filed, for surviving spouses and estates that paid gift or estate taxes based on the assumption that portability was no longer available to them