Gift and real estate tax exemptions could fall from $13.99 million in 2026 to about $7 million.
They say that death and tax are the only thing that is certain. However, they can come at once in the form of real estate taxes, often called death tax. However, most people do not pay real estate tax. This is primarily due to a lifetime gift of $13.99 million and a real estate tax exemption in 2025. This means that real estate taxes are charged on the value of the property that exceeds that amount. But that can change dramatically.
The large threshold was set by the Tax Cuts and Employment Act (TCJA), which was officially made by President Donald Trump in 2017. However, without the transfer from Congress, lifetime gifts and real estate tax exemptions are expected to return to about $7 million, which was pre-2017 levels. This could push many wealthy families into the real estate tax zone. Especially those who own expensive homes in high-income areas, with high value and high-income areas.
What is QPRT?
A qualified individual residence trust is a type of irrevocable trust that allows the transfer of a personal residence to a trust, and retains the right to reside in the property for a certain number of years before handing it over to an heir or beneficiary.
Once you have established a QPRT and moved your home, the trust owns the property. This will give you the value of your home and the appreciation of leaving your technically taxable property. However, it can also reduce gift tax liabilities when transferred to the beneficiary.
How does QPRT work?
It helps you calculate some numbers to understand how QPRT works. So let’s take a look at a scenario that takes into account the following factors: Housing Value: $3 million Age: 65 TRUST Period: 20th Year 7520 Rate: 5% This calculator, the retention rate is 0.376889%, and the remaining value is $1,130,667. So, it will earn around $1.87 million, deducted from the value of the $3 million home. This is the amount qualifies for gift tax. However, you will not borrow gift tax on it, as the value is below lifetime gifts and real estate tax exemptions.
And let’s say after a 20-year term, the house is grateful for $5 million. In the first place, since you have deleted it from the property that is taxable, you will transfer it to a trust, so real estate tax will not borrow tax on it. In other words, you handed over $5 million in property and only spent about $1.87 million of your lifetime gifts and real estate tax exemption.
Disadvantages of QPRTS
If you die before the trust term ends, the home will return to the taxable property. This is why QPRT is known as a “betting live” strategy. Additionally, you can borrow property tax. This is because depending on your residence status, transferring property to QPRT could void state and local property tax exemptions. And if the beneficiary sells the house after the trust period has expired, the individual will pay taxes on the assessment since the trust was created. In our example, it’s $2 million ($5 million to $3 million to $3 million).
Conclusion
Gift and real estate tax exemptions could fall from $13.99 million in 2026 to about $7 million. This could mean that wealthier families will rent real estate taxes, especially if they have expensive homes in high-income areas. However, you can remove your home from your property, live there, hand it over to your heir and move it to QPRT.
Related Stories
Epoch Times Copyright©2025. The views and opinions expressed are those of the author. They are for general informational purposes only and should not be interpreted or interpreted as recommendations or solicitations. Epoch Times does not provide investments, taxes, legal, financial planning, real estate planning, or other personal financial advice. Epoch Times is not responsible for the accuracy or timeliness of the information provided.
