The IRS has issued the following adjustments to certain transfer tax and foreign items that are adjusted annually based on the prior year's inflation:
GIFT TAX EXCLUSION - For gifts made in 2008, the annual gift tax exclusion will remain unchanged at $12,000 per recipient.
ANNUAL EXCLUSION FOR GIFTS TO NONCITIZEN SPOUSES. For 2008 gifts, the exclusion will be $128,000 ($125,000 in 2007).
REPORTING OF GIFTS FROM FOREIGNERS. For gifts from a nonresident alien individual or an inheritance from a foreign estate, reporting is required if the aggregate amount of gifts from that person exceeds $100,000 during the tax year. For gifts from foreign corporations and foreign partnerships, the reporting threshold amount will be $13,561 in 2008 ($13,258 in 2007).
ESTATE TAX SPECIAL USE VALUATION REDUCTION. For decedents dying in 2008, the maximum decrease in value of qualifying assets for special use valuation is $960,000 ($940,000 in 2007).
2% INTEREST RATE PORTION ON DEFERRED ESTATE TAX. In determining the part of the estate tax that is deferred on a farm or closely-held business that is subject to interest at a rate of 2% a year, the tentative tax will be computed on $1,280,000 ($1,250,000 in 2007) plus the applicable exclusion amount.
EXPATRIATION PRESUMPTIONS. Subject to certain exceptions, a tax avoidance motive is presumed for an expatriate whose average annual net income tax liability for the 5 tax years ending before the date of loss of citizenship or residency exceeds $139,000 in 2008 ($136,000 in 2007) or whose net worth on that date exceeds $2 million.
FOREIGN EARNED INCOME EXCLUSION. The foreign earned income exclusion amount increases is $87,600 in 2008 ($85,700 in 2007).