Every taxpayer has a lifetime gift and estate tax exemption amount. The combined exemption amount is the amount a person can transfer at death or during life without triggering a transfer (gift or estate) tax. In addition to this lifetime exemption amount, taxpayers are accorded an “annual exclusion amount,” which is the amount you can give away to any number of people each year without having to file a gift tax return or use up any of your lifetime exemption amount. Both amounts are adjusted for inflation.
The exemption amount for 2023 is set to rise a whopping $860,000 to $12,920,000 per person ($25,840,000 per married couple) from the 2022 figure ($12,060,000/$24,120,000). In addition, the annual exclusion amount is set to rise to $17,000 per donee. This will allow individuals increased flexibility in transferring wealth without incurring taxes on these transfers.
The enhanced exemption amounts are scheduled to sunset at the end of 2025 (and revert to levels in the $6,000,000 range) unless Congress proactively takes action to extend them.
If you have questions about what this means for you and any planned transfers, please contact our estate planning team for more information.