2023 YEAR-END TAX ALERT– PLANNING OPPORTUNITIES
The US Internal Revenue Service has announced their annual adjustments to exclusions and exemptions due to inflation.
2023 2024
Annual Gift Tax Exclusion $17,000 → $18,000
Lifetime Gift/ Estate Tax $12,920,000 → $13,610,000
Combined Exemption
The annual gift tax exclusion will be increased to $18,000 per recipient for 2024 from $17,000 in 2023.
The gift and estate tax exemption will be increased to $13.61 million per individual for 2024, an increase of $690,000 in 2023. This increase means that a married couple can exempt a total of $27.22 million before having to pay any federal gift or estate tax. The Generation Skipping Tax Exemption also provides another opportunity for clients to maximize their ability to pass their hard-earned monies to multiple generations.
ANNUAL GIFT TAX EXCLUSION
Each year, the IRS sets the annual gift tax exclusion, which allows a taxpayer to give a certain amount (in 2024, $18,000) per recipient tax-free without using up any of the taxpayer’s lifetime gift and estate tax exemption. Married couples may give $36,000/year per recipient beginning next year. This is an annual opportunity to transfer substantial assets gift-tax-free. Further, not only are the assets removed from the taxpayers’ taxable estates, the assets’ future appreciation also avoids gift and estate taxes.
LIFETIME GIFT AND ESTATE TAX EXEMPTION
If one gifts an amount that is above the annual gift tax exclusion, that individual will use a portion of his or her lifetime gift tax exemption ($13.61 million in 2024). The gift and estate tax exemptions are linked, meaning that the use of one’s gift tax exemption will reduce the exemption available for one’s estate. If one makes gifts in excess of the annual gift tax exclusion, one must file a gift tax return, due April 15 in the following year, to report the gift and track the amount of the lifetime exemption that has been used.
It should be noted that although the IRS has announced an inflationary increase to the lifetime gift and estate tax exemption, that amount is set to be cut in half at the start of 2026. The time is now to start the planning process to determine what works for your specific family situation.
As always, the attorneys at Winne, Banta, Basralian & Kahn are here to serve you.
If you have specific questions pertaining to the information above, please contact one of the attorneys in our Tax, Trusts & Estates Department listed below.
Co-Chairs of the Tax, Trusts & Estates Department
Martin J. Dever, Jr. mdever@winnebanta.com
Jonathan Kukin jkukin@winnebanta.com
Partners of the Tax, Trusts & Estate Department
Arthur I. Goldberg agoldberg@winnebanta.com
Peter J. Bakarich, Jr. pbakarich@winnebanta.com
Doris Brandstatter dbrandstatter@winnebanta.com
Associates of the Tax, Trusts & Estate Department
Marley A. Guerrera mguerrera@winnebanta.com
Qualia C. Hendrickson qhendrickson@winnebanta.com