Increases to Estate and Gift Tax Exemptions in 2023

Did you know that you can pass a certain amount of your estate and cash gifts to friends and family completely tax-free?

History of Estate and Gift Tax Exemptions

In 2012, the American Taxpayer Relief Act (ATRA) was the first piece of legislation to allow a permanent estate and gift tax exemption. The ATRA exemption set an amount of $5,000,000.00 of wealth that a taxpayer can transfer during their lifetime or at the time of their death without having to pay taxes. It also allowed for adjustments in the amount over time to account for inflation.

ATRA was followed by the Tax Cuts and Jobs Act of 2017 (TCJA), at which time the lifetime gifts exemption doubled to $11,180,000.00. Since then, the amount has been adjusted upward to account for inflation.

Estate and Gift Tax Exemptions in the New Year

The exemption amount for 2023 will be $12,920,000.00, which is excellent news for individuals and families planning to transfer wealth and protect their assets from estate taxes.

Furthermore, in 2023, the annual gift tax exclusion is increasing to $17,000.00 from $16,000.00 in 2022. What does this mean? You can gift anyone $17,000.00 without paying taxes on that amount, plus, it will not reduce your remaining exemption. For example, if you already gifted your annual gift exemption of $12,920,000.00, you can still give as many $17,000.00 gifts to as many individuals as you like without incurring taxes. As for estates, these funds could also be removed from an estate and exempt for estate tax purposes.

The Future of Estate and Gift Tax Exemptions

The TCJA is currently set to end in 2025. By January 1, 2026, the exemption will revert back to the ATRA level (i.e., $5,000,000, indexed for inflation) if Congress does not extend the TCJA.

Since the future of the increased TCJA exemptions is uncertain, it is important that individuals and families properly plan to finalize any gifting in 2022 and 2023 under the current exemption.

The professionals at Easy Estate Probate are up-to-date on all estate and gift tax exemptions to help you and your family plan for a more secure financial future. Contact us today to request a FREE estate, gift, and tax planning review!