2024 Estate & Gift Tax Update
When making gifts in 2024, taxpayers should consider recent and planned future federal tax changes, including:
In 2024 the gift tax annual per-recipient exclusion increased to $18,000;
In 2024 the gift/estate tax lifetime exemption increased to $13.61 million; but
In 2026 that lifetime exemption is scheduled to plunge to around $5 million
Gift Tax Annual Exclusion
The annual federal gift tax exclusion has increased to $18,000. This is the amount you can give to or for the benefit of any one person in a calendar year without needing to file a federal gift tax return and reduce your lifetime exemption (see below). If you are married, you can “split” gifts with your spouse, doubling your annual gift tax exclusion. For example, if you are married and your spouse consents, in 2024 you can gift up to $36,000 to any number of persons with no gift or estate tax consequences. In addition, most gifts to pay certain education and medical expenses are exempt even if they exceed the annual exclusion, if those gifts are paid directly to the educational institution or medical provider.
Gift/Estate Tax Lifetime Exemption
You may believe gift taxes are due if you give away more than the $18,000 per recipient annual exclusion. For most taxpayers that is not true. Every taxpayer has a large lifetime gift and estate tax exemption. In 2024 the lifetime exemption increased to $13.61 million. Married persons generally can double these amounts. Gifts above the annual exclusion described above count against your lifetime exemption and must be reported on a gift tax return. Generally, you must pay federal gift taxes only if your total lifetime gifts exceed the lifetime exemption.
Gift tax and estate tax are integrated. After you die, the value of your estate is added to total taxable gifts you made during your lifetime. If the total amount (after deductions) is greater than the lifetime exemption in the year of your death, your estate must pay estate tax on the excess at rates ranging from 18% to 40%, depending on the size of your estate.
But Remember: Unless the tax laws change, in 2026 the lifetime gift/estate exemption will plunge to $5 million (plus adjustments for inflation). So for tax reasons it may make sense to make large gifts before the exemption drops.
