On Jan. 1 of each year, there is an inflation increase to the gift and estate tax basic exclusion amounts and to the gift tax annual exclusion. Although the IRS does not issue the actual figures until the fall, it is possible to project the inflation adjustments. Currently, the lifetime basic exclusion amount — the amount that any individual can shelter from gift and estate tax during their lifetime — is $12,920,000. In 2024, that is projected to increase by $740,000, and it is reasonable to assume that the 2025 increase will be another $500,000. For planning purposes, this means that individuals will be able to give away almost $1.3 million over the next two years before the sunset of the exemption after 2025 to an amount projected to be about $6-7 million (refer to our previous article, Plan your estate before it’s too late, for more information).
Additionally, the annual gift exclusion — currently $17,000 is projected to increase to $18,000 in 2024 and probably to $19,000 in 2025. The gift tax annual exclusion is the amount an individual can give to as many people as he or she wants without using any of the lifetime basic exclusion amount.
These inflation increases present more opportunities to plan for smart gift giving and should not be wasted.
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