The Internal Revenue Service (IRS) announced its inflation adjustment for the 2024 tax year, raising both estate and gift tax exclusion benefits.
The annual gift tax exclusion for 2024 is $18,000 per person, up from $17,000 in 2023.
The tax exclusion for gifts to spouses who are not U.S. citizens is $185,000.
The combined gift and estate tax exclusion for 2024 is $13.61 million per person, up from $12.92 million in 2023 (an increase of $690,000). This includes both lifetime gifts made in 2024 and bequests made by someone who passes away in 2024.
A married couple can transfer a combined total of $27.22 million without paying federal gift or estate tax. If they have already maximized use of the 2023 exemption, they can now transfer an additional $1.38 million without paying gift tax.
For example, a married couple with two children and three grandchildren may gift a total of $180,000 to their descendants in 2024, without affecting their $27.22 million lifetime gift tax exclusion.
Persons gifting more than the $18,000 annual exclusion must file a gift tax return by April 15, 2025.
NOTE: the lifetime estate and gift tax exclusion is expected to be cut in half in 2026, unless further legislation is enacted. Those wishing to make a lifetime gift, either directly or through a trust, may want to consider doing so in 2024.
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