The U.S. Internal Revenue Service has revealed increases in the annual gift tax exclusion and the lifetime estate and gift tax exemption for 2024.
What is the Annual Gift Tax Exclusion?
The annual gift tax exclusion allows taxpayers to transfer gifts to unlimited donees – up to a designated yearly amount – without experiencing gift taxes.
The lifetime estate and gift tax exemption provides the limit for lifetime gifts as of the date of the gift (or date of death) before incurring a gift or estate tax liability.
The exclusion is also an important consideration for estate planning purposes. Taxpayers can make gifts up to that amount before utilizing any of their lifetime estate and gift tax exemption. The value of any gifts in excess of the gift tax exclusion would then be subtracted from the lifetime exemption.
As the lifetime exemption gets used over the taxpayer’s lifetime, the amount that can be excluded from the taxable estate upon death also decreases.
Updated Amounts for 2024
For the 2024 tax year, the exclusion increased by $1,000 to a total of $18,000. The exclusion covers gifts an individual makes to each donee per year.
Married taxpayers can combine their gift tax exclusion as they can share their two annual exclusions. For example, married taxpayers with three children could potentially transfer $36,000 a year to each child (or a total of $108,000) without incurring any gift taxes.
For 2024, the lifetime exemption will increase by $690,000 to $13,610,000. Additionally, the total available to a married couple will be $27,220,000 in 2024.
Questions?
If you have any questions regarding estates, gifts, or any topics in this area, give us a call at (401) 921-2000 or contact us here.