Increase of Annual Gift Tax and Estate Tax Exclusions in 2022

The amount you can gift to any one person without filing a gift tax form is increasing to $16,000 in 2022, the first increase since 2018. The federal estate tax exclusion is also climbing to more than $12 million per individual.
The IRS’s announcement that the annual gift exclusion will rise for calendar year 2022 means that any person who gives away $16,000 or less to any one individual (anyone other than their spouse) does not have to report the gift or gifts to the IRS. Any person who gives away more than $16,000 to any one person is required to file Form 709, the gift tax return.ç
The basic federal estate tax exclusion amount for the estates of decedents dying during calendar year 2022 will be $12,060,000 for individuals and $24,120,000 for couples, up from $11.7 million and $23.4 million for calendar year 2021. This means that individuals dying in 2022 will not face a federal estate tax if their estate is valued at $12,060,000 or less ($24,120,000 or less for married couples). In other words, a federal estate tax will only impact a minuscule number of estates and the vast majority of estates will not be subject to a federal gift tax.
Moreover, the increase in the estate tax exclusion amount also means that the lifetime tax exclusion for gifts should similarly increase to $12,060,000. This $12,060,000 million lifetime gift tax exclusion means that even if you are required to file Form 709 because you gave away more than $16,000 to any one person during the year, you will owe taxes only if you have given away more than a total of $12,060,000 million in the past. As a result, under current rules the filing of Form 709 is irrelevant for most people because the vast majority do not have $12,060,000 million to give away. Still, Congress could change the exclusion limit, and the lifetime exclusion is slated to drop in half in 2026, causing some additional estates to be taxable.
We should all be so lucky as to have to worry about potential federal gift taxes!
For more information please contact the Law Office of Sean D. Ethington at (661)295-4604 or visit our website at www.ElderLawSite.com.